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Technology Commercialization: DEA and Related Analytical Methods for Evaluating The Use and Implementation of Technical Innovation examines both general Research & Development commercialization and targeted new product innovation. New product development is a major occupation of the technical sector of the global economy and is viewed in many ways as a means of economic stability for a business, an industry, and a country. The heart of the book is a detailing of the analytical methods-with special, but not exclusive emphasis on DEA methods-for evaluating and ranking the most promising R & D and technical innovation being developed. The sponsors of the research and development may involve universities, countries, industries, and corporations-all of these sources are covered in the book. In addition, the trade-off of environmental problems vis-à-vis new product development is discussed in a section of the book.

Sten Thore (editor and author) has woven together the chapter contributions by a strong group of international researchers into a book that has characteristics of both a monograph and a unified edited volume of well-written papers in DEA, technology evaluation, R&D, and environmental economics. Finally, the use of DEA as an evaluation method for product innovation is an important new development in the field of R&D commercialization.

Inhaltsverzeichnis

Frontmatter

Prologue

Prologue

Abstract
The editor explains the origin of the present volume, the general motivation of the research effort, and provides a brief introduction to each chapter.
Sten A. Thore

Commercial Priorities

Frontmatter

Chapter 1. The Many Dimensions of an R&D Project: Multi-Criteria Analysis

A Tutorial
Abstract
The need to evaluate a series of R&D projects may arise in many instances: in a commercial corporation upgrading new technology or developing new one, in a business incubator, in a venture capitalist firm, or in the management of government research programs. For each of these applications, some elementary concepts and procedures of Multi-Criteria Analysis are explained and discussed.
C. Bana e Costa, S. Thore

Chapter 2. Using Frontier Analysis to Rate the R&D Projects of a Commercial Corporation

Editorial Introduction
Abstract
Frontier analysis classifies a number of R&D projects into two categories: efficient and sub-efficient ones. Efficient units are said to be in equilibrium; sub-efficient ones are in disequilibrium. There is always the potential for a future technological breakthrough, also for projects that currently rank far below the efficiency frontier.
Sten A. Thore

Prioritizing a Portfolio of R&D Activities, Employing Data Envelopment Analysis

A Research Paper
Abstract
A system of monitoring, ranking and prioritizing the R&D projects of a commercial enterprise or of an academic institution is presented. To characterize the progress and commercial potential of an R&D project, an entire range of criteria need to be considered. The choice of these may vary from one application to another, but will certainly include characteristics of the new product and its market, the strategic opportunities that the new product will offer, and some suitable indicators) of expected financial return. Environmental and societal considerations may also enter the picture. A new mathematical technique called data envelopment analysis (DEA) permits the ranking of projects in the presence of such multiple performance criteria. The basic DEA calculations are explained. Two practical applications illustrate the choice of criteria and the nature of the calculations, first for a Texas corporation engaged in the development of new drilling equipment for the oil industry, and, next, for the ranking of NASA aeronautics investments.
S. Thore, G. Rich

Chapter 3. The Life Cycles of Sales and Profits: Dealing with the Uncertainties of the Commercialization Process

Editorial Introduction
Abstract
The text briefly revisits some basic techniques of planning under uncertainty, including the calculation of net present value (NPV), the internal rate of return of a project, and scenario analysis.
Sten A. Thore

Prioritizing R&D Projects in the Face of Technological and Market Uncertainty: Combining Scenario Analysis and DEA

A Research Paper
Abstract
Assessing the priorities of a portfolio of R&D projects, uncertainty pertains not only to the narrow outcome of the product development efforts but also to the state of future technology and market conditions in general. A few alternative scenarios are spelled out and each project under each scenario is rated using data envelopment analysis (DEA). In an application using data from a large telecommunications manufacturer and distributor, a set of development projects were rated under alternative scenarios for the future fortune of the company. Each scenario was characterized by a set of technology, market and social “drivers” such as the technological progress in optical communications, the success of the planned EU common currency etc. Each individual event (a single project under a particular scenario projected for a particular future time period) was recorded as a vector of inputs and a vector of outputs. The events were ranked using DEA. The final prioritization of the R&D projects was established calculating ordinal ranks and validating the obtained rankings using the Kruskal-Wallis non-parametric test.
S. Thore, L. Lapão

Chapter 4. Investment Policies by Venture Capital Firms and Government Development Foundations

Editorial Introduction
Abstract
Sometimes, a private corporation will seek funding for a new R&D venture from a venture capitalist, or from a government development foundation. The operations of venture capitalist firms are described.
Sten A. Thore

