TECHNOLOGY COMMERCIALIZATION

Transcription

1 TECHNOLOGY COMMERCIALIZATION

2 TECHNOLOGY COMMERCIALIZATION: DEA AND RELATED ANALYTICAL METHODS FOR EVALUATING THE USE AND IMPLEMENTATION OF TECHNICAL INNOVATION Edited by Sten A. Thore, Gregory A. Kozmetsky Centennial Fellow Emeritus, IC 2 Institute, The University of Texas, Austin Former Chair in Commercialization ofscience and Technology, Instituto Superior Tecnico, Lisbon Springer Science+Business Media, LLC

3 Library of Congress Cataloging-in-Publication Data Thore, Sten AO. Technology commerciaiization : DEA and related anaiyticai methods for evaiuating the use and implementation oftechnicai innovation / Sten A Thore. p.cm. Includes bibligraphicai references and index. ISBN ISBN (ebook) DOI / TechnologicaI innovations--evaiuation. 2. TechnologicaI innovations--management. 3. Data envelopment anaiysis. 1. Title. HC79.T Copyright 2002 Springer Science+Business Media New York OriginaIly published by Kluwer Academic Publishers in 2002 Softcover reprint of the hardcover 1 st edition 2002 AH rights reserved. No part ofthis work may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilm ing, recording, or otherwise, without the written permission from the Publisher, with the exception of any material supplied specificahy for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Permission for books published in Europe: permissions@wkap.nl Permissions for books published in the United States of America: permissions@wkap.com Printed an acid-free paper.

4 Contents Foreword: Technology Choices and The New Discipline of Technology Commercialization. By Robert Ronstadt Acknowledgements Prologue xi xv 1 PART I: COMMERCIAL PRIORITIES Chapter 1. Tutorial. The Many Dimensions of an R&D Project: Multi-Criteria Analysis. By C. Bana e Costa and S. Thore 23 Chapter 2. Using Frontier Analysis to Rate the R&D Projects of a Commercial Corporation 45 EDITORIAL INTRODUCTION 45 RESEARCH PAPER: Prioritizing a Portfolio of R&D Activities, Employing Data Envelopment Analysis. By S. Thore and G. Rich 53 Chapter 3. The Life Cycles of Sales and Profits: Dealing with the Uncertainties of the Commercialization Process 75 EDITORIAL INTRODUCTION 75

5 Vl RESEARCH PAPER: Prioritizing R&D Projects in the Face of Technological and Market Uncertainty: Combining Scenario Analysis and DEA. By S. Thore and L. Lapao 87 Chapter 4. Investment Policies by Venture Capital Firms and Government Development Foundations 105 EDITORIAL INTRODUCTION 105 RESEARCH PAPER: Applying Data Envelopment Analysis to Evaluate the Efficiency of R&D Projects - - A Case Study of R&D in Energy Technology. By B. Yuan and J.-N. Huang 111 Chapter 5. Rating Academic Research 135 EDITORIAL INTRODUCTION 135 RESEARCH PAPER: Controlling the Efficiency of University Research in the Netherlands. By T. Garcia Valderrama and T.L.C.M. Groot 147 Chapter 6. Rating R&D Stock 183 EDITORIAL INTRODUCTION 183 RESEARCH PAPER: Pricing IPOs, Using Two-Stage DEA to Track their Financial Fundamentals. By C. Abad and S. Thore 197 Chapter 7. Monitoring the Dynamic Performance of a Portfolio of R&D Projects over Time 227 EDITORIAL INTRODUCTION 227 RESEARCH PAPER: Evaluating a Portfolio of Proposed Projects, Ranking them Relative to a List of Existing Projects. By S. Thore and F. Pimentel 233 Chapter 8. R&D Budgeting: Assessing the Efficiency of R&D Projects in the Presence of Resource Constraints 247

