View source for Research and development

{{Short description|General term for activities in connection with corporate or governmental innovation}}
{{For|the video game mod|Research and Development (mod){{!}}''Research and Development'' (mod)}}
{{multiple|
{{Update|developments in (a) USA since Barack Obama and (b) elsewhere since that time|date=June 2021}}
{{More citations needed|date=March 2020}}
}}
{{Research sidebar}}
{{Science}}

[[File:Cycle of Research and Development.svg|thumb|upright=1.8|Cycle of research and development]]
[[File:Spending on research and development as share of GDP, OWID.svg|thumb|upright=1.8|Spending on research and development as share of GDP (2015)]]
'''Research and development''' ('''R&D''' or '''R+D'''; also known in [[Europe]] as '''research and technological development''' or '''RTD''')<ref>{{Cite web|url=https://www.europarl.europa.eu/factsheets/en/sheet/66/policy-for-research-and-technological-development|title = Policy for research and technological development &#124; Fact Sheets on the European Union &#124; European Parliament| date=31 March 2023 }}</ref> is the set of innovative activities undertaken by corporations or governments in developing new services or products, and improving existing ones.<ref>{{cite book |title=A Dictionary of Aviation |first=David W. |last=Wragg |isbn=9780850451634 |edition=first |publisher=Osprey |year=1973 |page=223}}</ref><ref name="investopedia">{{Cite news|url=http://www.investopedia.com/terms/r/randd.asp|title=Research And Development – R&D|last=Staff|first=Investopedia|date=2003-11-25|work=Investopedia|access-date=2017-12-12|language=en-US}}</ref> [[Research]] and development constitutes the first stage of development of a potential new service or the production process.

R&D activities differ from institution to institution, with two primary models<ref name="investopedia"/> of an R&D department either staffed by [[engineers]] and tasked with directly [[new product development|developing new products]], or staffed with [[applied science|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]].<ref>{{Cite journal|last1=Yiu|first1=L. M. Daphne|last2=Lam|first2=Hugo K. S.|last3=Yeung|first3=Andy C. L.|last4=Cheng|first4=T. C. E.|date=2020|title=Enhancing the Financial Returns of R&D Investments through Operations Management|url=https://onlinelibrary.wiley.com/doi/abs/10.1111/poms.13186|journal=Production and Operations Management|language=en|volume=29|issue=7|pages=1658–1678|doi=10.1111/poms.13186|s2cid=216529963|issn=1937-5956|hdl=10397/89881|hdl-access=free}}</ref> However R&D is crucial for acquiring larger shares of the market through the marketisation of new products.<ref name="investopedia"/> '''R&D&I''' or R&D&i are also acronyms with the same general meaning of R&D and stand for research, development and innovation.<ref>EUROPEAN COMMISSION https://ec.europa.eu/competition/state_aid/cases/220403/220403_758165_5_1.pdf</ref><ref>Expenses for university R&D&I increase moderately in Spain https://www.eurekalert.org/pub_releases/2021-07/ucid-efu072221.php</ref><ref>Research, Development and Innovation (R&D&I), [[Fundação Para a Ciência e Tecnologia]] https://www.fct.pt/dsi/idi/index.phtml.en</ref>

==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 alliance]]s, [[acquisitions]], and networks to tap into the innovations of others.

A system driven by [[marketing]] is one that puts the customer needs first, and produces goods that are known to sell.<ref>{{Cite news|url=https://hbr.org/1998/11/business-marketing-understand-what-customers-value|title=Business Marketing: Understand What Customers Value|last1=Anderson|first1=James C.|date=1998-11-01|work=Harvard Business Review|access-date=2019-02-06|last2=Narus|first2=James A.|issue=November–December 1998|issn=0017-8012}}</ref> [[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|date=March 2017}}

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 [[sovereign state|state]] agencies.{{cn|date=January 2023}} 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.<ref>{{Cite web|url=http://chartsbin.com/view/41854|title=Research and Development Employees by Country|last=ChartsBin|website=ChartsBin|access-date=2019-02-06}}</ref>

[[Statistics]] on organizations devoted to "R&D" may express the state of an [[Industry (economics)|industry]], the degree of [[competition]] or the lure of [[scientific progress|progress]].<ref>{{Cite book|url=https://books.google.com/books?id=fax-DwAAQBAJ&q=Statistics+on+organizations+devoted+to+%22R&pg=PT659|title=Biotechnology Fundamentals|last=Khan|first=Firdos Alam|date=2018-09-03|publisher=CRC Press|isbn=9781498723459|language=en}}</ref> Some common measures include: [[budget]]s, numbers of [[patent]]s or on rates of peer-reviewed [[publication]]s. Bank ratios are one of the best measures, because they are continuously maintained, public and reflect risk.

