1. Risk aversion, the tendency to avoid actions with uncertain outcomes (even with good probability of success), is a common trait among managers. This leads frequently to a choice of a short-term gain that may conflict with a long-term benefit. In the case of R&D, when economic times are hard, very often the risk aversion and the short-term thinking take over and R&D is reduced. A recent Business Week article (cited below) notes this trend among Silicon Value venture capitalists. The article notes that the solution to risk aversion can be to rely on the least risk averse entity around, the federal government. The article notes that there are discussions of federal tax breaks to encourage increased spending in R&D. Also, the America Competes Act, passed by Congress in 2007 but not funded, was intended to increase funding for research and development at universities and in corporations, as well as improvements in science education.
While managing risk aversion may mean relying in part on external sources of funding, it can also be accomplished by a strong emphasis on the importance of innovation and its role in future competitiveness. Sometimes this means that “champions” of research within firms will play an important role in increasing the funding of research. The Business Week article notes that some Silicon Valley entrepreneurs have taken money out of their own pockets to fund research
1. Risk aversion, the tendency to avoid actions with uncertain outcomes (even with good probability of success), is a common trait among managers. This leads frequently to a choice of a short-term gain that may conflict with a long-term benefit. In the case of R&D, when economic times are hard, very often the risk aversion and the short-term thinking take over and R&D is reduced. A recent Business Week article (cited below) notes this trend among Silicon Value venture capitalists. The article notes that the solution to risk aversion can be to rely on the least risk averse entity around, the federal government. The article notes that there are discussions of federal tax breaks to encourage increased spending in R&D. Also, the America Competes Act, passed by Congress in 2007 but not funded, was intended to increase funding for research and development at universities and in corporations, as well as improvements in science education.
While managing risk aversion may mean relying in part on external sources of funding, it can also be accomplished by a strong emphasis on the importance of innovation and its role in future competitiveness. Sometimes this means that “champions” of research within firms will play an important role in increasing the funding of research. The Business Week article notes that some Silicon Valley entrepreneurs have taken money out of their own pockets to fund research
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