A Linear Programming Model for the Allocation of R and D Efforts

Abstract

Many indices of profitability for research and development (R and D) ventures have appeared in the literature. Most of these are calculations of the estimated economic value of a project, if successful. Their greatest utility has been in the development-type project where the probability of success has been relatively large (pr ≧ 0.25). This paper considers the optimum utilization of a scarce resource, professional man power, among many alternative research projects. Other parameters and restrictions of the model are: the economic value of a successful project, the probability of success, the man-hours required per test or screen per project, the total available man-hours, the cost per man-hour, and the available raw materials (compounds, components, etc.). These factors are used to construct a linear programming model. The solution indicates the optimum allocation of professional man power over the most attractive projects to maximize the return to the corporation. Further aspects of the model are discussed.