Research and development

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Cycle of research and development Cycle of Research and Development.svg
Cycle of research and development

Research and development (R&D,R+D, or R'n'D), known in Europe as research and technological development (RTD), refers to innovative activities undertaken by corporations or governments in developing new services or products, or improving existing services or products. [1] Research and development constitutes the first stage of development of a potential new service or the production process.

Europe Continent in the Northern Hemisphere and mostly in the Eastern Hemisphere

Europe is a continent located entirely in the Northern Hemisphere and mostly in the Eastern Hemisphere. It is bordered by the Arctic Ocean to the north, the Atlantic Ocean to the west, Asia to the east, and the Mediterranean Sea to the south. It comprises the westernmost part of Eurasia.

Research systematic study undertaken to increase knowledge

Research is "creative and systematic work undertaken to increase the stock of knowledge, including knowledge of humans, culture and society, and the use of this stock of knowledge to devise new applications." It is used to establish or confirm facts, reaffirm the results of previous work, solve new or existing problems, support theorems, or develop new theories. A research project may also be an expansion on past work in the field. Research projects can be used to develop further knowledge on a topic, or in the example of a school research project, they can be used to further a student's research prowess to prepare them for future jobs or reports. To test the validity of instruments, procedures, or experiments, research may replicate elements of prior projects or the project as a whole. The primary purposes of basic research are documentation, discovery, interpretation, or the research and development (R&D) of methods and systems for the advancement of human knowledge. Approaches to research depend on epistemologies, which vary considerably both within and between humanities and sciences. There are several forms of research: scientific, humanities, artistic, economic, social, business, marketing, practitioner research, life, technological, etc. The scientific study of research practices is known as meta-research.

Contents

R&D activities differ from institution to institution, with two primary models [1] of an R&D department either staffed by engineers and tasked with directly developing new products, or staffed with industrial scientists and tasked with applied research in scientific or technological fields, which may facilitate future product development. R&D differs from the vast majority of corporate activities in that it is not intended to yield immediate profit, and generally carries greater risk and an uncertain return on investment. However R&D is crucial for acquiring larger shares of the market through the marketisation of new products. [1]

In business and engineering, new product development (NPD) covers the complete process of bringing a new product to market. A central aspect of NPD is product design, along with various business considerations. New product development is described broadly as the transformation of a market opportunity into a product available for sale. The product can be tangible or intangible, though sometimes services and other processes are distinguished from "products." NPD requires an understanding of customer needs and wants, the competitive environment, and the nature of the market. Cost, time and quality are the main variables that drive customer needs. Aiming at these three variables, innovative companies develop continuous practices and strategies to better satisfy customer requirements and to increase their own market share by a regular development of new products. There are many uncertainties and challenges which companies must face throughout the process. The use of best practices and the elimination of barriers to communication are the main concerns for the management of the NPD.

Applied science is the application of existing scientific knowledge to practical applications, like technology or inventions.

Return on investment (ROI) is a ratio between the net profit and cost of investment resulting from an investment of some resources. A high ROI means the investment's gains favorably to its cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments. In purely economic terms, it is one way of relating profits to capital invested. Return on investment is a performance measure used by businesses to identify the efficiency of an investment or number of different investments.

Background

New product design and development is often a crucial factor in the survival of a company. In a global industrial landscape that is changing fast, firms must continually revise their design and range of products. This is necessary as well due to the fierce competition and the evolving preferences of consumers. Without an R&D program, a firm must rely on strategic alliances, acquisitions, and networks to tap into the innovations of others.

A strategic alliance is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. A strategic alliance will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship. Typically, two companies form a strategic alliance when each possesses one or more business assets or have expertise that will help the other by enhancing their businesses. Strategic alliances can develop in outsourcing relationships where the parties desire to achieve long-term win-win benefits and innovation based on mutually desired outcomes.

A system driven by marketing is one that puts the customer needs first, and produces goods that are known to sell. [2] Market research is carried out, which establishes the needs of consumers and the potential niche market of a new product. If the development is technology driven, R&D is directed toward developing products to meet the unmet needs.[ citation needed ]

Marketing is the study and management of exchange relationships. Marketing is the business process of creating relationships with and satisfying customers. With its focus on the customer, marketing is one of the premier components of business management.

Market research is an organized effort to gather information about target markets or customers. It is a very important component of business strategy. The term is commonly interchanged with marketing research; however, expert practitioners may wish to draw a distinction, in that marketing research is concerned specifically about marketing processes, while market research is concerned specifically with markets.