6 vii EDITORIAL INTRODUCTION 247 RESEARCH PAPER: On the Ranking of R&D Projects in a Hierarchical Organizational Structure subject to Global Resource Constraints. By B. Golany and S.Thore 253 PART II ENVIRONMENTAL CONCERNS 275 Chapter 9: Tutorial. The Environmental Impact of New Products. By S. Thore and P. Ferrao 277 Chapter 10: A New Mathematical Programming Format for Activity Analysis and the Life Cycle of Products 291 EDITORIAL INTRODUCTION 291 FIRST RESEARCH PAPER: Activity Analysis with Environmental Variables and Recycling: An Example from the Portuguese Bottled Water Industry. By S. Thore and F.M. Freire 301 SECOND RESEARCH PAPER: Life Cycle Activity Analysis: A Case Study of Plastic Panels. By F. Freire, E. Williams, A. Azapagic, R. Clift, G. Stevens and W. Mellor 323 Chapter 11. Ranking Commercial Products with Harmful Environmental Effects 353 EDITORIAL INTRODUCTION 353 RESEARCH PAPER: Using DEA to Rank the Performance of Producers in the Presence of Environmental Goals. By S.Thore and M. Freire 363 Appendix. The Mathematics of Data Envelopment Analysis 385 Index 407

7 Contributors Cristina Abad is a Ph. D. student at the Department of Accounting and Finance, University of Seville. cristina.abad@uca.es Adisa Azapagic is a Reader in the Department of Chemical and Process Engineering at the University of Surrey, UK. A.Azapagic@surrey.ac.uk. Carlos A. Bana e Costa is a Professor in Operations Research at the Department of Operational Research, London School of Economics, and at the Department of Engineering and Management, Instituto Superior Tecnico, Lisbon. carlosbana@netcabo.ptorc.bana@lse.ac.uk Roland Clift is a Professor at the University of Surrey, UK, and Director for the Centre for Environmental Strategy. r.clift@surrey.ac.uk Paulo Ferrao is an Assistant Professor at the Instituto Superior Tecnico, Lisbon where he is responsible for the graduate program in Energy and Environment. ferrao@dem.ist.utl.pt Fausto M. Freire is a teaching and research assistant at the Faculty of Sciences and Technology, the University of Coimbra, and a Ph.D. student at the Instituto Superior Tecnico, Lisbon. fausto.freire@dem.uc.pt Boaz Golany is a Professor in the Faculty ofindustrial Engineering and Management, the Technion, Haifa, Israel. golany@ie.technion.ac.il

8 x Tom L.C.M. Groot is a Professor at the Vrije University, Amsterdam, The Netherlands. tgroot@feweb.vu.nl J.-N- Huang obtained his M.S. degree from the Institute of Management of Technology, National Chiao Tung University, Taiwan. Luis Lapao is a graduate student at the Instituto Superior Tecnico, Lisbon. llapao@mail.telepac.pt Warren Mellor is a research fellow in the Centre for Environmental Strategy, the Polymer Research Centre and the Department of Chemical and Process Engineering at the University of Surrey, UK. w.mellor@surrey.ac.uk Fernando Pimentel is a graduate of the Instituto Superior Tecnico, Lisbon, currently employed at the central bank of Portugal, Banco de Portugal, Lisbon. Fernando.Lobo.Pimentel@bportugal.pt Gary Rich is the Director of Marketing at Baker Hughes Inc., Houston. He holds a M.Sc. of Commercialization of Science and Technology, a new graduate program offered by the IC 2 Institute, The University of Texas at Austin. gary.rich@hugheschris.com Gary Stevens is Director for the Polymer Research Centre at the University of Surrey, UK. g.stevens@surrey.ac.uk Sten A. Thore is the Gregory A. Kozmetsky Centennial Fellow Emeritus at the IC2 Institute, The University of Texas at Austin. He held a personal chair in the Commercialization of Science and Technology, the Instituto Superior Tecnico, Lisbon, Portugal, Website: thore@mai1.telepac.pt Teresa Garcia Valderrama is Professor at the Department of Business Economics, University of Cadiz, Spain. teresa.garcia@uca.es Elizabeth Williams is a research fellow in the Centre for Environmental Strategy, the Polymer Research Centre and the Department of Chemical and Process Engineering at the University of Surrey, UK. Elizabeth. Wright@surrey.ac.uk Benjamin Yuan is Associate dean and a Professor at the Institute of Management of Technology, the National Chiao Tung University, Taiwan, benjamin@cc.nctu.edu.tw

