Vilkkumaa, E;
Liesiö, J;
Salo, A;
Siddiqui, AS;
(2015)
Fostering breakthrough technologies -- How do optimal funding decisions depend on evaluation accuracy?
Technological Forecasting and Social Change
, 96
pp. 173-190.
10.1016/j.techfore.2015.03.001.
Preview |
Text
Siddiqui_manuscript_clean.pdf Download (398kB) | Preview |
Abstract
There is a growing interest in fostering breakthrough technologies that offer exceptionally high value to society. However, when starting technology projects, it is impossible to know which of them have the potential to lead to breakthroughs. Therefore, organizations have adopted funding policies in which on-going projects are subjected to interim evaluations based on which some projects may be abandoned to release resources for seizing new opportunities. In this paper, we study which funding policies are optimal when the objective is either (i) to maximize the expected value of the project portfolio, or (ii) to maximize the expected number of exceptionally excellent projects that may lead to breakthrough technologies. We show that the optimal policy for funding exceptionally excellent projects is to start a large number of projects and abandon a high proportion of them later, whereas the optimal policy for maximizing the expected value of the project portfolio is to grant long-term funding to a smaller set of projects based on initial evaluation. Furthermore, we show how the trade-off between these two objectives depends on the initial project evaluation accuracy and the rate at which this accuracy improves. Our results suggest that this trade-off is particularly significant when the initial project evaluations are very uncertain but become more accurate soon after the projects have been launched. In such a setting, policies that seek to maximize the expected portfolio value may fail to promote breakthrough technologies.
| Type: | Article |
|---|---|
| Title: | Fostering breakthrough technologies -- How do optimal funding decisions depend on evaluation accuracy? |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.techfore.2015.03.001 |
| Publisher version: | http://dx.doi.org/10.1016/j.techfore.2015.03.001 |
| Language: | English |
| Additional information: | © Elsevier 2015. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/. Access may be initially be restricted by the publisher. |
| Keywords: | Breakthrough technologies; Project portfolio selection; Abandonment option |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences > Dept of Statistical Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/1463143 |
Loading...
Loading...Loading...Loading...Archive Staff Only
 |
View Item |
