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Optimal Sequencing and Resource Allocation in Research and Development Projects

Author

Listed:
  • Daniel Granot

    (Faculty of Commerce and Business Administration, The University of British Columbia, Vancouver, BC, Canada)

  • Dror Zuckerman

    (Business School, Hebrew University, Jerusalem, Israel)

Abstract

The main purpose of this study is to construct a suitable research and development (R&D) model which would facilitate the analysis of activity sequencing and resource allocation in R&D projects. In the proposed model, essential characteristics of R&D projects are incorporated. Namely, the activities and the technological specifications of the project are selected dynamically, and the stopping time of the R&D process is introduced as a decision variable to be determined endogeneously. We characterize the collection of optimal sequencing of R&D activities that would maximize the expected net present value of the project, and we evaluate the possibility of incorporating various learning aspects into the model. We further analyze a resource allocation problem associated with the R&D model. It is shown that in certain cases one can efficiently implement a greedy-optimal resource allocation procedure for increasing the expected net present value of the R&D project.

Suggested Citation

  • Daniel Granot & Dror Zuckerman, 1991. "Optimal Sequencing and Resource Allocation in Research and Development Projects," Management Science, INFORMS, vol. 37(2), pages 140-156, February.
    • Handle: RePEc:inm:ormnsc:v:37:y:1991:i:2:p:140-156
    DOI: 10.1287/mnsc.37.2.140
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    Citations

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    Cited by:

    1. Roy Cerqueti & Daniele Marazzina & Marco Ventura, 2016. "Optimal Investment in Research and Development Under Uncertainty," Journal of Optimization Theory and Applications, Springer, vol. 168(1), pages 296-309, January.
    2. Agastya, Murali & Bag, Parimal Kanti & Pepito, Nona, 2016. "Task ordering in incentives under externalities," ESSEC Working Papers WP1601, ESSEC Research Center, ESSEC Business School.
    3. Scott A. Shane & Karl T. Ulrich, 2004. "50th Anniversary Article: Technological Innovation, Product Development, and Entrepreneurship in Management Science," Management Science, INFORMS, vol. 50(2), pages 133-144, February.
    4. Levesque, Moren & Shepherd, Dean A., 2002. "A new venture's optimal entry time," European Journal of Operational Research, Elsevier, vol. 139(3), pages 626-642, June.
    5. Plambeck, Erica L. & Taylor, Terry A., 2004. "Implications of Breach Remedy and Renegotiation for Design of Supply Contracts," Research Papers 1888, Stanford University, Graduate School of Business.
    6. Eric V. Denardo & Uriel G. Rothblum & Ludo Van der Heyden, 2004. "Index Policies for Stochastic Search in a Forest with an Application to R&D Project Management," Mathematics of Operations Research, INFORMS, vol. 29(1), pages 162-181, February.
    7. Sonin, Isaac M., 2008. "A generalized Gittins index for a Markov chain and its recursive calculation," Statistics & Probability Letters, Elsevier, vol. 78(12), pages 1526-1533, September.
    8. Armstrong, Michael J & Levesque, Moren, 2002. "Timing and quality decisions for entrepreneurial product development," European Journal of Operational Research, Elsevier, vol. 141(1), pages 88-106, August.
    9. Levesque, Moren & Shepherd, Dean A., 2004. "Entrepreneurs' choice of entry strategy in emerging and developed markets," Journal of Business Venturing, Elsevier, vol. 19(1), pages 29-54, January.
    10. Levesque, Moren, 2004. "Mathematics, theory, and entrepreneurship," Journal of Business Venturing, Elsevier, vol. 19(5), pages 743-765, September.
    11. B. De Reyck & Y. Grushka-Cockayne & R. Leus, 2007. "A New Challenge in Project Scheduling. The Incorporation of Activity Failures," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(3), pages 410-435.
    12. Dutta, Prajit K., 1997. "Optimal management of an R&D budget," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 575-602.
    13. Erica L. Plambeck & Terry A. Taylor, 2007. "Implications of Breach Remedy and Renegotiation Design for Innovation and Capacity," Management Science, INFORMS, vol. 53(12), pages 1859-1871, December.
    14. A. Messica & A. Mehrez & I. David, 2000. "Optimal Expenditure Patterns of a Double-Path Engineering Project," Journal of Optimization Theory and Applications, Springer, vol. 105(2), pages 441-455, May.
    15. Levner, Eugene & Zuckerman, Dror & Meirovich, Gavriel, 1998. "Total quality management of a production-maintenance system: A network approach," International Journal of Production Economics, Elsevier, vol. 56(1), pages 407-421, September.
    16. Creemers, Stefan & De Reyck, Bert & Leus, Roel, 2015. "Project planning with alternative technologies in uncertain environments," European Journal of Operational Research, Elsevier, vol. 242(2), pages 465-476.
    17. Boguslaw Nowak & Maciej Nowak & Tadeusz Trzaskalik, 2011. "Multicriteria decision aiding in project planning using dynamic programming and simulation," RePAd Working Paper Series UQO-DSA-wp2202011, Département des sciences administratives, UQO.
    18. Charles R. Weisbin & Guillermo Rodriguez & Alberto Elfes & Jeffrey H. Smith, 2004. "Toward a systematic approach for selection of NASA technology portfolios," Systems Engineering, John Wiley & Sons, vol. 7(4), pages 285-302.

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