9 Foreword TECHNOLOGY CHOICES AND THE NEW DISCIPLINE OF TECHNOLOGY COMMERCIALIZATION by Robert Ronstadt, The Ie 2 Institute, The University of Texas at Austin, You won't read about it in the Sunday Times, but I'm predicting that the application of Data Envelopment Analysis (DEA) will be seen in the years ahead as a major achievement in the history of technology commercialization. If you're reading this book, you probably know that DEA means something other than the Drug Enforcement Agency. But just in case... DEA is a statistical methodology that permits the setting of commercial priorities while taking into account a wide array of factors where outcomes are calculated against a "frontier or best practice," as oppose to some statistical average. For those of you who never resonated to statistical regression, DEA is much more palatable. Think of it as "progressing to an optimum, versus regressing to a mean." Who wants to be "average," anyway?

10 xu Certainly, the authors don't. Led by Senior IC 2 Fellow, Sten Thore, they have produced a book that shows how to apply theory to difficult real world problems. In the process, they've enriched a stream of seminal research started by IC 2 Fellows, Bill Cooper and Abe Charnes over 20 years ago. IC 2 Institute has regularly supported the early theoretical work and the subsequent applications work of DEA over the last two decades. We've done so because we believed this work has the potential to improve the efficacy of: I) national and corporate research laboratories; 2) university research investments; 3) venture incubator portfolios; 4) venture capital portfolios; and, in fact, any portfolio where choices must be made about capital allocations. In fact, this array of applications is telltale. They reveal that this extremely readable book is more than one more step in the arduous journey to quantify research and development (R&D) projects. Despite the limitation of the book's subtitle, Technology Commercialization is much more. From my perspective, this book is part of a larger movement whose outline is now barely visible on the horizon, a movement whose goal is more than the demonstration of a new quantitative technique, but part of an effort to create an entirely new discipline around a critical wealth producing process known as technology commercialization. What is technology commercialization? Technology commercialization can be defmed simply as "the movement of ideas from the research laboratory to the market place." The value of this simple defmition is its ease of understanding. People can be perplexed about "technology commercialization," but they generally comprehend that the "lab to market" description implies a conversion of ideas into products and services. Also, it's easy to expand this defmition to be more precise about the starting and ending points of the technology commercialization process. For instance, a more realistic starting point sees technology commercialization commencing at the very moment of ideation versus some laboratory workbench... and ending at that point when a venture actually creates real wealth. These latter stipulations aren't just semantics. The recent dot.com bubble illustrates how new businesses can reach the market place, even go public, without creating real wealth. And breakthrough ideas are just as likely (perhaps more likely) to hit us after a good night's sleep, or in the shower, versus at some research laboratory. Why are applications of DEA important? History shows us the discovery of new scientific tools often opens the floodgates of scientific breakthroughs and eventually commercial application. F or instance, many scientific theories and new technologies would never have seen the light of

11 xiii day without Galileo's telescope, the electron microscope, or the computer instruments enabling the Gnome. Less appreciated, but equally true, history shows us that analytic methodologies can have the same impact on science and technology commercialization. Examples range from the scientific method itself, to mathematical advances in geometry, calculus, classical statistics, Bayesian statistics, to linear programming and other operations research techniques. But whether the innovation is a tool or a method of analysis, it must be demonstrated before it is deemed worthwhile. Even Galileo's telescope was viewed with great skepticism until a large number of scientists confrrmed his celestial sightings. That's why the demonstration of DEA by Thore and company is so important. Their application of DEA breathes life into the theory, incenting others to use it, while showing how the methodology will improve productivity. How will DEA impact technology commercialization? Sometimes scientific advances lead to commercial innovations that improve the human condition. In most instances, they do not, even when the intent behind the original research work is to produce a commercial outcome. For instance, billions are spent each year on science and technology research at universities, national labs, and corporate laboratories located around the world. A huge chunk of this investment leads to journal articles, patents, more journal articles, and even scientific fame without ever having any commercial impact. In other instances, commercialization occurs but the net impact on society is negative, especially when environmental and other social objectives are ignored. All the best evidence indicates that only a minute share of our investments in science and technology result in knowledge that creates real wealth. To be fair, I'd be the last to imply that the nexus of science and commercialization does not present daunting challenges for scientists, entrepreneurs, and everyone else in between. For instance, calculating the value of a specific research project is fraught with difficulties given the nature of discovery and the usual uncertainties associated with computing fmancial returns. This difficulty is compounded when one attempts to assess the costlbenefits of pursuing one set of technology pathways versus another set. Ascertaining an accurate time period covering the calculation can also be a hazardous task... especially when a scientific discovery with seemingly zero commercial potential today may have great impact in the market place once future discoveries are made decades down the road. Factoring into the equation those variables that represent environmental and other social concerns presents still more dilemmas.

