LAUSR

The aerospace industry is a rich source of innovation and novel technologies. However, structural drivers, such as product complexity and stringent performance requirements, inhibit the uptake of new technologies and present challenges to portfolio management specific to technology-rich environments. Although project risk is often managed through staged funding processes associated with intermediate milestones, this process is typically decoupled from portfolio valuation. In this paper, we use a simple real options binomial tree model to value the National Aeronautics and Space Administration portfolio funded through the Small Business Innovation Research program, accounting quantitatively for the funding stages and future opportunities accompanying technology infusion. For the 2009 portfolio, the average net project investment is $166k, suggesting the important role that early-stage funding plays in launching innovation efforts. We study the staged architecture to offer insight to managers of commercial and public portfolios alike.