Project Selection Directed By Intellectual Capital Scorecards

Management of intellectual capital is an important issue in knowledgeintensive organizations. Part of this is the composition of theoptimal project portfolio the organization will carry out in thefuture. Standard methods that guide this process mostly focus onproject selection on the basis of expected returns. However, in manycases other strategic factors should be considered in theirinterdependence such as customer satisfaction, reputation, anddevelopment of core competences.In this paper we present a tool for the selection of a projectportfolio, explicitly taking into account the balancing of thesestrategic factors. The point of departure is the intellectual capitalscorecard in which the indicators are periodically measured against atarget; the scores constitute the input of a programming model. Fromthe optimal portfolio computed, objectives for management can bederived. The method is illustrated in the case of R&D departments.knowledge management;intellectual assets;knowledge capitalization;optimal portfolio

Innovation and venture capital exit performance

Venture capital is a potent source of R&D financing which contributes significantly to technological innovation output in the form of patented inventions. Scholars have argued that tighter protection of intellectual property rights reduces expropriation risks and encourages venture capitalists to invest in technology firms. Prior studies have showed that early stage technology investors give much weight to investment selection criteria related to innovation e.g. protection of intellectual property, platform and uniqueness. However, VC investors generally receive little on their investments until a liquidation event occurs – IPO and M&A (trade sale) exits define venture capital performance. A review of the literature indicates that few empirical studies have examined the influence of patented innovation on the exit performance of VC-backed technology firms. This paper seeks to address this specific knowledge gap in venture capital research and practice. It builds on resource-based view (RBV) theory which argues that technological innovation is an important strategic resource of the entrepreneurial firm that can attract VC investment, provide competitive advantage and produce superior performance. This study is based on matched data compiled from VentureXpertTM, DelphionTM and NBER/USPTO databases. The resulting unique and proprietary dataset consists of 1504 U.S. VC-backed exits across 7 technology sectors in the 20 years from 1980-2000, 961 IPOs and 543 M&As. The influence of technological innovation on the exit performance of VC-backed technology firms is examined. As predicted by RBV theory, technology firms engaged in patenting activity were found more likely to be associated with the more profitable IPO exit route, higher VC investment and exit value

Inhibitors to optimal project portfolio selection

The selection of projects and programs of work is a key function of both public and private sector organisations. Ideally, projects and programs that are selected to be undertaken are consistent with strategic objectives for the organisation; will provide value for money and return on investment; will be adequately resourced and prioritised; will not compete with general operations for resources and not restrict the ability of operations to provide income to the organisation; will match the capacity and capability of the organisation to deliver; and will produce outputs that are willingly accepted by end users and customers. Unfortunately,this is not always the case. Possible inhibitors to optimal project portfolio selection include: processes that are inconsistent with the needs of the organisation; reluctance to use an approach that may not produce predetermined preferences; loss of control and perceived decision making power; reliance on quantitative methods rather than qualitative methods for justification; ineffective project and program sponsorship; unclear project governance, processes and linkage to business strategies; ignorance, taboos and perceived effectiveness; inadequate education and training about the processes and their importance

Risk and Real Estate Investment: An International Perspective

The literature regarding portfolio analysis for institutional real estate investors has until now largely been concerned with benefits associated with naive diversification strategies. In this paper, we discuss the prospects that institutional characteristics suggest for risk reduction in internationally diversified portfolios. The risk/return relationship of each country is affected by its own unique institutional environment and therefore there are potential benefits for investors. We argue that, given the significant differences in the institutional framework across countries, there are likely impacts on returns and that this fact deserves the attention of institutional investors.

Mean-Variance and Expected Utility: The Borch Paradox

The model of rational decision-making in most of economics and statistics is expected utility theory (EU) axiomatised by von Neumann and Morgenstern, Savage and others. This is less the case, however, in financial economics and mathematical finance, where investment decisions are commonly based on the methods of mean-variance (MV) introduced in the 1950s by Markowitz. Under the MV framework, each available investment opportunity ("asset") or portfolio is represented in just two dimensions by the ex ante mean and standard deviation $(\mu,\sigma)$ of the financial return anticipated from that investment. Utility adherents consider that in general MV methods are logically incoherent. Most famously, Norwegian insurance theorist Borch presented a proof suggesting that two-dimensional MV indifference curves cannot represent the preferences of a rational investor (he claimed that MV indifference curves "do not exist"). This is known as Borch's paradox and gave rise to an important but generally little-known philosophical literature relating MV to EU. We examine the main early contributions to this literature, focussing on Borch's logic and the arguments by which it has been set aside.Comment: Published in at http://dx.doi.org/10.1214/12-STS408 the Statistical Science (http://www.imstat.org/sts/) by the Institute of Mathematical Statistics (http://www.imstat.org

