Optimal diversification for R&D project portfolios

Lieh-Ming Luo ()
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Lieh-Ming Luo: Fu Jen Catholic University

Scientometrics, 2012, vol. 91, issue 1, No 15, 219-229

Abstract: Abstract Diversification of R&D projects not only can reduce overall risk, but also can create value-enhancement effect. A useful guideline for optimal diversification of R&D projects is important to R&D organizations. This paper extends financial portfolio analyses for R&D management particularly incorporating the technology risk. This study uses a survival model to describe the technology risk since termination of an R&D project can be caused by any technology risk factors. A formula of optimal R&D resource allocation that can dynamically achieve the greatest diversification effect is offered. Furthermore we provide an alternative method for estimating correlations between R&D portfolios, which has a critical influence on diversification effect. The method can be useful in risk assessment when measure the exposure of R&D portfolio to particular sources of uncertainty. The evaluation framework for R&D portfolios optimization also can be applied in project-selection decisions.

Keywords: R&D portfolios optimization; Risk management; Diversification (search for similar items in EconPapers)
JEL-codes: G11 L53 O33 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11192-011-0537-0

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