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Methodology for Economic Analysis of Highly Uncertain Innovative Projects of Improbability Type

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  • Aleksandr Babkin

    (Higher School of Economics and Engineering, Institute of Industrial Management, Economics and Trade, Peter the Great St. Petersburg Polytechnic University, Saint Petersburg 195251, Russia)

  • Nadezhda Kvasha

    (Department of Economics and Management of Infocommunications, The Bonch-Bruevich Saint Petersburg State University of Telecommunications, Saint Petersburg 193232, Russia)

  • Daniil Demidenko

    (Higher School of Economics and Engineering, Institute of Industrial Management, Economics and Trade, Peter the Great St. Petersburg Polytechnic University, Saint Petersburg 195251, Russia)

  • Ekaterina Malevskaia-Malevich

    (Department of Management, The North-West Institute of Management-Branch of the Russian Presidential Academy of National Economy and Public Administration (RANEPA), Saint Petersburg 199034, Russia)

  • Evgeny Voroshin

    (Department of High-Tech Production Economics, St. Petersburg State University of Aerospace Instrumentation, Saint Petersburg 190000, Russia)

Abstract

Modern conditions for real investment are generally associated with increasing uncertainty, which is even more relevant when evaluating innovative projects. Current innovation analysis methods using a linear model are outdated. At the same time, an open interactive model of the innovation process, formed due to digitalization, allows to connect to innovations at almost any stage of their life cycle. The aim of the study is to form a methodology for the economic analysis of innovative projects implemented in the context of an open innovation model. To achieve the goal, the study defines approaches to innovation projects differentiation. The approach to the analysis methods selection is based on the decision matrix. The developed decision matrix allows to determine the location of each project as its element and to select analysis methods, considering the project’s uncertainty characteristics. The logic of the analysis methods transformation under the influence of a changing uncertainty level determines the combination of the fuzzy-set approach and the concept of real options. The implementation of the project analysis algorithm leads to the choice of an appropriate method for evaluating effectiveness and ensures that the flexible risk response concept under conditions of improbable uncertainty is taken into account when implementing the option model.

Suggested Citation

  • Aleksandr Babkin & Nadezhda Kvasha & Daniil Demidenko & Ekaterina Malevskaia-Malevich & Evgeny Voroshin, 2022. "Methodology for Economic Analysis of Highly Uncertain Innovative Projects of Improbability Type," Risks, MDPI, vol. 11(1), pages 1-20, December.
    • Handle: RePEc:gam:jrisks:v:11:y:2022:i:1:p:3-:d:1009213
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    References listed on IDEAS

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    1. J. Muñoz & J. Contreras & J. Caamaño & P. Correia, 2011. "A decision-making tool for project investments based on real options: the case of wind power generation," Annals of Operations Research, Springer, vol. 186(1), pages 465-490, June.
    2. Hanne Lamberts-Van Assche & Tine Compernolle, 2022. "Using Real Options Thinking to Value Investment Flexibility in Carbon Capture and Utilization Projects: A Review," Sustainability, MDPI, vol. 14(4), pages 1-24, February.
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