Applying Stakeholder Theory in a Real Options Model of the NASA SBIR R&D Portfolio
23 Pages Posted: 20 Aug 2021 Last revised: 5 Oct 2022
Date Written: August 18, 2021
We consider an important class of project portfolio management (PPM) problems in public and private entities: research and development (R\&D) portfolios in which the projects' potential monetary value is not a first-order factor in selection, and the investments are staggered in multiple stages. Generally, these portfolios comprise projects in which multiple constituents are invested in the outcome and with high levels of technical uncertainty. We present a real options method to evaluate a portfolio of proposals in each stage of a staggered selection process. Viewing the portfolio through the lens of stakeholder theory, we apply this methodology to a time series of data from the Small Business Innovation Research (SBIR) program of the National Aeronautics and Space Administration (NASA). We use the aerospace standard Technology Readiness Level (TRL) as a way to estimate the factors of interest to the various parties. We demonstrate the flexibility of our approach by proposing different specifications and tradeoffs, like the possibility to favor ``microfirms” (fewer than 10 employees), critical for job creation; or increasing the number of proposals funded in the first stage. These findings illustrate how stakeholder theory can be operationalized in project portfolio management models.
Keywords: stakeholder theory, project portfolio management, real options, TRL, SBIR
JEL Classification: H5, J16, O3, O32
Suggested Citation: Suggested Citation