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Title: An Enhanced Evaluation Framework for Defence R&D Investments under Uncertainty
Keywords: Defence R&D investments, defence technological innovations, capability development, R&D investment evaluation, real options, uncertainty
Issue Date: 31-May-2011
Citation: ANG CHOON KEAT (2011-05-31). An Enhanced Evaluation Framework for Defence R&D Investments under Uncertainty. ScholarBank@NUS Repository.
Abstract: The effective and objective evaluation of defence R&D investments is both an important and challenging issue. There is ever increasing pressure on decision makers to demonstrate effectiveness and objectivity in the evaluation of the substantial public investments in defence R&D programmes. Quantitative evaluation methods are apparently more objective but existing methods have difficulties dealing with the uncertainties and strategic nature of returns on defence research and development investments. These methods also neither consider the system sufficiently nor encourage innovations. This project develops a theoretical framework for the dynamics of defence technological innovations by building on the body of knowledge in strategic and technology management and using case studies in historically significant defence technological innovations. Innovations are created by capabilities which could be built on (1) technological pursuit and subsequent identification of military applications or (2) technology development initiated by military demand. Adopting the theoretically attractive real options lens, defence R&D investments can be framed as building a value robust portfolio of real options in capability options and human capital amidst environmental and technological uncertainties. Upon this theoretical framework, we develop an objective evaluation framework for defence R&D investments, which effectively considers the strategic issues in the innovation system and highly uncertain return on investments, and encourages innovations. While real option is a theoretically attractive model for defence R&D investment, there are limitations to the classical real option valuation methods. Using our improved understanding of defence technological innovations, we propose that the appropriateness and boundaries of the real option model and suitability of the valuation method are contingent on the nature of the investment. As arbitrary selection of evaluation techniques for R&D investments may result in misleading or even wrong conclusions, we develop an evaluation methodology which advises the appropriate real options model and suitable evaluation method. Scoring method is the most favourable method for R&D project evaluation because of their ability to deal with multiple dimensions of R&D problems and their simplicity in formulation and use. However, it lacks consideration of risk and uncertainty. We propose improvements to the scoring method for evaluation of defence R&D investments by adopting the real options approach to consider risk and uncertainty. The enhanced scoring method is integrated into our evaluation methodology for defence R&D investments. The applications of our theoretical framework and evaluation methodology are illustrated using three contemporary defence technological innovations in Singapore. This project does not adopt a pure mathematical or technology management approach. A framework is first developed through theory building, and an evaluation methodology is subsequently built upon this theoretical framework. The good and novel positioning has led to a unique research with theoretical as well as practical contributions to the body of knowledge on strategic and technology management, real options and systems engineering. Our research demonstrates the validity of concepts from these theories within the defence context, and develops a theoretical framework for defence R&D innovations by building on these theories, and empirical evidences from defence technological innovations. This theoretical framework contributes to our understanding of the dynamics of defence R&D innovations and forms the foundation of our proposed evaluation framework for defence R&D investments. The latter enables the effective and objective evaluation of defence R&D investments and supports good decision making amidst uncertainties in the innovation process.
Appears in Collections:Ph.D Theses (Open)

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