| Project Portfolio Selection is a critical problem faced by research and development (R&D) organizations. It is a dynamic and stochastic resource allocation problem. The decision variables interact in multiple ways, as projects compete for the same resources and complement or substitute each other in the market, and as there are dynamic effects over time.; The portfolio problem arises at different decision-making levels. We employ stylized mathematical models to derive qualitative managerial decision rules. At the top management level, we consider revenue expectations as an important determinant in the allocation of a total R&D budget across different product lines. At the product line level, we examine optimal dynamic sharing of scarce resources among ongoing projects as they progress. Finally, we show how our rules can be applied in a real setting. We use the data collected from the R&D unit of a diamond mining company, and derive a two-step portfolio selection process that is optimal.; Portfolio Selection is a problem that has relevance in OM, Marketing and Finance literatures. |