Applying Data Envelopment Analysis to Evaluate the Efficiency of R&D Projects — A Case Study of R&D in Energy Technology

A Research Paper
Abstract
This research uses Data Envelopment Analysis (DEA) to evaluate energy technology projects in Taiwan. Collecting empirical data from several such projects, we develop a model and an integrated framework for the evaluation of such projects. Both cross-sectional and longitudinal studies are conducted. Cross-sectional analysis is used to evaluate the efficiency of technology projects within the same year; longitudinal analysis is used to evaluate the overall trend of technology projects and the performances of cross-period technology projects that last for several years. Through cross-sectional analysis, we identify the efficiently run projects from the sub-efficient ones and determine how the latter ones might be improved. Through longitudinal analysis, we evaluate the overall trend of technology projects that last several years. Hopefully, our analysis will serve as a reference for project leaders and management who wish to monitor and control their technology projects.
B. Yuan, J.-N. Huang

Chapter 5. Rating Academic Research

Editorial Introduction
Abstract
The societal production chains extending from academic research to eventual commercial applications are examined. The theory of the role of knowledge in economic development is briefly reviewed. Some common metrics to evaluate the inputs and outputs from academic research are listed.
Sten A. Thore

Controlling the Efficiency of University Research in the Netherlands

A Research Paper
Abstract
In order to evaluate government funding of university research in the Netherlands, the Association of Dutch Universities uses a system of periodic evaluations. Review committees of international experts assess each research program. In 1995, the Association published statistics on the performance of 90 programs in economics and econometrics during a preceding five-year period. The difficulties of statistical evaluation and assessment of academic research programs are well known. There are few objective measurements of performance. Bibliometric data, such as the number of journal articles or dissertations published, give only indirect indication of the importance of the research results. In the present case, however, the review committees of international experts were asked to evaluate each program with respect to four characteristics: scientific quality, scientific productivity obtained, relevance, and long-term viability. The assessment of each of these characteristics was expressed in a single score. Drawing on the data published by the Association, the authors have used Data Envelopment Analysis (DEA) to evaluate and rank the research programs. The results of the full study are being published elsewhere. The present paper discusses in depth the results for three typical programs.
T. Garcia Valderrama, T. L. C. M. Groot

Chapter 6. Investing in IPOs in Technology Stocks

Editorial Introduction
Abstract
Markowitz’ portfolio theory is reviewed. In a small textbook example, the frontier of efficient portfolios is calculated numerically. The editor demonstrates that the very same frontier can alternatively be obtained using quadratic Data Envelopment Analysis.
Sten A. Thore

Pricing IPOs, Using Two-Stage DEA to Track their Financial Fundamentals

A Research Paper
Abstract
In order to assess the long run price potential of an IPO, we compute a piece-wise linear price frontier of similar stocks already present in the stock market. Drawing on so-called Fundamental Analysis of stocks (Ou, Penman, Abarbarell and Bushee, and others), stock prices are linked to underlying financial data in two consecutive steps: a predictive information link tying current financial data to nature earnings, and a valuation link tying future earnings to firm value. A new procedure of two-stage data envelopment analysis is employed to fit a piecewise linear efficiency frontier to the observed data for each of these two steps. The procedure is illustrated by a numerical example, analyzing five IPOs in the Spanish manufacturing industry (and comparing them with industry performance) occurring in the years 1991–96.
C. Abad, S. Thore

Chapter 7. Monitoring the Dynamic Performance of a Portfolio of R&D Projects over Time

Editorial Introduction
Abstract
The task of monitoring a portfolio of R&D projects over time is discussed. The so-called “window analysis” of DEA is briefly explained.
Sten A. Thore

Evaluating a Portfolio of Proposed Projects, Ranking them Relative to a List of Existing Projects

A Research Paper
Abstract
The paper discusses the use of Data Envelopment Analysis (DEA) to rank the relative efficiency of R&D projects, when information is available on both earlier projects already carried out and a set of new proposed projects. Each proposed project may then be measured in (at least) two different ways: its performance relative to the other proposed projects, and its performance relative to the projects already carried out. To illustrate the calculations an application is discussed, rating the performance of a series of proposed student residence halls in Lisbon, Portugal. The proposed housing units are ranked among themselves, and in relation to existing housing units in the city.
S. Thore, F. Pimentel

Chapter 8. Assessing the Efficiency of R&D Projects in the Face of Resource Constraints

