Optimal resource allocation between the ideation and evaluation phases of the innovation process
Abstract
We develop a stylized model of the ideation-evaluation process to study how to allocate a fixed budget between the generation of ideas and the evaluation of their quality. We study three versions, differentiated by our assumptions about the prior distribution of idea quality and the structure of information gathering. We prove that interior allocations are always optimal and analytically derive optimal allocations for small-budget instances. We explore larger instances through numerical simulation, finding that it is always optimal to allocate 38–75% of the budget to ideation, and, in general, more ideation is optimal when prior quality is low.
Fields of Study & Subjects
Capital Investment and Risk Analysis
Innovation and Knowledge Management
Innovation Diffusion and Forecasting
Publication details
- Journal / source
- The Engineering Economist
- Volume
- 71
- Issue
- 1
- Pages
- 24–56
- Publication date
- 2 January 2026
- Language
- EN