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‘Real options’ framework to assess public research investments

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  • Nicholas S Vonortas
  • Chintal A Desai

Abstract

This paper deals with R&D priority setting. It advocates the introduction of strategic capital budgeting methodologies that will unite the hitherto largely independent processes of strategic planning and capital budgeting. Significant advances in economics and finance theory regarding valuing derivative securities, such as futures and options, and in computing power over the past 20 years make it feasible now to capture in explicit analytical terms the flexibility inherent in active strategy and management of R&D resources. R&D strategies can now be analyzed as chains of ‘real options’. The methodology can, in principle, be applied to all kinds of research investments, including longer-term, more basic research. Copyright , Beech Tree Publishing.

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  • Nicholas S Vonortas & Chintal A Desai, 2007. "‘Real options’ framework to assess public research investments," Science and Public Policy, Oxford University Press, vol. 34(10), pages 699-708, December.
    • Handle: RePEc:oup:scippl:v:34:y:2007:i:10:p:699-708
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    File URL: http://hdl.handle.net/10.3152/030234207X259012
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    Cited by:

    1. Cave, Jonathan & Gibson, Stephen, 2023. "Primary and secondary legislation – assessing the impacts of rules for making rules," The Warwick Economics Research Paper Series (TWERPS) 1486, University of Warwick, Department of Economics.
    2. Jonathan Linton & Nicholas Vonortas, 2015. "From Research Project to Research Portfolio: Meeting Scale and Complexity," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 9(2), pages 38-43.

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