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|date=March 2017}} A [[high technology]] company, such as a computer manufacturer, might spend 7% or a [[pharmaceutical company|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 [[biotech]] company [[Allergan]], which tops the spending table with 43.4% investment.<ref name="fn_2">All figures [http://www.innovation.gov.uk/rd_scoreboard/ UK R&D Scoreboard] {{webarchive|url=https://web.archive.org/web/20051027005836/http://www.innovation.gov.uk/rd_scoreboard/ |date=2005-10-27 }} {{As of|2006|lc=on}}.</ref> Such companies are often seen as [[credit risk]]s because their spending ratios are so unusual.{{citation needed|date=March 2017}}

Generally such firms prosper only in markets whose customers have extreme high technology needs, like certain prescription drugs or special chemicals, [[scientific instrument]]s, and [[safety-critical system]]s in medicine, [[aeronautics]] or [[military weapons]]. {{citation needed|date=March 2017}}The extreme needs justify the high risk of failure and consequently high gross margins from 60% to 90% of revenues.{{citation needed|date=March 2017}} That is, [[gross profit]]s 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|date=March 2017}}

On a technical level, high tech organizations explore ways to re-purpose and repackage advanced technologies as a way of [[amortizing loan|amortizing]] the high overhead.{{citation needed|date=March 2017}} They often reuse advanced manufacturing processes, expensive safety certifications, specialized embedded software, computer-aided design software, electronic designs and mechanical subsystems.{{citation needed|date=March 2017}}

Research from 2000 has shown that firms with a persistent R&D strategy outperform those with an irregular or no R&D investment program.<ref>{{Cite book|url=https://books.google.com/books?id=0MGICwAAQBAJ&q=Research+from+2000+has+shown+that+firms+with+a+persistent+R&pg=PA286|title=The SAGE Handbook of Research Management|last1=Dingwall|first1=Robert|last2=McDonnell|first2=Mary Byrne|date=2015-06-26|publisher=SAGE|isbn=9781473914452|language=en}}</ref>

==Business R&D==
[[File:Mercedes Benz Research Development North America (13896037060).jpg|thumb|Mercedes Benz Research Development North America (13896037060)]]
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".<ref>{{cite web|title=Aerospace and Defense: Inventing and Selling the Next Generation|url=http://csis.org/files/publication/090520_diig_aerospace.pdf|website=Center for Strategic and International Studies|publisher=Center for Strategic and International Studies, International Security Program|access-date=6 August 2017|pages=1|language=en|date=December 5, 2009}}</ref> 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.<ref>{{cite web |url=http://investor-partner.co.uk/business-dictionary/42/invention-finance |title=Investor-partner business partner finder Business dictionary}}</ref> 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.<ref>{{cite web |url=http://investor-partner.co.uk/business-dictionary/41/know-how-finance |title=Investor-partner business partner finder Business dictionary}}</ref>

===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.<ref>{{cite journal |last1=Ortega-Argiles |first1=Raquel |last2=Potters |first2=Lesley |last3=Vivarelli |first3=Marco |date=2011 |title=R&D and productivity: testing sectoral peculiarities using micro data |journal=Empirical Economics |volume=41 |issue=3 |pages=817–839 |doi= 10.1007/s00181-010-0406-3|hdl=10419/35059 |s2cid=59130979 |url=https://econpapers.repec.org/RePEc:iza:izadps:dp3338 |hdl-access=free }}</ref><ref>{{cite journal|last1=Ortega-Argiles|first1=Raquel|last2=Piva|first2=Mariacristina|last3=Vivarelli|first3=Marco|author-link3=Marco Vivarelli|date=2011|title=Productivity Gains from R&D Investment: Are High-Tech Sectors Still Ahead?|journal=IZA Discussion Papers|publisher=IZA|issue=5975|pages=1–22}}</ref> In research done by Francesco Crespi and Cristiano Antonelli, high-tech firms were found to have "virtuous" [[Matthew effect]]s 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.<ref>{{cite journal |last1=Crespi |first1=Francesco |last2=Antonelli |first2=Cristiano |date=2011 |title=Matthew Effects and R&D Subsidies: Knowledge Cumulability in High-Tech and Low-Tech Industries |journal=Working Papers |publisher=Università degli Studi Roma Tre |issue=140 |pages=1–24 }}</ref>  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.<ref>{{cite journal |last=Mendonca |first=Sandro |date=2009 |title=Brave Old World: Accounting for 'High-Tech' Knowledge in 'Low-Tech' Industries |journal=Research Policy |volume=38 |issue=3 |pages=470–482 |doi= 10.1016/j.respol.2008.10.018}}</ref>

