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Robust future-oriented technology portfolios: Black–Litterman approach
Article first published online: 14 JUL 2013
© 2013 John Wiley & Sons Ltd and RADMA
Volume 43, Issue 5, pages 409–419, November 2013
How to Cite
Shin, J., Coh, B.-Y. and Lee, C. (2013), Robust future-oriented technology portfolios: Black–Litterman approach. R&D Management, 43: 409–419. doi: 10.1111/radm.12022
- Issue published online: 22 OCT 2013
- Article first published online: 14 JUL 2013
We propose a new way of constructing more robust technology portfolios to overcome the weaknesses of previous technology portfolios based either on the judgments of experts or on quantitative data such as patents. Instead of using historical data, the method of nonlinear forecasting enables us to forecast the future number of patent citations and accordingly, to use the forecast as a quantitative proxy for future returns and risks of technologies. Using the Black–Litterman portfolio model, we improve the accuracy of inputs by combining the future views of experts with the future returns and risks of technologies. As a consequence of this, the portfolio becomes strongly future-oriented. With our approach, corporate managers use both experts and data more effectively to build robust technology portfolios. In particular, our method is of great help for companies launching new businesses because the method avoids heavy dependency on internal experts with little knowledge about emerging technologies. A company entering the molecular amplification instrument market is exemplified herein.