A niche market is the subset of the market on which a specific product is focused. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that it is intended to target. It is also a small market segment.

In general, research and development activities are conducted by specialized units or centers belonging to a company, or can be out-sourced to a contract research organization, universities, or state agencies.[ citation needed ] In the context of commerce, "research and development" normally refers to future-oriented, longer-term activities in science or technology, using similar techniques to scientific research but directed toward desired outcomes and with broad forecasts of commercial yield. [3]

Sovereign state Political organization with a centralized independent government

In international law, a sovereign state, sovereign country, or simply state, is a nonphysical juridical entity that is represented by one centralized government that has sovereignty over a geographic area. International law defines sovereign states as having a permanent population, defined territory, one government, and the capacity to enter into relations with other sovereign states. It is also normally understood that a sovereign state is neither dependent on nor subjected to any other power or state.

Commerce relates to "the exchange of goods and services, especially on a large scale". It includes legal, economic, political, social, cultural and technological systems that operate in a country or in international trade.

Statistics on organizations devoted to "R&D" may express the state of an industry, the degree of competition or the lure of progress. [4] Some common measures include: budgets, numbers of patents or on rates of peer-reviewed publications. Bank ratios are one of the best measures, because they are continuously maintained, public and reflect risk.

Statistics Study of the collection, analysis, interpretation, and presentation of data

Statistics is a branch of mathematics working with data collection, organization, analysis, interpretation and presentation. In applying statistics to a scientific, industrial, or social problem, it is conventional to begin with a statistical population or a statistical model to be studied. Populations can be diverse groups of people or objects such as "all people living in a country" or "every atom composing a crystal". Statistics deals with every aspect of data, including the planning of data collection in terms of the design of surveys and experiments. See glossary of probability and statistics.

An industry is the production of goods or related services within an economy. The major source of revenue of a group or company is the indicator of its relevant industry. When a large group has multiple sources of revenue generation, it is considered to be working in different industries. Manufacturing industry became a key sector of production and labour in European and North American countries during the Industrial Revolution, upsetting previous mercantile and feudal economies. This came through many successive rapid advances in technology, such as the production of steel and coal.

Competition rivalry between organisms, animals, individuals, groups, etc.

Competition arises whenever at least two parties strive for a goal which cannot be shared: where one's gain is the other's loss.

In the United States, a typical ratio of research and development for an industrial company is about 3.5% of revenues; this measure is called "R&D intensity".[ citation needed ] A high technology company, such as a computer manufacturer, might spend 7% or a pharmaceutical companies such as Merck & Co. 14.1% or Novartis 15.1%. Anything over 15% is remarkable, and usually gains a reputation for being a high technology company such as engineering company Ericsson 24.9%, or Allergan a biotech company, tops the spending table with 43.4% investment [5] Such companies are often seen as credit risks because their spending ratios are so unusual.[ citation needed ]

Generally such firms prosper only in markets whose customers have extreme high technology needs, like certain prescription drugs or special chemicals, scientific instruments, and safety-critical systems in medicine, aeronautics or military weapons. [ citation needed ]The extreme needs justify the high risk of failure and consequently high gross margins from 60% to 90% of revenues.[ citation needed ] That is, gross profits will be as much as 90% of the sales cost, with manufacturing costing only 10% of the product price, because so many individual projects yield no exploitable product. Most industrial companies get 40% revenues only.[ citation needed ]

On a technical level, high tech organizations explore ways to re-purpose and repackage advanced technologies as a way of amortizing the high overhead.[ citation needed ] They often reuse advanced manufacturing processes, expensive safety certifications, specialized embedded software, computer-aided design software, electronic designs and mechanical subsystems.[ citation needed ]

Research from 2000 has shown that firms with a persistent R&D strategy outperform those with an irregular or no R&D investment program. [6]

Business R&D

Research and development are very difficult to manage, since the defining feature of research is that the researchers do not know in advance exactly how to accomplish the desired result. As a result, "higher R&D spending does not guarantee more creativity, higher profit or a greater market share". [7]

Research is the most risky financing area because both the development of an invention and its successful realization carries uncertainty including the profitability of the invention. [8] One way entrepreneurs can reduce these uncertainties is to buy the licence for a franchise, so that the know-how is already incorporated in the licence. [9]

