A fuzzy approach to R&D project portfolio selection

Christer Carlsson, R. Fullér, Markku Heikkilä, Péter Majlender

Research output: Contribution to journalArticle

145 Citations (Scopus)

Abstract

A major advance in the development of project selection tools came with the application of options reasoning in the field of Research and Development (R&D). The options approach to project evaluation seeks to correct the deficiencies of traditional methods of valuation through the recognition that managerial flexibility can bring significant value to projects. Our main concern is how to deal with non-statistical imprecision we encounter when judging or estimating future cash flows. In this paper, we develop a methodology for valuing options on R&D projects, when future cash flows are estimated by trapezoidal fuzzy numbers. In particular, we present a fuzzy mixed integer programming model for the R&D optimal portfolio selection problem, and discuss how our methodology can be used to build decision support tools for optimal R&D project selection in a corporate environment.

Original languageEnglish
Pages (from-to)93-105
Number of pages13
JournalInternational Journal of Approximate Reasoning
Volume44
Issue number2
DOIs
Publication statusPublished - Feb 2007

Fingerprint

Portfolio Selection
Integer programming
Trapezoidal Fuzzy number
D-optimal
Optimal Portfolio
Methodology
Imprecision
Mixed Integer Programming
Decision Support
Valuation
Research and Development
Programming Model
Reasoning
Flexibility
Evaluation
Project portfolio
Portfolio selection
Project selection
Cash flow

Keywords

  • Fuzzy number
  • Possibilistic mean
  • Possibilistic variance
  • Real option valuation

ASJC Scopus subject areas

  • Statistics and Probability
  • Electrical and Electronic Engineering
  • Statistics, Probability and Uncertainty
  • Information Systems and Management
  • Information Systems
  • Computer Science Applications
  • Artificial Intelligence

Cite this

A fuzzy approach to R&D project portfolio selection. / Carlsson, Christer; Fullér, R.; Heikkilä, Markku; Majlender, Péter.

In: International Journal of Approximate Reasoning, Vol. 44, No. 2, 02.2007, p. 93-105.

Research output: Contribution to journalArticle

Carlsson, Christer ; Fullér, R. ; Heikkilä, Markku ; Majlender, Péter. / A fuzzy approach to R&D project portfolio selection. In: International Journal of Approximate Reasoning. 2007 ; Vol. 44, No. 2. pp. 93-105.
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