Research On The Decision-making Models For Independent Innovative Project

In recent years, with developing economic interaction with the world economy and growing prosperity in internal economy at the same time, domestic enterprises have been greatly threatened by the competitors from other countries and our home. For survival and development, more and more enterprises rely on independent innovation on the path of looking for progress. Considering the history of economic development of the United States, United Kingdom, South Korea, Japan and other countries, it can be seen that technical innovation is the essential means for domestic enterprises to master the core competitiveness. As the technological progress of the industry has been proved a lot and the interdisciplinary transfer of knowledge and information has achieved great efforts, enterprises have much more core technology innovation investment opportunities to choose. However, in view of its high input, high-risk characteristics and the relatively limited resources that the enterprises can afford, decision-makers have to make a choice in the alternative innovation projects. On the other hand, due to rapidly changing business environment both inside and outside, the same initiation at the different points in time receive diverse scales of returns. Therefore, accurate and scientific evaluation of alternative projects and making an appropriate decision-making are vital for domestic enterprises to master the core competitiveness and striving to find their feet in such a fierce market. There is an urgent need for decision-making modes solving innovative projects selection and initiation timing problems.Independent innovative projects with high-risk characteristics need high investment. Effective project evaluation and decision-making, as well as proper initiation timing can ensure that the limited R&D resources be fully utilized, simultaneously enhancing the capability of independent innovation, improving the performance of companies and providing a sustainable competitive advantage for domestic enterprises. Then a strong micro-foundation for national development strategy of independent innovation is successfully established. This study is based on the analysis of independent innovation projects and evaluation their characteristics, making a comprehensive factor analysis including independent innovative capacity, technology, market and risk factors. According to the project stage, divide the evaluation and analysis period into three parts. In accordance with the characteristics that for each phase of the project the input of resources corresponding to the periodic output to establish an input and output index system structure. And apply the DEA method to draw the composite indicator of every part. Each alternative project has a weighted average index of the three indicators. Then we get the scheme arranged in order. In addition, based on the analysis of the characteristics of the initiation timing for independent innovative projects, as well as study of the internal and external independent innovative projects environment in depth, introduce the theory of risk-neutral portfolio into the initiation timing decision-making to establish the profit maximization model, which under the premise of either in response of the trends or not to miss the golden chance. Finally, take SK Company for example, and carry out the empirical research.There are two main innovations in this article: First, the writer recognized that during the process of project screening, only considering the practicality or progressiveness of the technology is far from being able to meet the strategic requirements of enterprises, and purely advanced technical nature cannot provide the desired competitive advantage for enterprises. The research of this article focusing on the development of self-innovation stage of the project, analyses the different risks contained in very stage, then combine with innovative and technical analysis, and market factor analysis to identify the differences between the input and output of every stage. Second, the writer recognized that for the initiative timing decision-making, the assumption within the traditional DCF approach is not in accord with the environment of independent innovative project decision-making. Therefore, this article takes examples from the financial risk-free portfolio theory, basing on a deep consideration of the internal and external environment of the independent innovative project, takes the two possible different future market conditions as a risk-free investment portfolio, then make an initiation timing decision.The writer found that the most technologically advanced or the largest economic returns project might not be the best choice for certain enterprise, while carrying out the project selection decision-making model study. "suitability" is the key. It does not only refer to the match between technologic nature and market demands, but also refer to the match between the resources investment capacity of enterprises and the resource demands of the project. Therefore the research for independent innovative project selection model should follow the principles that technological advanced and market wanted, as well as capacity matching. Only a project with leading technology and good benefit, which especially can be taken under control, has the ability to bring a competitive advantage for enterprises.The writer found that only a quantitative analysis of the economic nature far from enough to meet the demands of seizing the opportunities and avoiding risks, while carrying out the project initiation timing decision-making. Quantitative analysis only based on qualitative research has practical significance. Traditional DCF method has lost the most basic assumptions while facing the independent innovative project decision-making problem, but irreversibility and the characteristic of not being postponed for investment are not prerequisites for risk-free portfolio. Risk-free portfolio can well imitate the different market environment that enterprise might face in the future, and it implicate that the decision-maker is risk-averse. Therefore, at the qualitative analysis phase of the project, the writer makes an in-depth study of the real options contained in the project selection decision-making, and takes risk-free investment portfolio as a basis for modeling. Although this article enhances the advantages of the independent innovative project evaluation and decision-making in terms of scientific and practicality, and complements as well as improves the project management theory, the course of the study is still flawed. First of all, the indicators'size and settings of the evaluation index system will affect that the evaluation content is comprehensive or not, thus affect the objectivity of the evaluation results. Second, the preferences of the evaluators can seriously affect the result of the evaluation even the selection. It can make the selection model loss its objectivity. Third, although the established initiation timing model for independent innovative project makes up for some shortcomings of the traditional DCF method, its key backstop is still the calculation for the time value of money. The application of the initiation timing model base on estimate of the future cash flows. Given the shortcomings mentioned above, the models that established in this paper are comparatively shallow, but the research still have plenty room for in-depth improvement and also it is necessary for an to in-depth study to be continued. Models in this paper can be applied according to the actual situation. Appropriate modifications of the scale or settings for the indicator independent innovative project evaluation index system can make the evaluation content much more comprehensive, and the indicator system increasingly scientific; enhancement in the capacities in market research and forecasting can improve the objectivity of the evaluation process and the accuracy of the future cash flow estimation, laying a foundation for further study.