Home World Industry DirectoryResearch in Industry R&D, Research and Development

R&D, Research and Development

By: EconomyWatch Date: 30 June 2010

About The Author

The core Content Team our economy, industry, investing and personal finance reference articles.

Research and Development or R&D pertains to all the innovative ideas and work that is undertaken either to better the current state of things or to create something new. As outlined by the Organization for Economic Co-operation and Development (OECD), R&D aims at increasing the “the stock of knowledge, including knowledge of man, culture and society…” In the corporate world, R&D has more to do with experimental research aimed towards the improvement of the existing products and creation of new ones. For companies, R&D is important because it helps them survive in an extremely competitive environment. Besides, R&D also keeps them focused on the varying preferences of the customers.

The Process and Management of Research and Development

Research on a new concept is usually triggered by a company’s need to cater to its existing customers as well as create a new customer base. The process begins by investigating the needs and desires of the customers. This base research is followed by the following steps:

The actual genesis of the R&D process occurs with the conception of a new idea by the creative team within an organization.

The conception of an idea is followed by a test on its viability. Checking the feasibility is largely dependent on previous and current surveys, and the assessment of the performance of similar products by a competitor.

Search and review of the patents.

The next step is the development of a prototype. The prototype is subjected to various lab tests to ensure its practicability.

A successful prototype is sent for small scale manufacture, so that a field trial can be conducted. Customer feedback is also requested.

Depending on the results obtained from these trials, a new or renewed product is launched in the market.

Allocation of Budget for Research and Development

The US, EU, China and Japan are considered to be the top four spenders on R&D in the world. Some statistics related to the percentage of budget allocation on R&D are as following:

US President Obama, in his speech to the National Academies of Sciences in 2009, announced that 3% of the country’s GDP will be spent on R&D. This is done in pursuit of achieving breakthroughs in the fields of ‘space race’, medicine, education and science.

In the US, the budget for the fiscal year 2010 allocated $50 million to the Department of Commerce’s Economic Development Program, in order to boost the R&D commercialization.

In Russia, over 4,500 centers employ more than two million people in the R&D sector.

Software, pharmaceuticals and semiconductor companies tend to spend the most (above 5% of their revenue) on R&D.

As reported by the OECD and the UK R&D Scoreboard, biotech giant, Allergan, at 43.4% and Ericson at 29.4%, respectively, are the leading spenders on R&D.

The extent of budget allocation for R&D for a particular project also depends on the probable achievability of a product.