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

See all articles by Andrea Belz

Andrea Belz

University of Southern California - Viterbi School of Engineering

Jeremy Eckhause

RAND Corporation

Richard Terrile

Government of the United States of America - Jet Propulsion Laboratory

Fernando Zapatero

Questrom School of Business, Boston University

Date Written: August 18, 2021

Abstract

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

Belz, Andrea and Eckhause, Jeremy and Terrile, Richard and Zapatero, Fernando, Applying Stakeholder Theory in a Real Options Model of the NASA SBIR R&D Portfolio (August 18, 2021). Boston University Questrom School of Business Research Paper No. 3907466, Available at SSRN: https://ssrn.com/abstract=3907466 or http://dx.doi.org/10.2139/ssrn.3907466

Andrea Belz (Contact Author)

University of Southern California - Viterbi School of Engineering ( email )

3650 McClintock Ave
Los Angeles, CA
United States
2138210829 (Phone)

Jeremy Eckhause

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Richard Terrile

Government of the United States of America - Jet Propulsion Laboratory ( email )

Pasadena, CA
United States

Fernando Zapatero

Questrom School of Business, Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-353-3631 (Phone)

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