R&D Portfolio Valuation and Formation

Peter D. Linquiti
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Peter D. Linquiti: George Washington University

Chapter 3 in The Public Sector R&D Enterprise: A New Approach to Portfolio Valuation, 2015, pp 45-73 from Palgrave Macmillan

Abstract: Abstract Chapter 3 confronts the challenge ofpredicting the return on R&D investments before they are made. It critiques traditional government methods that apply discounted cash flow analysis to individual R&D projects in isolation. Option theory and portfolio theory are used to identify potential enhancements to traditional methods. Chapter 3 also demonstrates that focusing exclusively on potential returns while ignoring risk is a fundamentally unsound practice. Methods often used by the private sector to form, value, and manage portfolios of R&D projects are summarized, including the “bucket” method, quantitative multi-objective methods, static choice methods, and dynamic management methods. While a portfolio perspective is rarely taken within government R&D programs, a few examples are identified and characterized.

Keywords: dynamic R&D management; government R&D; NRC Prospective Evaluation Study; real options; R&D portfolios; R&D risks (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:stachp:978-1-137-54209-0_3

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DOI: 10.1057/9781137542090_3

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