Holding or folding?

R&D portfolio strategy under different information regimes

Edición de la obra Holding or folding?

One of the most vexing challenges in the management of R&D concerns decisions whether to continue or halt development of a project. Such decisions must often be made in the face of significant uncertainty regarding the technical or commercial feasibility of projects and aggregate resource constraints. To reduce uncertainty, firms should exploit the information that becomes available in the development cycle. In this paper, we argue that in different R&D contexts there are significant differences in the timing with which information becomes available during the development cycle. In some contexts, information becomes available relatively quickly due to advanced prototyping and test technologies and the availability over the course of the development cycles. We use the term "information regime" to describe these different inter-temporal patterns of information availability over the course of the development cycle. Our thesis is that R&D performance is influenced by the match between risk management heuristics and the information regime in which the firms operates. We test this argument using a simulation model of the R&D process.