Methodology for Formation of the Cost of the Innovation Project

By Iskoskov, Maxim O.; Sosunova, Ljiljana A. | Asian Social Science, April 2015 | Go to article overview

Methodology for Formation of the Cost of the Innovation Project


Iskoskov, Maxim O., Sosunova, Ljiljana A., Asian Social Science


Abstract

The authors of the present study propose the methodology for formation of the cost of the innovation project based on the application of the process approach. The essence of this methodology is to represent each stage of the innovation project as a scheme of interrelated business processes, decomposition of which occurs up to the level of functions and even at this level takes place a valuation of each of these functions, which allows to most effectively consider all types of costs at the formation of the project budget.

Keywords: innovation, innovation project, project cost, project management, intangible assets, cost management

1. Introduction

Nowadays one of the competitive advantages of any enterprise, regardless of its ownership form, the types of products sold, services rendered or enterprise-wide, is the realization of innovation activity, while the innovation projects serve as one of the ways of its implementation. The development and implementation of the innovation project require attraction of investments - both internal (through budget planning, at the expense of the company's profit or mobilization of internal resources) and external investments (by attracting investors, with the help of state support) (Atoyan, 2009, pp. 3-8; Korolev, 2010, pp. 63-67; Laskowski, 2009; Hill, 2009; Wheelen, 2011; Wheelen, 2009).

One of the criteria of the innovation project attractiveness is its cost, i.e. total costs involved in its development and implementation (Laskowski, 2007, pp. 19-31; Tukkel, 2011).

The correct determination of the cost of the innovation project has great significance for the results of the project. The evaluation of the project efficiency, planning of the effective use of investments and mobilization of internal resources depend on the way how accurately the cost, presented as a cost estimate, reflects the level of necessary expenses. The accuracy of the estimates shall be determined by a complex of works, literacy and optimality of assumptions (Christensen, 2008; Cool, 2002, pp. 55-71; Dodgson, 2009; Brunner, 2011).

On the basis of the indicated cost of the innovation project determined the amount of capital investment, which includes design costs, purchase costs of the equipment necessary for the project, the cost of control over activities on the development of project documentation, and other costs (Novikov, 2007; Dyer, 2011).

The determination of the design costs is also necessary for establishing the contracted price at the conclusion of contracts between innovation stakeholders, as well as for the stakeholders` settlement in the case when some of the life cycle stages of the innovation project are conducted by attracting partners and outsourcers (Kandrashina, 2009, pp. 50-54; Norn, 2008).

The basis for budgeting preparations of the innovation project is a schedule and cost estimate, after that the implementation of accounting and evaluation of the project participants can take place. In this regard, the project cost determined by the estimate shall ensure covering of expenses and receiving of certain profit. The analysis of the difference between the design costs indicated in the estimate and actual costs shall be the basis for determining the sources of profits and losses. But the estimate is always of the project nature, and the final cost of the project shall be determined on the basis of the end of funding.

It is necessary to plan the costs so that they meet the needs of the project in part of financing for the entire duration of its implementation, which conditions the feasibility of the development of the project budget, presented in the form of the plan and expressed in quantitative indicators, it also reflects the expenditure required to achieve the goals (Karpov, 2003; Karpov, 2000).

2. Methods

2.1 Cost Planning at Innovation Development

Cost planning in the preparation of the budget plan of the innovation project is proposed to be conducted by general-to-specific way, i. …

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