Research and Development (R&D)- Definition

Cite this article as:"Research and Development (R&D)- Definition," in The Business Professor, updated December 11, 2018, last accessed October 27, 2020,


Research and Development (R&D) Definition

Research and Development is a process implemented by the companies or governmental organizations to innovate or improve its products and services. The Research and Development activity may involve both the basic research and applies research. Companies use this method either to innovate new products or to improve the effectivity of the existing products. It may also aim at solving a specific issue regarding a product or service.

A Little More on What is R&D

Organizations spend a substantial amount of their cost in conducting Research and Development as the process is crucial for the development and growth of the company. Producers of consumer goods use this process to improve their product offerings and develop the existing products.

Typically, pharmaceuticals, technology companies and semiconductors spend most on R&D.
In Europe, the process is known as Research and Technological Development (RTD). The process of R&D differs from one company to another, it also largely depends on the industry it belongs to but all of them follow the standard primary models.

There are mainly two existing models that are implemented in conducting an R&D. Generally, the big corporate houses do have a separate department dedicated to R&D activities.
The first model involves engineers who develop new products. The entire department is staffed with engineers engages in extensive research. The other model involves industrial scientists or researchers. The department is engaged in applied research in technical, industrial or scientific fields for developing new products or improving the existing offerings. It also may aim at improving a procedure or solving a problem identified.

The Research and Development process does not guarantee an immediate profit, rather it is performed for long-term growth. There is a certain amount of risk associated with this activity as it doesn’t bring a profit immediately. Research can fail for a number of times before the team reaches the desired goal, so the general return of investment is uncertain to an extent. Risk adjusted return must be estimated by the companies.

Companies spend billions of dollars in R&D activities with of aim of introducing innovations and offer the newest technologies. The R&D team consists of skillful, knowledgeable and experienced staffs who can offer the best solutions and innovative ideas.

References Research and Development

Academic Research on Research and Development (R&D)

