Syomik Maria

Abstract

INTRODUCTION

Relevance of the topic. The realities of modern economic development argue that the main factors of development are innovations - high technology, new technology, new organization of labor and production, a new motivation for entrepreneurship and opportunity to provide high rates of economic growth. Innovations provide economic stability of micro-and macrosystems, their competitiveness, help increase the export potential, solve specific economic, environmental and social problems. 

Problems of definition and study of innovation and innovation processes, and economic evaluation of innovative solutions touched upon in the works of many domestic and foreign scientists have been and still are disputable questions. However, many issues of theoretical and methodological nature on management and evaluation of effectiveness of innovation require more profound investigation.

In Ukraine there is no comprehensive approach to the problem of innovation activity evaluation. Authors as a rule consider general problems of innovation activity and when evaluating capital investments (investment) do not take into account the degree of innovation and the consumers` need for the latter. That is why study, and analysis (in terms of possible adaptation to Ukrainian economy) of foreign theories and practices in evaluation of innovative solutions, as well as clarification and definition of certain categories of innovation are gaining importance in the contemporary economy.

Problems of innovation activity management are investigared in many works, which examined the content, factors, trends, strategies and methods for organizing innovation activities and identified its impact on the development of the state and regions, industries and enterprises. The leading Ukrainian researchers of innovative development of economy are A.Amosha, I.Aleksandrov, S.Aptekar, V.Heyets, M. Doleshny, V.Landik, N.Lepa, O. Savchuk, N. Chumachenko, V.Khobta, O. Popova, S.Kravchenko and others.

However, issues of innovative activity management in the context of investigating the mechanism of innovative solutions effectiveness management at enterprises which integrate their functional spheres, in particular, marketing, production and organizational structure remain underdeveloped. The limited investment resources of enterprises on the background of high degree of risks caused by innovative activity strengthens the importance of innovative solutions effectiveness management.

It is essential to evaluate every innovative solution effectiveness and select the projects which allow to fully use the company's resources and reduce terms of application and keep the profitability planned.

Thus, the urgency of the subject is determined by the study of assumptions, trends and development of organizational and economic mechanism of the company innovative solutions management.

The purpose and objectives of the study. The purpose of the master thesis is to generalize and develop scientific and methodological foundations, develop tools and practical recommendations regarding the mechanism of innovative solutions effectiveness management.

To achieve this purpose it is necessary to solve the following theoretical, scientific, methodological and practical tasks:

- to analyze the concept of "innovation" using traditional theoretical (fundamental) approaches and new applied viewpoints on this issue;

-to develop mechanism of evaluating the innovative solutions effectiveness;

- to anlayze the state of innovation activity in the tested company;

- to determine the means of stimulating innovative activity of the tested enterprises;

- to work out the methods of rising the innovative solutions effectiveness of the tested company.

The object of the master thesis is the process of evaluating the effectiveness of innovative solutions which are planned and implemented at the industrial enterprises of Ukraine.

The subject of the master thesis is theoretical and methodological foundations and practical aspects of innovative solutions effectiveness management.

To achieve this purpose methods of logic generalization, scientific abstraction and system analysis, dialectical method, methods of statistical and comparative analysis and methods of economic and mathematical modeling were applied.

The scientific value of the master thesis lies in the theoretical grounds of organizational and economic mechanisms of effectiveness management and ways of increasing innovative solutions effectiveness in industry. 

The practical importance of the outcomes. Conclusions and proposals found in the master thesis aim at creating conditions for effective operation of industrial enterprises by improving the organizational and economic mechanism of innovative solutions effectiveness management.

THE CONTENT OF THE MASTER THESIS

In the introduction releavance of the topic of the master thesis, object, subject, purpose and methods of the research, its scientific and practical significance are defined and grounded.

