The Public Sector R&D Enterprise: A New Approach to Portfolio Valuation (eBook)

Peter Linquiti is Associate Professor at George Washington University, USA, where he teaches courses in environmental policy and policy analysis methods. His research focuses on interdisciplinary environmental analysis, valuation of government investments in new technologies, and adaptation to climate change. Linquiti previously served as Executive Vice President at ICF International, a global energy and environmental consulting firm.

Cover 1
Half-Title 2
Title 4
Copyright 5
Contents 6
List of Figures 9
List of Tables 10
Acknowledgments 11
1 Research and Development: Opportunities and Challenges 12
2 A Primer on the Public Sector R& D Enterprise
2.1 Overview 17
2.2 Mediating factors: policy objectives 20
2.2.1 Correct market failures 20
2.2.2 Strengthen the economy 22
2.2.3 Enhance national competitiveness 25
2.3 Model component: inputs 27
2.4 Model component: activities 30
2.5 Mediating factors: institutional conditions 34
2.5.1 Program-specific statutory and regulatory requirements 34
2.5.2 Government-wide statutory and regulatory requirements 37
2.5.3 Inter-agency coordination 38
2.5.4 Political oversight 39
2.6 Model component: outputs 41
2.7 Mediating factors: conditions faced by new technologies 44
2.7.1 The market environment for new technologies 44
2.7.2 The policy environment for new technologies 47
2.8 Model component: outcomes 48
2.9 Model component: impacts 51
2.10 Model component: program evaluation 53
3 R& D Portfolio Valuation and Formation
3.1 National Research Council method for prospective evaluation 57
3.2 Potential enhancements to the standard DT/DCF approach 60
3.2.1 Enhancement #1: treat R& D projects as real options
3.2.2 Enhancement #2: treat groups of R& D projects as portfolios
3.2.3 Enhancement #3: value R& D portfolios as portfolios of real options
3.3 Approaches to portfolio formation 75
3.3.1 Commercial practices for portfolio formation 75
3.3.2 Public sector practices for portfolio formation 82
4 Public Sector R& D Valuation: A Practical Example
4.1 Research questions 86
4.2 Data 86
4.2.1 R& D project data
4.2.2 Energy price data 95
4.3 Methodology 100
4.3.1 Replicate and extend NRC methodology 101
4.3.2 Execute real option analysis with related projects 101
4.3.3 Sensitivity analyses 104
4.3.4 Measuring portfolio risk 104
4.4 Results 106
4.4.1 Project valuation 106
4.4.2 Portfolio valuation 108
4.4.3 Sensitivity analyses 110
5 Recommendations for Public Sector R& D Managers
6 Next Steps in Valuing R& D Portfolios: A Research Agenda
References 127
Index 140