Research & Development – Geography – UGC NET – Notes

Introduction

Research and development (R&D) includes activities that companies undertake to Innovate and introduce new products and services. It is often the first stage in the development process. The goal is typically to take new products and services to market and add to the company’s bottom line.

Key Takeaways

• R&D represents the activities companies undertake to innovate and introduce new products and services or to improve their existing offerings.
• R&D allows a company to stay ahead of its competition.
• Companies in different sectors and industries conduct R&D; pharmaceuticals, semiconductors, and technology companies generally spend the most.

Understanding Research and Development (R&D)

The term R&D is widely linked to innovation both in the corporate and government world or the public and private sectors. R&D allows a company to stay ahead of its competition. Without an R&D program, a company may not survive on its own and may have to rely on other ways to innovate such as engaging in mergers and acquisitions (M&A) or partnerships. Through R&D, companies can design new products and improve their existing offerings.

R&D is separate from most operational activities performed by a corporation. The research and/or development is typically not performed with the expectation of immediate profit. Instead, it is expected to contribute to the long-term profitability of a company. R&D may lead to patents, copyrights, and trademarks as discoveries are made and products created.

Companies that set up and employ entire R&D departments commit substantial capital to the effort. They must estimate the risk-adjusted return on their R&D expenditures-which inevitably involves risk of capital-because there is no immediate payoff, and the return on investment (ROI) is uncertain. As more money is invested in R&D, the level of capital risk increases. Other companies may choose to outsource their R&D for a variety of reasons including size and cost.

Companies across all sectors and industries undergo R&D activities. Corporations experience growth through these improvements and the development of new goods and services. Pharmaceuticals, semiconductors, and software/technology companies tend to spend the most on R&D. In Europe, R&D is known as research and technical or technological development (RTD).

Many small and mid-sized businesses may choose to outsource their R&D efforts because they don’t have the right staff in-house to meet their needs.