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Managing Advanced Technology System Deployment: An Optimal Allocation Between R&D And Prototype Funding

Listed author(s):
  • G. Rothwell

The research and development manager allocates R&D funds to maximize the expected discounted net value of the R&D programme. Because public R&D managers do not have the same market discipline (or rewards) as private R&D managers, public R&D managers require a methodology for maximizing the expected net benefits. The US National Research Council of the National Academies in Prospective Evaluation of Applied Energy Research and Development at DOE (Phase One): A First Look Forward (2005) proposed a cost-benefit methodology to evaluate US Department of Energy's Research, Development, and Demonstration (RD&D) programmes. This paper specifies and extends this methodology, e.g., by adding cost targets into each stage of the RD&D process. Expected benefits are modelled as a function of funding levels, stage durations, stage transition probabilities, and target costs. With this method, the paper determines an optimal allocation of pre-prototype R&D funding, given a total funding constraint for an advanced energy system.

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Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 16 (2007)
Issue (Month): 6 ()
Pages: 419-432

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Handle: RePEc:taf:ecinnt:v:16:y:2007:i:6:p:419-432
DOI: 10.1080/10438590601153894
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