IDEAS home Printed from https://ideas.repec.org/a/spr/scient/v91y2012i1d10.1007_s11192-011-0537-0.html
   My bibliography  Save this article

Optimal diversification for R&D project portfolios

Author

Listed:
  • Lieh-Ming Luo

    (Fu Jen Catholic University)

Abstract

Diversification of R&D projects not only can reduce overall risk, but also can create value-enhancement effect. A useful guideline for optimal diversification of R&D projects is important to R&D organizations. This paper extends financial portfolio analyses for R&D management particularly incorporating the technology risk. This study uses a survival model to describe the technology risk since termination of an R&D project can be caused by any technology risk factors. A formula of optimal R&D resource allocation that can dynamically achieve the greatest diversification effect is offered. Furthermore we provide an alternative method for estimating correlations between R&D portfolios, which has a critical influence on diversification effect. The method can be useful in risk assessment when measure the exposure of R&D portfolio to particular sources of uncertainty. The evaluation framework for R&D portfolios optimization also can be applied in project-selection decisions.

Suggested Citation

  • Lieh-Ming Luo, 2012. "Optimal diversification for R&D project portfolios," Scientometrics, Springer;Akadémiai Kiadó, vol. 91(1), pages 219-229, April.
    • Handle: RePEc:spr:scient:v:91:y:2012:i:1:d:10.1007_s11192-011-0537-0
    DOI: 10.1007/s11192-011-0537-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11192-011-0537-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11192-011-0537-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nicholas G. Hall & John C. Hershey & Larry G. Kessler & R. Craig Stotts, 1992. "A Model for Making Project Funding Decisions at the National Cancer Institute," Operations Research, INFORMS, vol. 40(6), pages 1040-1052, December.
    2. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    4. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mavrotas, George & Makryvelios, Evangelos, 2021. "Combining multiple criteria analysis, mathematical programming and Monte Carlo simulation to tackle uncertainty in Research and Development project portfolio selection: A case study from Greece," European Journal of Operational Research, Elsevier, vol. 291(2), pages 794-806.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Smimou, K. & Bector, C.R. & Jacoby, G., 2008. "Portfolio selection subject to experts' judgments," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 1036-1054, December.
    2. Dimson, Elroy & Mussavian, Massoud, 1999. "Three centuries of asset pricing," Journal of Banking & Finance, Elsevier, vol. 23(12), pages 1745-1769, December.
    3. Charilaos Mertzanis, 2013. "Risk Management Challenges after the Financial Crisis," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 42(3), pages 285-320, November.
    4. Christian Toll & Jan-Phillipp Rolinck, 2017. "Earn-outs to bridge gap between negotiation parties – curse or blessing?," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 18(1), pages 103-116.
    5. David G. Luenberger, 2012. "Pricing dynamic binary variables and their derivatives," Quantitative Finance, Taylor & Francis Journals, vol. 12(3), pages 451-464, April.
    6. Munk, Claus, 2015. "Financial Asset Pricing Theory," OUP Catalogue, Oxford University Press, number 9780198716457.
    7. Hildebrandt, Patrick & Knoke, Thomas, 2011. "Investment decisions under uncertainty--A methodological review on forest science studies," Forest Policy and Economics, Elsevier, vol. 13(1), pages 1-15, January.
    8. Remmers, Lee, 2004. "International financial management: 35 years later--what has changed?," International Business Review, Elsevier, vol. 13(2), pages 155-180, April.
    9. De Gennaro Aquino, Luca & Sornette, Didier & Strub, Moris S., 2023. "Portfolio selection with exploration of new investment assets," European Journal of Operational Research, Elsevier, vol. 310(2), pages 773-792.
    10. repec:dau:papers:123456789/2256 is not listed on IDEAS
    11. Sanchez-Romero, Miguel, 2006. "“Demand for Private Annuities and Social Security: Consequences to Individual Wealth”," Working Papers in Economic Theory 2006/07, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    12. Hany Shawky & Ronald Forbes & Alan Frankle, 1983. "Liquidity Services and Capital Market Equilibrium: The Case for Money Market Mutual Funds," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 6(2), pages 141-152, June.
    13. Malavasi, Matteo & Ortobelli Lozza, Sergio & Trück, Stefan, 2021. "Second order of stochastic dominance efficiency vs mean variance efficiency," European Journal of Operational Research, Elsevier, vol. 290(3), pages 1192-1206.
    14. Giovanni Bonaccolto & Massimiliano Caporin & Sandra Paterlini, 2018. "Asset allocation strategies based on penalized quantile regression," Computational Management Science, Springer, vol. 15(1), pages 1-32, January.
    15. Chris Kenyon & Andrew Green & Mourad Berrahoui, 2015. "Which measure for PFE? The Risk Appetite Measure, A," Papers 1512.06247, arXiv.org.
    16. Pirgaip, Burak & Arslan-Ayaydin, Özgür & Karan, Mehmet Baha, 2021. "Do Sukuk provide diversification benefits to conventional bond investors? Evidence from Turkey," Global Finance Journal, Elsevier, vol. 50(C).
    17. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2013. "Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures," Documentos de Trabajo del ICAE 2013-31, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico, revised Aug 2013.
    18. Zhong, Angel, 2018. "Idiosyncratic volatility in the Australian equity market," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 105-125.
    19. Fuinhas, José Alberto & Marques, António Cardoso & Nogueira, David Coito, 2014. "Análise VAR dos índices bolsistas SP500, FTSE100, PSI20, HSI e IBOVESPA [Integration of the indexes SP500, FTSE100, PSI20, HSI and IBOVESPA: A VAR approach]," MPRA Paper 62092, University Library of Munich, Germany, revised 10 Feb 2015.
    20. Sharpe, William F, 1991. "Capital Asset Prices with and without Negative Holdings," Journal of Finance, American Finance Association, vol. 46(2), pages 489-509, June.
    21. Figge, Frank & Hahn, Tobias & Barkemeyer, Ralf, 2014. "The If, How and Where of assessing sustainable resource use," Ecological Economics, Elsevier, vol. 105(C), pages 274-283.

    More about this item

    Keywords

    R&D portfolios optimization; Risk management; Diversification;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:scient:v:91:y:2012:i:1:d:10.1007_s11192-011-0537-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.