A Conceptual Model of the Incubation of New Technology-Based Ventures: a Social Capital Perspective

Technology incubators are newer organizational forms that are created to support and accelerate the development and success of affiliated ventures, particularly new technology-based ventures. Current literature regarding incubators has suggested that an understanding of the incubation process is important when seeking to understand how affiliated ventures develop and grow. However, very little is known about the incubation process, particularly the incubation of technology-based ventures. Prior literature suggests that technology-based ventures develop in terms of both business and technological development and that the incubation process varies along these dimensions. Thus, understanding the incubation of technology–based ventures must consider the differing but simultaneous dynamics of business and technological development. Drawing from the social capital, entrepreneurship, incubation, and organizational learning literature, a conceptual model of the incubation of new technology-based ventures within technology incubators is presented.incubators; new technology-based ventures; entrepreneurship; innovation.

Project Selection Directed By Intellectual Capital Scorecards

Management of intellectual capital is an important issue in knowledge intensive organizations. Part of this is the composition of the optimal project portfolio the organization will carry out in the future. Standard methods that guide this process mostly focus on project selection on the basis of expected returns. However, in many cases other strategic factors should be considered in their interdependence such as customer satisfaction, reputation, and development of core competences. In this paper we present a tool for the selection of a project portfolio, explicitly taking into account the balancing of these strategic factors. The point of departure is the intellectual capital scorecard in which the indicators are periodically measured against a target; the scores constitute the input of a programming model. From the optimal portfolio computed, objectives for management can be derived. The method is illustrated in the case of R&D departments

TRANSACTION COSTS, FADS, AND POLITICALLY MOTIVATED MISDIRECTION IN AGRICULTURAL RESEARCH

This paper examines efficiency implications of national and local policies for fund allocation and management of agricultural research, which produce pure and impure public goods. The possibility is examined that competitive grants programs increase rent seeking activities by scientists relative to specific block grants or formula allocations and thereby reduce both the real resources available to produce traditional research outputs and the productivity with which research resources are used. Management of local research units, including advantages of incentive compatible contracts, is also considered. Additional conceptual and empirical work are needed before the issues are resolved.

From tools to theories: The emergence of modern financial economics

It is shown that early research in modern financial economics had substantially been driven by the application of the research strategy of economics and the use of newly developed mathematical methods. For this purpose the professionalization of business education as a consequence of changes in the U.S. economy after Word War II is presented. The emergence of professional Journals in financial economics, similar to the academic culture including the trend of applying abstract mathematical reasoning and during the war developed methods like linear programming are highlighted. Also the meaning of Milton Friedman's 1953 essay The Methodology of Positive Economics for the dominance of abstract and prediction driven research in modern financial economics gets discussed. Finally, the emergence of Harry Markowitz's paper Portfolio Selection (1952) is used to substantiate the hypothesis. --history of finance,portfolio theory,business schools,modern financial economics,modelling,theories of modern financial economics,risk management,positivism,professionalization,methodology of finance

Optimal composition of hybrid/blended real estate portfolios

Purpose: The purpose of this paper is to establish an optimum mix of liquid, publicly traded assets that may be added to a real estate portfolio, such as those held by open-ended funds, to provide the liquidity required by institutional investors such as UK defined contribution pension funds. This is with the objective of securing liquidity while not unduly compromising the risk-return characteristics of the underlying asset class. This paper considers the best mix of liquid assets at different thresholds for a liquid asset allocation, with the performance then evaluated against that of a direct real estate benchmark index. Design/Methodology/Approach: The authors employ a mean-tracking error optimisation approach in determining the optimal combination of liquid assets that can be added to a real estate fund portfolio. The returns of the optimised portfolios are compared to the returns for portfolios that employ the use of either cash or listed real estate alone as a liquidity buffer. Multivariate Generalised Autoregressive models are used along with rolling correlations and tracking errors to gauge the effectiveness of the various portfolios in tracking the performance of the benchmark index. Findings: The results indicate that applying formal optimisation techniques leads to a considerable improvement in the ability of the returns from blended real estate portfolios to track the underlying real estate market. This is the case at a number of different thresholds for the liquid asset allocation and in cases where a minimum return requirement is imposed. Practical Implications: The results suggest that real estate fund managers can realise the liquidity benefits of incorporating publicly traded assets into their portfolios without sacrificing the ability to deliver real estate-like returns. However, in order to do so, a wider range of liquid assets must be considered, not just cash. Originality/value: Despite their importance in the real estate investment industry, comparatively few studies have examined the structure and operation of open-ended real estate funds. To the authors’ knowledge, this is the first study to analyse the optimal composition of liquid assets within blended or hybrid real estate portfolios