An econometric model for evaluating success/failure of an R&D project: the case of Korea

The financial crisis in 1997, which led Korea to the IMF management system, had offered the realisation of the technological competitiveness, owing to the significant increase of the government R&D budget from 3.5 trillion won in 1999 to 12 trillion in 2009. This paper examines the impact of government R&D incentives on the technological outcome by analysing firms' investment behaviours subject to the Korea's technology development program. Based on a mathematical model considering uncertainty and consequently introduced hypotheses, an econometric model of technological outcomes is estimated on a project level with cross-sectional data from Korea's R&D program. With a single equation approach, it is found that the structure of investment is a far more significant factor than the total amount of investment and that cash investment is a positive factor and in-kind for negative. The larger the number of institutions involved in a project, the less likely it leads to success, and meeting the proposed deadlines without postponing is estimated to be a good barometer to predict the successful outcome of an R&D project.