Benefit by sector

In general, it has been found that there is a positive correlation between the research and development and firm productivity across all sectors, but that this positive correlation is much stronger in high-tech firms than in low-tech firms. [10] [11] In research done by Francesco Crespi and Cristiano Antonelli, high-tech firms were found to have "virtuous" Matthew effects while low-tech firms experienced "vicious" Matthew effects, meaning that high-tech firms were awarded subsidies on merit while low-tech firms most often were given subsidies based on name recognition, even if not put to good use. [12] While the strength of the correlation between R&D spending and productivity in low-tech industries is less than in high-tech industries, studies have been done showing non-trivial carryover effects to other parts of the marketplace by low-tech R&D. [13]

Global

Global R&D management is the discipline of designing and leading R&D processes globally, across cultural and lingual settings, and the transfer of knowledge across international corporate networks. [14]

Government expenditures

United States

President Barack Obama requested $147.696 billion for research & development in FY2012, of which 21% was destined to fund basic research. [15]

European Union

Research and innovation in Europe are financially supported by the programme Horizon 2020, which is open to participation worldwide. [16]

A notable example is the European environmental research and innovation policy, based on the Europe 2020 strategy which will run from 2014 to 2020, [17] a multidisciplinary effort to provide safe, economically feasible, environmentally sound and socially acceptable solutions along the entire value chain of human activities. [18]

Worldwide

In 2015, research and development constituted an average 2.2% of the global GDP according to the UNESCO Institute for Statistics. [19]

See also

Notes and references

  1. 1 2 3 Staff, Investopedia (2003-11-25). "Research And Development – R&D". Investopedia. Retrieved 2017-12-12.
  2. Anderson, James C.; Narus, James A. (1998-11-01). "Business Marketing: Understand What Customers Value". Harvard Business Review (November-December 1998). ISSN   0017-8012 . Retrieved 2019-02-06.
  3. ChartsBin. "Research and Development Employees by Country". ChartsBin. Retrieved 2019-02-06.
  4. Khan, Firdos Alam (2018-09-03). Biotechnology Fundamentals. CRC Press. ISBN   9781498723459.
  5. All figures UK R&D Scoreboard Archived 2005-10-27 at the Wayback Machine as of 2006.
  6. Dingwall, Robert; McDonnell, Mary Byrne (2015-06-26). The SAGE Handbook of Research Management. SAGE. ISBN   9781473914452.
  7. "Aerospace and Defense: Inventing and Selling the Next Generation" (PDF). Center for Strategic and International Studies. Center for Strategic and International Studies, International Security Program. December 5, 2009. p. 1. Retrieved 6 August 2017.
  8. "Investor-partner business partner finder Business dictionary".
  9. "Investor-partner business partner finder Business dictionary".
  10. Ortega-Argiles, Raquel; Potters, Lesley; Vivarelli, Marco (2011). "R&D and productivity: testing sectoral peculiarities using micro data". Empirical Economics. 41 (3): 817–839. doi:10.1007/s00181-010-0406-3. hdl:10419/35059.
  11. Ortega-Argiles, Raquel; Piva, Mariacristina; Vivarelli, Marco (2011). "Productivity Gains from R&D Investment: Are High-Tech Sectors Still Ahead?". IZA Discussion Papers. IZA (5975): 1–22.
  12. Crespi, Francesco; Antonelli, Cristiano (2011). "Matthew Effects and R&D Subsidies: Knowledge Cumulability in High-Tech and Low-Tech Industries". Working Papers. Università degli Studi Roma Tre (140): 1–24.
  13. Mendonca, Sandro (2009). "Brave Old World: Accounting for 'High-Tech' Knowledge in 'Low-Tech' Industries". Research Policy. 38 (3): 470–482. doi:10.1016/j.respol.2008.10.018.
  14. Chiesa, V. (2001). R&D Strategy and Organisation, Imperial College Press
  15. https://fas.org/sgp/crs/misc/R41098.pdf
  16. "European Commission - PRESS RELEASES - Press release - Horizon 2020 – the EU's new research and innovation programme". europa.eu.
  17. "European Commission – PRESS RELEASES – Press release – Horizon 2020: Commission proposes €80 billion investment in research and innovation, to boost growth and jobs". europa.eu. Retrieved 2017-12-12.
  18. "EUR-Lex – 02013R1291-20150704 – EN – EUR-Lex". eur-lex.europa.eu. Retrieved 2017-03-16.
  19. "Research and development expenditure (% of GDP) | Data". data.worldbank.org. Retrieved 2017-12-12.



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