===Risks===
Business R&D is risky for at least two reasons. The first source of risks comes from R&D nature, where R&D project could fail without residual values. The second source of risks comes from takeover risks, which means R&D is appealing to bidders because they could gain technologies from acquisition targets.<ref>{{Cite journal|last1=Bena |first1=Jan |last2=Kai |first2=Li |date=2014|title=Corporate innovations and mergers and acquisitions.|journal=The Journal of Finance |volume=69 |issue=5|pages=1923–1960|doi=10.1111/jofi.12059 |hdl=10.1111/jofi.12059 |hdl-access=free }}</ref> Therefore, firms may gain R&D profit that co-moves with takeover waves, causing risks to the company which engages in R&D activity.<ref>{{Cite journal |doi=10.2308/accr-51270|title=The R&D Premium and Takeover Risk|journal=The Accounting Review|volume=91|issue=3|pages=955–971|year=2016|last1=Lin|first1=Ji-Chai|last2=Wang|first2=Yanzhi (Andrew)|hdl=10397/65000 |hdl-access=free}}</ref>

===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.<ref>Chiesa, V. (2001). R&D Strategy and Organisation, Imperial College Press</ref>

==Government expenditures==
{{further|Public research and development}}

===United States===
[[File:1953- Funding for research and development - US.svg|thumb|Since the 1960s, private businesses in the U.S. have provided an increasing share of funding for research and development, as direct federal funding waned.<ref name=NSF_R&D_2023>{{cite web |last1=Anderson |first1=G. |last2=Moris |first2=F. |title=Federally Funded R&D Declines as a Share of GDP and Total R&D |url=https://ncses.nsf.gov/pubs/nsf23339 |publisher=National Science Foundation, National Center for Science and Engineering Statistics |archive-url=https://web.archive.org/web/20231003235103/https://ncses.nsf.gov/pubs/nsf23339 |archive-date=3 October 2023 |date=2023 |quote=NSF 23-339 |url-status=live }}</ref>]]
[[File:Mercedes Benz Research Development North America (13896049248).jpg|thumb|Mercedes Benz Research Development North America (13896049248)]]
Former President [[Barack Obama]] requested $147.696&nbsp;billion for research and development in [[Fiscal year|FY]]2012, 21% of which was destined to fund basic research.<ref>{{Cite book|url=https://fas.org/sgp/crs/misc/R41098.pdf|title=Federal Research and Development Funding: FY2011|publisher=Library of Congress, Congressional Research Service|year=2011|editor-last=Sargent|editor-first=John F Jr|oclc=1097445714}}</ref> According to National Science Foundation in U.S., in 2015, R&D expenditures performed by federal government and local governments are 54 and 0.6&nbsp;billions of dollars.<ref>{{Cite web|url=https://www.nsf.gov/statistics/2018/nsb20181/assets/1038/research-and-development-u-s-trends-and-international-comparisons.pdf|title=Research and Development: U.S. Trends and International Comparisons, National Science Foundation.}}</ref> The federal research and development budget for fiscal year 2020 was $156 billion, 41.4% of which was for the Department of Defense ([[United States Department of Defense|DOD]]).<ref>{{Cite web|date=17 December 2020|title=Federal Research and Development (R&D) Funding: FY2021|url=https://crsreports.congress.gov/product/pdf/R/R46341|access-date=20 February 2021}}</ref> DOD's total research, development, test, and evaluation budget was roughly $108.5 billion.<ref>{{Cite web|date=February 2020|title=RDT&E Programs (R-1)|url=https://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2021/fy2021_r1.pdf|access-date=20 February 2021|website=Office of the Undersecretary of Defense (Comptroller)}}</ref>

