Should Companies Invest in Research and Development?

If I ask you what is the relation between an Electric Bulb, a transistor and a telephone? You would probably think that there is no relation between them. But these are all the perfect examples of how innovation can help economic progress and attain great heights. Invention and innovation have always been responsible for economic growth.

What exactly is innovation? Various organizations and people come up with different ideas of innovation but common to every definition is the idea of realizing commercial value by creating something that did not previously exist. Although innovation is responsible for economic growth but measuring it is quite a challenge.

It has been noted and found that in the last 18 months 25 global companies have set up their R&D centres in India. The analysis also shows that if R&D was treated as an investment rather than a current expense there could have been a 2.7% rise in the G.D.P. of the country.

Many in the public think of R&D as something that only big businesses undertake, ploughing billions into huge labs, vast testing fields, wind tunnels, and crash dummies flailing around as auto are crashed into walls. R&D is associated with the pharmaceutical industry, miracle cures, Laser Eye Surgery, and super-fast jet travel. To be sure, a vast amount of the money expended on formal research is expended by large corporations- often on relatively trivial improvements of products already doing quite a good job – and by the government on weapons systems and space exploration. The glory and the power thus displayed before our eyes on television fail to remind us that the crucial research and development on which much else is based has been – and continues to be – the work of small businesses and entrepreneurs.

R&D is a process that is intended to create new and improved technologies that prove a competitive advantage at the business and industrial level. The functions of R&D must be carefully organized and controlled. It is very tempting to believe that if the organization is running smoothly with good profits and all its employees are functioning well, it will continue to work in the same way. But sadly, it is not the case. The constant development of business and the team are essential to surpass others in the market and have a competitive edge. This is largely possible through research.

Research is not only limited to science and medical field it is an integrated part of any organization- big or small. A company consists of a team of people that steer the course of business growth. It is through the decision of these people that the company is able to succeed or fail in the market. These people keep a record of the data and analyze the company’s performance and output, and based on this research, the company makes changes in its product and policies. Many organizations have a full-fledged research department to ensure the quality of their product and also at the same time invent new products.

According to the National Science Foundation the research can be classified into 3 types:

    1. Basic Research: This research has its objective of getting deeper knowledge about the subject under study. This research does not deal with practical application. In industrial terms, basic research advances scientific knowledge but does not have commercial objective.
    2. Applied research: This research is conducted to carry out and gain knowledge about methods that will help in meeting a certain requirement. This research is basically focused on the discovery of new knowledge having specific commercial objective with respect to the company’s product or services.
    3. Development. Development is the systematic utilization of the knowledge or understanding gained from research toward the production of useful materials, devices, systems, or methods, including design and development of prototypes and processes.

It is, however, necessary not to confuse Research and Development with engineering as engineering is the application of state of art knowledge to design and produce marketable goods. Research creates knowledge, and development designs and builds prototypes and proves their feasibility. Engineering converts these prototypes into products that can be offered to the marketplace or into processes that can be used to produce commercial products and services.

Every Research and Development department should consider the following points before initializing any project:

      • Maximize the long term return on investment
      • Make proper and optimum use of the human and physical resource.
      • Maintain a balanced R&D portfolio and control risk
      • Develop or foster a favourable condition for research and innovation.

Research and Development have a vast advantage to offer to any organization or institution. Apart from helping the business grow these can also provide companies with tax benefits. The government allows the companies to deduct their R&D expenses from their income. Thus this saves a considerable amount of money and also, on the other hand, helps the company prosper and the country grows.

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