  • ¬∑¬†¬†¬†¬†¬†¬† Research and development¬†(R&D) beyond manufacturing: the strange case of services R&D, Miles, I. (2007).¬†R&D Management,¬†37(3), 249-268. According to this research thesis, the processes involved in the business sectors was explained as well as the research and development expenditure stemming from the aspect of the serving sector of the economy. According to his research, it was postulated that this sector of the economy has been growing rapidly in various OECD countries according to the data gotten from the official statistics. The process of the R and D was studied via a programme of workshop and interviews with the service firms where lack of familiarities with the R and D management practices which was termed as incompetence according to this research thesis.
  • ¬∑¬†¬†¬†¬†¬†¬† The effect of¬†research and development¬†(R&D) inputs and outputs on the relation between the uncertainty of future operating performance and R&D expenditures, Pandit, S., Wasley, C. E., & Zach, T. (2011). Journal of Accounting, Auditing & Finance,¬†26(1), 121-144. According to this research paper, prior research assumed the constant marginal productivity of the R and D in terms of the cross-section. This paper, however, has built on this assumption. This paper explains this process in relation to the assumption and advancement in the accounting result on the informational role of the R and D by evaluating how the measures of innovative products such as the patent citation and the patent count which is an alternative for the economic value of innovation related to the firm‚Äôs future performance. One main aim of this paper is that it demonstrates the relation between R and D expenses and future operating performance.
  • ¬∑¬†¬†¬†¬†¬†¬† What drives business¬†Research and Development¬†(R&D) intensity across Organisation for Economic Co-operation and Development (OECD) countries? Falk, M. (2006). Applied Economics,¬†38(5), 533-547. This paper studied the empirical result recorded from the investigation of the potential determinants in the business-sector R and D intensity using a panel of OECD. This paper estimates the system using the GMM estimator used for controlling an endogeneity shown as a result of the increase in the persistence of the business sector R and D expenditure. However, this paper finds out that expenditures for R and D carried out by universities are significantly and positively related to business enterprise sector expenditure. The result of this static fixed effect shows that countries characterized by strong patent right have higher R and D incentives.
  • ¬∑¬†¬†¬†¬†¬†¬† The implications of long-term performance plans and institutional ownership for firms’¬†research and development¬†(R&D) investments, Eng, L. L., & Shackell, M. (2001). Journal of Accounting, Auditing & Finance,¬†16(2), 117-139. According to this study, tests were carried out to examine whether long-term performance plans and institutional holdings are associated with the level of R and D spending firm. This study has helped to add to the growing research thesis concerned with the impact of the mechanism to ease the short-term focus of investors and managers. The result gotten from this research indicates that the horizon of institutional investors may have an impact on the managers‚Äô planning horizon and how they take a decision regarding long term investment. Although the decision of managers as regards R and D are not affected by the introduction of the performance plans.
  • ¬∑¬†¬†¬†¬†¬†¬† The dynamic relation between the organizational and professional commitment of highly educated¬†research and development¬†(R&D) professionals, Chang, J. Y., & Choi, J. N. (2007). The Journal of social psychology,¬†147(3), 299-315. The result drawn from this paper concludes that the importance of maintaining a balance between professional and organizational commitment and the provision of a method of identifying the critical period for the intervention designed to accelerate the retention of the R and D professionals during the early socialization of organizations. Investigation of the possibilities of the conflict between professional and organizational forms of commitment was also explained in this research paper. According to this paper, two forms of commitment were studied which are organizational and professional commitments.
  • ¬∑¬†¬†¬†¬†¬†¬† Regional dynamics of innovation: Investigating the co-evolution of patents,¬†research and development¬†(R&D), and employment, Buerger, M., Broekel, T., & Coad, A. (2012). Regional Studies,¬†46(5), 565-582. This research thesis explains the lead-lag relationship between the research and development, the growth rate of patents and the employment for German regions over the period of 1999 to 2005. The result gotten from this study was developed as a vector auto-regression model which shows an increase in patents associated with subsequent growth of employment in the optical equipment industry and the medical sector as well as in the electrical and electronic industry. The patent growth is also directly connected to the subsequent growth of the R and D.
  • ¬∑¬†¬†¬†¬†¬†¬† Research, development, and firm growth. Empirical evidence from European top R&D spending firms, Garc√≠a-Manj√≥n, J. V., & Romero-Merino, M. E. (2012). Research Policy,¬†41(6), 1084-1092. According to recent studies, a model of endogenous firm growth with the R and D investment as one of the main mechanism of growth was presented. This paper shows a positive effect of the R and D intensity on the growth of sales using OLS, GMM estimator for a sample of 754 European firms during the period of 2003-2007 and the quantile regression. This result also indicates this association is more severe in high-growth firms and is especially major when studying the high-technology sector.¬† This research paper also provides empirical support to the recommendations from the policymakers in business.
  • ¬∑¬†¬†¬†¬†¬†¬† SMEs; Virtual¬†research and development¬†(R&D) teams and new product development: A literature review, Ale Ebrahim, N., Ahmed, S., & Taha, Z. (2010). This paper indicates that there has not been important quality research carried out to explain the diverse characteristics of the virtual R and D terms in the SMEs (Small and medium-sized enterprises). This paper gives a comprehensive report on the various aspects of the virtual R and D teams collected from the reputed publications. The main aim of this paper is to provide a framework on the dynamics and structure of the R and D collaboration in SMEs. This research thesis concluded that noting the feebleness and gaps in the existing reports calls for further future research in this sector.
  • ¬∑¬†¬†¬†¬†¬†¬† Exploring responsibility rationales in¬†Research and Development¬†(R&D), Doorn, N. (2012). Science, Technology, & Human Values,¬†37(3), 180-209. According to this research, the rationales of engineers and scientists for distributing moral obligations related to technology development were explored. Qualitative research was carried out and an investigation which shows how the actors within a research network dispatch responsibility for this issue was also carried out. This paper shows that there is a similarity between the actors‚Äô ethics position and their responsibility rationale. This research thesis suggests that most people seek fir alliances between these layers rather than work one-directionally over them.

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