A New Approach to Measure Intangibles in the Economic Analysis of Advanced Technology Projects

Date

2016-05

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Abstract

Current global demand for products with more advanced features and capabilities, less weight, and increased aesthetics has driven manufacturers to make significant investments in machinery and tools. Company decisions to invest in advanced technologies are often strategically aimed toward short-term return and frequently do not conform to traditional cost accounting practices, which, in many cases, may lead to rejection of investment due to inappropriate measurement techniques.
In revitalizing the manufacturing sector of the United States, manufacturing companies have been encouraged by a multitude of incentives to invest capital in plant and equipment enhancements in order to meet and exceed market expectations. The capital investment made by these companies is expected to enhance the capacity to make new products while expanding existing production capacity. The investments in advanced manufacturing and technology systems are often extensive and their successful implementation requires the full support and commitment of senior management. Traditional justification methods are often directly tied to company cash flow and short return period and the investments in advanced technology projects are often rejected as a result of the long-term return commitment. In this research, we have developed a methodology to measure the intangible attributes, yet include both tangible and intangible attributes in the economic decision-making process. Multiple attributes that may influence the decision process are included and measured in the proposed method. We present a comprehensive numerical example demonstrating the capability of the methodology. Additionally, we present conclusions and recommendations for future research in this important area to the manufacturing sector.

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Keywords

Intangibles, Decision-making

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