12 XIV The authors make no claims that DEA will solve all the challenges presented by mankind's attempt to improve the human condition via science and technology commercialization. But they have made a step forward, especially when it comes to assessing environmental issues... and history suggests it may be a giant step, one that gives us a critical building tool to create a discipline around technology commercialization. This thought, I must admit, gives me some pause. The creation of a new discipline is something akin to a breach birth. It's a painful, drawn-out, often tortuous process that leaves career fatalities and setbacks in its wake. The good news is that all the trauma is worth the effort. Personal experience is speaking now. I've been fortunate to playa small role in the creation of two disciplines. The ftrst was a very minor role in the 1960's and 1970's when huge research and teaching efforts on multinational enterprise at Harvard Business School (and eventually elsewhere) led to the legitimization of international business as a core business discipline, one that became part and parcel of every business curriculum. The second occurred at Babson College in the 1970's and early 1980's where my efforts as Department Chair, Planning Director, and the ftrst Director of the Entrepreneurship Program contributed to the eventual acceptance of entrepreneurship as an accepted discipline... ftrst at Babson and then elsewhere. I should note that it took about 15 years for entrepreneurship to be fully accepted as a valid discipline, one with a concrete body of knowledge that had hard value for practitioners. Acceptance was rarely easy, especially in the early years, and resistance came not only from academicians, but also from corporate boardrooms and government offices. Even successful entrepreneurs rejected the notion that their success was explained as something more than a biological trait. Yet the evidence shows that entrepreneurship is a learnable process where the odds of success are improved through knowledge discovery. Now new concepts, tools, organizational entities, and methods must be innovated for technology commercialization. Sten Thore and others at IC 2 have opened the doors for us. We only need the courage to pass through to a new knowledge arena. Let your journey begin with this fme book. Austin, February 2001

13 Acknowledgements This book is the product of a vision, long nourished, and an opportunity. I shall have more to say about the vision in the Prologue (below). Here is the place to record the opportunity. It occurred in the spring of 1997 when I found myself installed at the Instituto Superior Tecnico (1ST) in Lisbon, appointed to a freshly minted Chair in The Commercialization of Science and Technology. It had all happened because of the inspired intervention of my friend and then 1ST deputy president Manuel Heitor, and the fmancial backing of the Luso-American Foundation guided by the enlightened policies of Charles Buchanan. lowe them my deepest gratitude. Surrounded by a bunch of smart and well-trained Ph.D. students, I realized that here was my dream research team, bristling with enthusiasm. They form the inner core, as it were, of the roster of researchers coauthoring this book (see the List of Contributors). Eventually, the team expanded as I invited (and as my students invited) others to join in. The end result is a true mix of nationalities, backgrounds, and academic careers - - for some authors, this is their very first published piece; others again are veterans of great recognized scholarly standing. What joined us was our common quest, exploring a new and promising research field. To all my contributors, I would like to express my sincere thanks for their cheerful cooperation and their willingness to submit to picky criticism and to my endless requests for new drafts of their papers. My editor, Mr. Gary Folven of Kluwer Academic Publishers, has shepherded this volume to publication right from its first inception. His wise advice and gentle nudging has been much appreciated. The Algarve, Portugal S.Th.