===European Union===
Europe is lagging behind in R&D investments from the past two decades. The target of 3% of [[Gross domestic product|gross domestic product (GDP)]] was meant to be reached by 2020, but the current amount is below this target. This also causes a [[digital divide]] among countries since only a few [[Member state of the European Union|EU Member States]] have R&D spending.<ref name=":133">{{Cite web |last=Bank |first=European Investment |date=2023-02-28 |title=Innovation overview 2023 |url=https://www.eib.org/en/publications/innovation-overview-2023 |language=EN}}</ref>

Research and innovation in Europe are financially supported by the programme [[Horizon 2020]], which is open to participation worldwide.<ref>{{cite web|url=http://europa.eu/rapid/press-release_MEMO-13-1085_en.htm|title=European Commission – PRESS RELEASES – Press release – Horizon 2020 – the EU's new research and innovation programme|website=europa.eu}}</ref>

A notable example is the [[European environmental research and innovation policy]], based on the [[Europe 2020]] strategy which will run from 2014 to 2020,<ref>{{Cite web|url=http://europa.eu/rapid/press-release_MEMO-11-848_en.htm?locale=en|title=European Commission – PRESS RELEASES – Press release – Horizon 2020: Commission proposes €80 billion investment in research and innovation, to boost growth and jobs|website=europa.eu|language=en|access-date=2017-12-12}}</ref> a multidisciplinary effort to provide safe, economically feasible, environmentally sound and socially acceptable solutions along the entire value chain of human activities.<ref>{{Cite web|url=http://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:02013R1291-20150704|title=EUR-Lex – 02013R1291-20150704 – EN – EUR-Lex|website=eur-lex.europa.eu|language=en|access-date=2017-03-16}}</ref>

Firms that have embraced advanced digital technology devote a greater proportion of their investment efforts to R&D. Firms who engaged in digitisation during the pandemic report spending a big portion of their expenditure in 2020 on software, data, IT infrastructure, and website operations.<ref name=":34">{{Cite book |last=Bank |first=European Investment |url=https://www.eib.org/en/publications/digitalisation-in-europe-2021-2022 |title=Digitalisation in Europe 2021–2022: Evidence from the EIB Investment Survey |date=2022-05-05 |publisher=European Investment Bank |isbn=978-92-861-5233-7 |language=EN}}</ref><ref>{{Cite web |title=Press corner |url=https://ec.europa.eu/commission/presscorner/home/en |access-date=2022-05-31 |website=European Commission – European Commission |language=en}}</ref> A 2021/2022 survey found that one in every seven enterprises in the Central, Eastern and South Eastern regions (14%) may be classed as active innovators — that is, firms that spent heavily in research and development and developed a new product, process, or service — however this figure is lower than the EU average of 18%. In 2022, 67% of enterprises in the same region deployed at least one sophisticated digital technology, and 69% EU firms did the same.'''<ref name=":115">{{Cite book |last=Bank |first=European Investment |url=https://www.eib.org/en/publications/20220265-econ-eibis-2022-cesee |title=EIB Investment Survey 2022 – CESEE overview |date=2023-01-11 |publisher=European Investment Bank |isbn=978-92-861-5435-5 |language=EN}}</ref>'''

As of 2023, European enterprises account for 18% of the world's top 2 500 R&D corporations, but just 10% of new entrants, compared to 45% in the United States and 32% in China.<ref>{{Cite book |last=Bank |first=European Investment |url=https://www.eib.org/en/publications/20230323-investment-report-2023 |title=EIB Investment Report 2023/2024: Transforming for competitiveness |date=2024-02-07 |publisher=European Investment Bank |isbn=978-92-861-5648-9 |language=EN}}</ref>

===Worldwide===
In 2015, research and development constituted an average 2.2% of the [[global GDP]] according to the [[UNESCO Institute for Statistics]].<ref>{{Cite web|url=https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS|title=Research and development expenditure (% of GDP) {{!}} Data|website=data.worldbank.org|language=en-us|access-date=2017-12-12}}</ref>

