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R&D Investments and Strategic Use of Financial Models

Author

Listed:
  • Wesley L. Harris

    (Department of Aeronautics and Astronautics, Massachusetts Institute of Technology, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139, USA)

  • Jarunee Wonglimpiyarat

    (Department of Aeronautics and Astronautics, Massachusetts Institute of Technology, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139, USA)

Abstract

Given that making research and development (R&D) investments has the potential to generate high profits in the future, this research aims to discuss the merits and demerits of using the major financial models — net present value (NPV), internal rate of return (IRR) and Black–Scholes — in assessing R&D investments. The study follows the appreciative theorizing to examine the strategic implications of financial models for managing R&D and building firm’s competitiveness. Conclusively, the analyses point out how conventional financial models fail to recognize the importance of strategic positioning as there are limits in terms of using the quantified approaches to measure the performance of R&D investments. The main contribution of this paper is the insights as well as the comprehensive and deeper understanding of using the financial models for evaluating investments in new technologies.

Suggested Citation

  • Wesley L. Harris & Jarunee Wonglimpiyarat, 2020. "R&D Investments and Strategic Use of Financial Models," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 17(04), pages 1-16, June.
    • Handle: RePEc:wsi:ijitmx:v:17:y:2020:i:04:n:s0219877020500303
    DOI: 10.1142/S0219877020500303
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    Cited by:

    1. Nataliya Chukhray & Nataliya Shakhovska & Oleksandra Mrykhina & Lidiya Lisovska & Ivan Izonin, 2022. "Stacking Machine Learning Model for the Assessment of R&D Product’s Readiness and Method for Its Cost Estimation," Mathematics, MDPI, vol. 10(9), pages 1-28, April.

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