Asessing the value exploratory and applied research in a competitive R&D project

Abstract

In acquiring and transferring a superior knowledge assessing the intermediate result value of a competitive R\&D project is very important for a firm engaging in R\&D. Most exxisting literatures on R\&D evaluation are concerned with project selection and resource allocation. In this thesis the stage of an R\&D project is classified into exploratory research, applied research and development. And a model is suggested which evaluates the intermediate result value before completion of development stage under duopoly and oligopolistic competition. Assessed value ofthe intermediate result transferred to the next tier company can be used as a minimum acceptable price to the inventor when more advanced knowledge acquired through R \&D is transferred to the next tier one. The model suggested is composed of structural variables including research cost, success rates, potential profits, discount rate and degree of competition. By using exponential distribution for invention process time in each stage, we derive a formula that can assess the value of the intermediate result, and we demonstrate how the model can be applied to a competitive R\&D situation through an example.