In the first chapter of the paper categories and concepts related to innovation activity management is considered; concept of "innovative solution" is defined, new classification of innovation solutions is suggested; the essence of innovative solutions effectiveness management and economic effectiveness of innovative solutions as the main part of management are investigated and tools of innovative solutions effectiveness management are defined.

Management of innovation means making innovative solutions aimed at creating competitive products, achieving effective outcomes of innovative activity. Decision-making in management of innovation depends on the degree of uncertainty in achieving the desired results, envisaged by the ultimate and intermediate objectives of the innovation process. Each stage of the innovation process is characterized by its own purpose and situation at the time of its achievement, which requires adequate solutions in management. Depending on the situation, innovative solutions may be aimed either at reducing the investors` commercial risks or overcoming the influence of numerous changes in design documentation during manufacturing prototypes of new products. Achieving the ultimate goal requires solutions on not only reducing the total costs, but also increasing time for a new product to penetrate the market.  Therefore, when making innovative solutions it is important to be aware of all the tasks performed within the framework of innovative activity. 

Particular attention in the master thesis is paid to the evaluation of innovation effectiveness, because evaluation of economic effectiveness of innovation is the basis of the nnovative solutions effectiveness management. 

The question naturally arises about the degree of novelty and the relevance of such recommendations to real economic conditions and their possible use for evaluating innovative solutions. It is therefore necessary to review not only the methodology for evaluating the innovation, but also a theoretical basis for the development of innovation process in order to develop a more refined method for evaluating the innovative solutions effectiveness to optimize the process of innovative activity management. 

In the second chapter the main principles of innovative solutions effectiveness are analysed, aspects of comprehensive assessment of innovative solutions effectiveness are clarified; the relationship between methods of assessing the cost-effectiveness of innovative solutions and M.Kondratiev`s theory of long-waves are identified and investigated; methods of determining the project lifecycle duration are examined. 

In economics, there are different types of parameters describing the processes of economic activity, which can be conventionally divided into three groups: economic, commercial and budget. But by analyzing the following classification of innovative solutions indicators, we can conclude that it is conditional,because efficiency is the main criterion for innovative solutions evaluation.

However, when considering the problem of effect it is necessary to take into account the complex assessment of scientific and technological, social and economic effects. It is not appropriate to summarize individual components of this effect or establish relationship between them because these effects are of different quality but but interrelated. They describe the result of innovative solutions separately or together, but always on the inherent criteria and indicators. 

Effectiveness is the relative value, which can be measured by such indicators as index of innovation profitability, accounting rate of return, internal rate of return, effectiveness of personal and borrowed capital, cost-effectiveness, etc. 

At the present stage we deal with a socially oriented economy, so the approach to determining the effectiveness of the decisions on scientific and technological innovations should be realized through the prism of three major stages. Algoritm of determining the innovative solutions effectiveness is the following: 

1. Ranking of purposes of development is conducted by expert method.  Social objectives and requirements of environmental safety are attributed to the highest rank and the maximization of economic efficiency to the lowest.

2. Checking the options of technological innovation functionality to meet social objectives and environmental safety requirements determined in state (international) operating standards. 

3. Comparing and selecting the best option which is determined by economic criteria. 

Fig.1. Algorithm for determining the innovative solutions effectiveness (animation: volume - 72 932 byte; size - 794х559; consists of a 9 shot; delay between shots - 1sec.; delay between the last and first shots - 5sec.; amount of cycles of reiteration - 0)

Many models for determining the innovative solutions effectiveness are essentially static. They consider innovative solution as the intervention which entails certain costs and profits. The economic effect is the only general indicator of economic efficiency of any group of innovative solutions. It describes the absolute value of the excess valuation of the expected results over the total consumption of resources per rated period. 

The master thesis investigates the problems of definition and study of innovation and innovation processes and the economic evaluation of innovative solutions. An algorithm for determining the innovative solutions effectiveness, which enables to analyze and monitor the indicators of innovation effectiveness and influence the preparation and decision- making in the process of innovation management, which defines the choice of innovative solutions. 