By 2018, research and development constituted an average 1.79% of the [[global GDP]] according to the [[UNESCO Institute for Statistics]]. Countries agreed in 2015 to monitor their progress in raising research intensity (SDG 9.5.1), as well as researcher density (SDG 9.5.2), as part of their commitment to reaching the [[Sustainable Development Goals]] by 2030. However, this undertaking has not spurred an increase in reporting of data. On the contrary, a total of 99 countries reported data on domestic investment in research in 2015 but only 69 countries in 2018. Similarly, 59 countries recorded the number of researchers (in full-time equivalents) in 2018, down from 90 countries in 2015.<ref name="UNESCO Science Report 2021">{{cite book |editor1-last=Schneegans |editor1-first=S. |editor2-last=Straza |editor2-first=T. |editor3-last=Lewis |editor3-first=J. |title=UNESCO Science Report: the Race Against Time for Smarter Development. |date=11 June 2021 |publisher=UNESCO |location=Paris |isbn=978-92-3-100450-6 |url=https://unesdoc.unesco.org/ark:/48223/pf0000377433/PDF/377433eng.pdf.multi}}</ref> UNESCO Institute for Statistics is the global custodian of these R&D data; data can be freely obtained from the [http://data.uis.unesco.org/ UIS database].

{{Bar chart
| title  = Top countries by R&D spending<ref>[http://data.uis.unesco.org/Index.aspx?DataSetCode=SCN_DS&lang=en#  UNESCO Institute for Statistics, 9.5.1 Research and development expenditure as a proportion of GDP]</ref>
| label_type = Country |
| data_type  = R&D as percentage of GDP
| data_max   = 6
| label1  = Israel  | data1  = 5.44
| color1 = #99ccff
| label2  = Korea | data2  = 4.81
| color2 = #99ccff
| label3  = Sweden | data3  = 3.53
| color3 = #99ccff
| label4  = Belgium | data4  = 3.48
| color4 = #99ccff
| label5  = United States | data5  = 3.45
| color5 = #99ccff
| label6  = Japan | data6  = 3.26
| color6 = #99ccff
| label7  = Austria | data7  = 3.20
| color7 = #99ccff
| label8  = Switzerland | data8  = 3.15
| color8 = #99ccff
| label9  = Germany | data9  = 3.14
| color9 = #99ccff
| label10  = Denmark | data10  = 2.96
| color10 = #99ccff
| label11  = Finland | data11  = 2.94
| color11 = #99ccff
| label12  = Iceland | data12  = 2.47
| color12 = #99ccff
| label13  = China | data13  = 2.40
| color13 = #99ccff
| label14  = France | data14  = 2.35
| color14 = #99ccff
| label15  = Netherlands | data15  = 2.29
| color15 = #99ccff
| label16  = Norway | data16  = 2.28
| color16 = #99ccff
| label17  = Slovenia | data17  = 2.15
| color17 = #99ccff
| label18  = Czechia | data18  = 1.99
| color18 = #99ccff
| label19  = Singapore | data19  = 1.89
| color19 = #99ccff
| label20  = Australia | data20  = 1.83
| color20 = #99ccff
}}

==See also==
* [[Basic research]]
* [[Technology demonstration|Demonstration]]
* [[Industrial laboratory]]
* [[Innovation]]
* [[List of business and finance abbreviations]]
* [[List of companies by research and development spending]]
* [[List of countries by research and development spending]]
* [[Neglected tropical disease research and development]]
* [[Prototype]]
* [[Science of science policy]]
* [[Science policy]]
* [[Technological revolution]]
* [[Technology life cycle]]

==References==
{{reflist}}

==Sources==
* {{Free-content attribution
| title = UNESCO Science Report: the Race Against Time for Smarter Development.
| author = Schneegans, S., T. Straza and J. Lewis (eds)
| publisher = UNESCO
| page numbers =
| source =
| documentURL = https://unesdoc.unesco.org/ark:/48223/pf0000377433/PDF/377433eng.pdf.multi
| license statement URL =
| license = C-BY-SA 3.0 IGO
}}

==External links==
* {{commons category inline}}
{{Industries}}
{{Technology topics}}
{{Authority control}}

[[Category:Research and development| ]]
[[Category:Innovation]]
[[Category:Product development]]
[[Category:Research|Development]]