Agriculture Reference
In-Depth Information
sive acts of selection. The initial large set of potential innovations considered early
in the R&D process is, throughout the process, continually winnowed, filtered, and
narrowed down.
2.1 Managing R&D Risks
Decisions are routinely made by scientists, managers, and their fund-providers—
both in the private sector and in the public sector—as to whether to proceed with,
modify, or terminate particular innovations at each successive stage of R&D. Those
who are responsible for making such decisions—again, in both private and public
sectors—are essentially engaged in an exercise of calculating the expected net ben-
efits (expected benefits minus expected costs, to all relevant stakeholders) of mov-
ing the innovation one more step closer to commercialization. As a result, making
a decision, either way, involves risk. At a minimum, if the decision is made to ter-
minate, potentially large future private and social returns may be foregone (had the
commercialization of the innovation succeeded). On the other hand, if the decision
is made to proceed further, those further investments may be lost (if the innovation
is later terminated or its commercialization does not succeed). In addition, liabilities
may be incurred if the innovation somehow causes damages or losses to others.
Typically, the degree of uncertainty confronted is greatest early in the R&D pro-
cess and decreases as the innovation progresses towards market and more is learned.
There may be significant value gained in moving an innovation one step closer to
market, precisely because of the learning that results in thereby reducing risk, some-
times referred to in the business world as 'buying down the risk' of a larger stream
of future investments. There may also be value in simply 'buying time' for an inno-
vation and keeping options open. This is particularly true if stopping and re-starting
an R&D project and the associated redeployments of key personnel and physical
resources, is costly or unfeasible. Finally, it should be noted that, at any given point
in time, risk calculations about whether to further invest in or to terminate an R&D
project, are made looking forward and considering future risks and opportunities for
the innovation. R&D managers should not regard the size of prior investment that
has already been made to bring the innovation to its current stage. These are 'sunk'
costs. Of course, without them, the innovation would not have been brought this
far, but having done so, they should no longer factor into how much further there is
to go. Nor do past investments factor into the uncertainties faced further down the
pipeline.
2.2 Four Types of Uncertainties
There are four primary types of uncertainties to be managed in crop genetic R&D:
technological, intellectual property, regulatory, and market. Properly managing
