Formulating R&D portfolios that account for risk

Research Technology Management

Volumn 42, Issue 6, 1999, Pages 40-43

  Ringuest, Jeffrey L ^a,b   Graves, Samuel B ^c,d   Case, Randolph H ^a,e,f  

^a BOSTON COLLEGE   (United States)

^b CLEMSON UNIVERSITY   (United States)

^c BOSTON COLLEGE   (United States)

^d GEORGE WASHINGTON UNIVERSITY   (United States)

^e Och Spine at New York Presbyterian Hospitals   (United States)

^f UNIVERSITY OF PENNSYLVANIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ADMINISTRATIVE DATA PROCESSING; DECISION MAKING; DECISION SUPPORT SYSTEMS; MARKETING; RISK MANAGEMENT; SPREADSHEETS; SUPERVISORY PERSONNEL;

PORTFOLIO DECISION MODELS;

RESEARCH AND DEVELOPMENT MANAGEMENT;

EID: 0033228262     PISSN: 08956308     EISSN: None     Source Type: None    
DOI: 10.1080/08956308.1999.11671317     Document Type: Article

References (7)

1. R. G. Cooper, S. J. Edgett, and E. J. Kleinschmidt. "Portfolio Management in New Product Development: Lessons from the Leaders - I," Research • Technology Management, Sept.-Oct. 1997, pp. 16-28.
2. S. B. Graves and J. L. Ringuest. "Evaluating a Portfolio of R&D Investments." High Technology Management Research, Vol. 7(1): pp. 53-60, 1996.
3. A utility function is a curve that relates a satisfaction level to a given monetary return.
4. H. Shalit and S. Yitzhaki. "Marginal Conditional Stochastic Dominance." Management Science, Vol. 39 (5): pp. 670-684, 1994.
5. R. O. Swalm. "Utility Theory - Insight into Risk Taking." Harvard Business Review, Vol. 44, pp. 123-136, 1966.
6. We computed the inter-rater reliability (Cronbach's alpha) between senior R&D executives and project team members and leaders, and found it ranged between .64 and .74, indicating that senior executives and those on the project teams had similar conceptions of the constructs in the survey. (Cronbach's alpha is a measure of internal consistency, used when different subjects respond to the same question. A value above about .60 is generally considered acceptable.)
7. Our model follows closely the work of Shalit and Yitzhaki (4) who developed this approach for application to stock market portfolios. Their work established that this risk-adjusted return is a valid decision criterion for all varieties of risk-averse decision makers and that it works quite well in evaluating stock market portfolios.