Another wave of economic restructuring : returns to R&D-investments : evaluation of technological projects in Hong Kong

Abstract

Project valuation has always been a hot topic in the fields of Engineering Management, Management Science and Business Analytics. In the more recent decades, technology advancement has gained more attention from both academics and the markets, as they become a buzzword among the academics and the industry practitioners. Nevertheless, the prevailing uncertainties at both market-level and individual level, such as the heavy capital input but a long payback period, have made valuation not as easy and realistic.

The subject of this research, Hong Kong, is lagging behind its counterparts in the battlefield of R&D, especially when it comes to private investment. Being strategically proximate to China, where R&D spending sees the highest growth rate in the world – the synergy unleashed by regional R&D collaborations is too huge to forgo. A restructuring from financial industry to a R&D-hub is both urgent and important in Hong Kong – not only to safeguard its strategic position in both China and on international context, also to enhance the city’s competitive edge and achieve long-term growth potentials. In view of this, the government has rather intervened – as an alternative to the management philosophy “laissez faire” – by way of public-R&D in a timelier fashion.

The existing literature, however, focuses on private investment in R&D-driven economies such as the US and South Korea. In view of the research gap, this research attempts to apply existing framework to a new frontier – namely the public sector in Hong Kong where economic restructuring is yet to realize. A value evaluation and accounting exercise will be presented, with a focus on two valuation approaches: Net Present Value (NPV) and Net Options Value (NOV) which takes managerial flexibility for granted. Scholastic simulation is employed to facilitate empirical studies with managerial insights equally important in the context of project management and value creation.