In the third chapter part method to optimize the innovative solutions effectiveness management through improving methods of their evaluation at every stage of the project development is proposed; recommendations on the use of BCG matrix are developed; corrective indicator "coefficient of innovation multiplier” is introduced.

Analysis of existing methods for assessing the cost-effectiveness led to the conclusion that it is appropriate to evaluate an innovative solution according to its stages: pre-investment, investment and operational stsge. At the same time each of them has its own methods. This, on the one hand, simplifies and systematizes the process of effectiveness management, and on the other hand, covers all phases of the innovative solution life cycle. At the pre-investment stage of the innovation solution it is an important to do a market research to determine the organization's strategy. The most often used method is designing the BCG (Boston Consulting Group) matrix; in its classical form it can not be applied to Ukrainian companies for the following reasons: 

- majority of Ukrainian businessmen have a traditional linear-functional management system, so the individual activities are valued on the principle of comparative cost-effectiveness; 

- lack of reliable market information makes the system of coordinates BKG available only on a qualitative level. For the current state of Ukrainian economy with a huge 50% shadow sector obtaining this information is virtually impossible, and studies on its own require additional resources; 

- method of division into basic quadrants is unacceptable, because the "low" and "high" parameters do not have clear numerical limitations. 

That is why a modified BCG matrix is suggested in the master thesis.  

Conclusions

The master thesis investigates methods of evaluating economic effectiveness of innovative projects related to innovation processes management at the enterprise level. The research allowed to work out the measures which enable to analyze innovative projects, facilitate their implementation and improve the innovation climate in the country.

Basic scientific and practical results of the research resulted in the following conclusions:

Classification factors and schemes used in the economy at present do not fully reflect the essence of innovation and innovation process, that is why they should be reconsidered. A new classification scheme based on the innovation multiplier effect was developed. This made it possible to identify the relationship between the theory of cyclical development of economy and evaluation of the innovation project effectiveness. As a result, the necessity to choose the method of evaluating the economic effectiveness of innovative projects in the light of M.Kondratyev`s theory of cyclic development of economy was grounded.

The expediency of comprehensive evaluation of the innovative projects effectiveness was grounded; absolute and relative indicators of innovative projects, which can be both static and dynamic, were analyzed. As a result, it was proposed to apply static and dynamic indicators at the stages of depression, recession and recovery.

To prove the above proposal the logic of turning points in the economy was analyzed as a result of which

- the question of the investments` dynamics associated with fundamentally new technical directions was further developed;

- the conclusion that the investments` dynamics is linked with the movement of the general rate of profit defined as the main criterion for evaluating the innovative projects effectiveness was made;

-- the expediency of evaluating the innovative project at pre-investment, investment and operational stages was gounded;

Methodical recommendations on carrying out market analysis at the pre-investment stage of the innovation project were worked out and application of improved BCG matrix was developed.

The investment stage provides for financial evaluation. Each method of evaluation was analyzed taking into account phases of economic development. Analysis of static methods showed that they do not apply at the phase of depression or growth because their time lag is long-term, while static methods are used to evaluate short-term projects. They can be recommended at the early stages of innovative projects evaluation as well as for projects with relatively short investment period.

Methodical recommendations on the use of dynamic methods of innovative projects evaluation were updated. The adjustment indicator - coefficient of innovation multiplier that characterizes the relationship between basic and improving innovations – was developed. The coefficient of innovation multiplier influince has the same influence as the inflation rate on the rate of discounting and NPV. This is due to the fact that the proposed rate, as well as inflation, varies depending on the phase of economic development. Its application allows to more accurately determine the economic effectiveness of innovative project at the stages of economic development (recession, recovery, depression).

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Note

At the time of writing this summary the master thesis was not yet completed. The deadline for completion is December 2010. Full text of the work and materials on the topic can be obtained from the author or his supervisor after that date.