Research and development

The phrase research and development (also R and D or R&D) has a special commercial significance apart from its conventional coupling of research and technological development.

Related Topics:
Research - Development

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In general, R&D activities are conducted by specialized units or centers belonging to companies, universities and State agencies.

Related Topics:
Companies - Universities - State

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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 without pre-determined outcomes and with broad forecasts of commercial yield.

Related Topics:
Commerce - Future - Science - Technology

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Statistics on organisations devoted to "R&D" may express the state of an industry, the degree of competition or the lure of scientific progress. Some common measures include: budgets, numbers of patents or on rates of peer-reviewed publications.

Related Topics:
Statistics - Industry - Competition - Progress - Budget - Patent - Publication

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Bank ratios are one of the best measures, because they are continuously maintained, public and reflect risk.

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In the U.S., a typical ratio of research and development for an industrial company is about 3.5% of revenues. A high technology company such as a computer manufacturer might spend 7%. Although Allergan (a pharmaceutical) tops the spending table 43.4% investment, anything over 15% is remarkable and usually gains a reputation for being a high technology company. Companies in this category include the "big pharma" such as Merck & Co. (14.1%) or Novartis (15.1%), and the engineering companies like Ericcson (24.9%).{{fn|1}}

Related Topics:
Merck & Co. - Novartis

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Such companies are often seen as poor credit risks because their spending ratios are so unusual.

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Generally such firms prosper only in markets whose customers have extreme needs, such as medicine, scientific instruments, safety-critical mechanisms (aircraft) or high technology military armaments. The extreme needs justify the high risk of failure and consequently high gross margins from 60% to 90% of revenues. 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 only 40% revenues.

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Generally the largest technology companies not only have the largest technical staffs, but also manage them most effectively.

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

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