Inclusion of risk in evaluation of advanced technologies

Traditional economic evaluation techniques are often used to rank the technology alternatives for adoption purposes. However, the results of such evaluations are somewhat misleading since these techniques ignore the intangibles. Intangibles are factors that cannot be quantified for inclusions in the economic evaluation techniques but have great impact on the evaluation and adoption process. The current research addresses this issue by first identifying the intangible costs or risks of adopting a new technology and then developing a mechanism for their inclusion in the evaluation process. Taguchi loss functions are used as a tool for quantifying the intangible costs. The loss functions are developed based on the risks’ specification limits set by the decision maker. These loss functions are used to calculate a loss score for each technology candidate. The technology alternatives are then ranked based on their loss scores, and the technology with the lowest loss score is selected for adoption. The proposed methodology offers a powerful tool for evaluation of alternative technologies by complementing the traditional economic evaluation techniques.