A Decision-Making Approach for R&D Project Selection in a Fuzzy Environment

Technology centered organizations must be able to identify promising new products or process improvements at an early stage so that the necessary resources can be allocated to those activities. It is essential to invest in targeted research and development (R&D) projects as opposed to a wide range of ideas so that resources can be focused on successful outcomes. However, R&D project selection is a complicated and knowledge intensive decision-making process in that project selection is complicated by many factors, such as uncertainty, interrelationships between projects. This paper considers an R&D project selection model which maximizes the whole net present value (NPV) of the firm in a fuzzy environment. The NPV and expenditure of individual project are treated as fuzzy variables. It is assumed that the fuzzy NPV of some projects may depend on the crisp NPV of other projects and that the common realization of certain couples of projects may allow some savings in the resource expenditure. Furthermore, the decision-maker is supposed to take a rather pessimistic attitude. The proposed model takes on the form of a quadratic 0-1 programming problem. Finally, an illustrative numerical example is presented at the end of this paper.