Multi-Attribute Investment Decisions: A Study of R&D Project Selection

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In evaluating R&D opportunities executives make tradeoffs among three classes of attributes: commitment of resources, expected payoff, and risk. The focus of this study of Canadian top executives and R&D managers is the investigation of these tradeoffs and how they differ among executives and industries. On the basis of judgments of sixty hypothetical projects, alternative individual and group models were estimated using regression and discriminant analysis procedures. The results indicate that linear models provide good fit with observations of R&D investment judgments and that differences in tradeoffs between risk and rates of return can be related to the characteristics of the executives and their work environments. This information is useful for predicting R&D investment portfolios in an environment of changing opportunities.

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