Change search
ReferencesLink to record
Permanent link

Direct link
Fostering breakthrough technologies - How do optimal funding decisions depend on evaluation accuracy?
Stockholm University, Faculty of Social Sciences, Department of Computer and Systems Sciences. University College London, UK.
Number of Authors: 4
2015 (English)In: Technological forecasting & social change, ISSN 0040-1625, E-ISSN 1873-5509, Vol. 96, 173-190 p.Article in journal (Refereed) Published
Abstract [en]

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.

Place, publisher, year, edition, pages
2015. Vol. 96, 173-190 p.
Keyword [en]
Breakthrough technologies, Project portfolio selection, Abandonment option
National Category
Economics and Business Social and Economic Geography Information Systems
URN: urn:nbn:se:su:diva-119309DOI: 10.1016/j.techfore.2015.03.001ISI: 000357223000019OAI: diva2:844085
Available from: 2015-08-03 Created: 2015-08-03 Last updated: 2015-08-03Bibliographically approved

Open Access in DiVA

No full text

Other links

Publisher's full text

Search in DiVA

By author/editor
Siddiqui, Afzal
By organisation
Department of Computer and Systems Sciences
In the same journal
Technological forecasting & social change
Economics and BusinessSocial and Economic GeographyInformation Systems

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Altmetric score

Total: 18 hits
ReferencesLink to record
Permanent link

Direct link