Estimation of Social Ripple Effect of Government-Sponsored R&D using Real Options approach

Abstract

Technology is commonly viewed as one of the major factors determining the competitiveness of each industry. Various public R&D has taken place to accommodate the necessity of R&D in nation. For public R&D the performance evaluation of R&D projects or programs has been emphasized because it is initiated and financed by the taxes of citizens. The evaluation of social dimension is regarded as the important task because the main objective of public R&D is to facilitate the living standards of citizens and to increase the overall infrastructure and system of society. Particularly, the evaluation of social ripple effects has been considered as the most critical job in evaluation because social ripple effects do not only account for the current accomplishment but also for potential impact of R&D. Previously, the evaluation of social ripple effect has been done by using qualitative approach under no single uniform guidelines. Therefore, in this study, we aimed to develop the framework that effectively measure the social ripple effect while minimizing drawbacks of the current economic analysis framework for government-sponsored R&D by using the insights from the theory of real option. The developed framework was applied into one of 21st Century Frontier R&D project to validate the effectiveness of the framework.