Editorial Introduction
Abstract
In a classical piece of work, Martin Weingartner back in 1963 showed how it is possible to pose the problem of allocating a given budget between a number of investment or R&D projects as a problem of zero-one programming.
Sten A. Thore

On the Ranking of R&D Projects in a Hierarchical Organizational Structure subject to Global Resource Constraints

A Research Paper
Abstract
The problem of evaluating a portfolio of R&D projects is not only to rank the projects but also to find the necessary resources to see the projects through development and eventual commercialization. We discuss ways of arranging a set of two-stage DEA calculations in a hierarchical organizational structure where headquarters allocates resources to departments and each department operates a portfolio of R&D projects. Assuming that projects are indivisible, we formulate a zero-one programming model for the allocation of resources to them. Finally, we construct a global DEA program covering the entire organizational hierarchy that combines rankings with a set of global resource constraints.
B. Golany, S. Thore

Environmental Concerns

Frontmatter

Chapter 9. The Environmental Impact of New Products

A Tutorial
Abstract
Negative externalities of goods may arise both from their production, their use by the consumers, and from the disposal of waste. The concept of life cycle assessment (LCA) of a good is explained, tracking the environmental impacts of a good along its entire life cycle. Some elementary linear programming models of industrial production are presented, illustrating the possible presence of environmental goals laid down on resource use, on consumer demand, or on environmental impacts. The corresponding dual programs are formulated, featuring excise taxes to be imposed on harmful releases into the environment (rather than direct constraints)
S. Thore, P. C. Ferrão

Chapter 10. A New Mathematical Programming Format for Activity Analysis and the Life Cycle of Products

Editorial Introduction
Abstract
The main concepts of Koopmans’ activity analysis are surveyed.
Sten A. Thore

Activity Analysis with Environmental Variables and Recycling: An Example from the Portuguese Water Bottling Industry

A Research Paper
Abstract
The standard mathematical programming formulation of activity analysis, due to Charnes and Cooper, 1961, is extended to embrace the presence of environmental “bads” such as pollution and waste products destined for landfills. Special attention is given to the presence of loops in the production chains such as those occurring when the packaging materials of consumer goods are recycled and reused. The possibility of stimulating recycling and reusing by appropriate environmental fees is examined. An application from the Portuguese bottled water industry is described. Some used and discarded bottles are recycled (the glass is crushed and used as raw material for the manufacture of new bottles), others are cleaned and used again; the remainder ends up in landfills. A numerical prototype is solved and discussed. The scope for environmental policy is discussed, comparing direct environmental controls with a goal programming model implemented by environmental fees
S. Thore, F. Freire

Life Cycle Activity Analysis: A Case Study of Plastic Panels

A Research Paper
Abstract
Life Cycle Activity Analysis (LCAA) combines classical Activity Analysis with environmental Life Cycle Assessment (LCA). It provides a structured approach to economic and environmental optimization of the entire supply chain of products, processes or services. LCAA considers all activities from “cradle to grave” including alternative methods of production, distribution, reuse and recovery. This paper builds on the previous work by the authors and applies the LCAA approach to assess alternative end-of-life options for plastic components used in electronic equipment. The environmental and economic consequences associated with these end-of-life options, such as remanufacturing, mechanical recycling, feedstock recycling and incineration, are evaluated for the entire supply chain and opportunities for closing the material loop are highlighted. A mathematical programming model is formulated and solved numerically to determine the optimal supply chain configurations for several scenarios. Solutions are proposed which reduce both environmental and economic impacts when compared to current practice.
F. Freire, E. Williams, A. Azapagic, R. Clift, G. Stevens, W. Mellor

Chapter 11. Ranking Commercial Products with Harmful Environmental Effects

Editorial Introduction
Abstract
A brief introduction to goal programming is given. “Goals” are soft constraints that may be violated, but at a cost. The penalty costs may be cardinal numbers or just ordinal rankings. The methods of data envelopment analysis with goal constraints are explained.
Sten A. Thore

Ranking the Performance of Producers in the Presence of Environmental Goals

Research paper
Abstract
In a study of the Portuguese bottled water industry, it was desired to rank the commercial and ecological performance of the individual bottlers of spring water. To effect the rankings, a new model type of data envelopment analysis (DEA) is proposed that includes an assessment of the performance of individual producers with respect to a list of environmental variables. The environmental concerns of society are expressed as goals, either absolute (=cardinal) goals or just preemptive priorities. Data for some 20 Portuguese table water bottlers are examined and a goal programming version of DEA is presented, ranking the performance of the bottlers with respect to recycling goals.
S. Thore, F. Freire

Backmatter

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