The Relationship Between R&D and Company Performance

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Abstract:

In setting R&D budgets, many companies compare their R&D intensity with that of the average intensity for global companies in their sector using an R&D scoreboard. However, it's important to define the sector or subsector for this purpose carefully since unduly broad sector definitions have led to misleading conclusions. Moreover, R&D is only one of the investments that should be compared in this way—both Capex and market development can be as or more important for some sectors. Competitive advantage can also be gained by increasing R&D at the start of a recession or downturn when competitors may be decreasing R&D a number of companies have shown that this boosts the relative advantage of the company's products and services and hence leads to increased sales and market capitalization in the subsequent upturn.

Keywords: BUSINESS PERFORMANCE; INNOVATION; R AND D INVESTMENT; R AND D SCOREBOARDS; R AND D STRATEGY

Document Type: Research Article

Publication date: November 1, 2007

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