Research and development definition
Research and development definition includes characterization of two interrelated processes in the company or whole industry, which result in the application of technological innovations, new products or improvements of the products. According to the official nomenclature research & development (R&D) is systematic creative work undertaken to increase the knowledge of man, culture and society, and the search for new solutions based on this knowledge.
Areas of research and development activity
To define research and development, three areas of activity should be distinguished:
- basic Research,
- applied research,
- development work (prototypes making, testing).
Basic research performed at the level of theory and experiments have the goal to increase knowledge concerning the causes of phenomena and events, and their results can be applied in practice or not. Basic research does not apply to the economic primacy of their usefulness.
Applied research, in contrast to the previous category, uses knowledge to enable the achievement of practical goals or seeking applications for the results of basic research,
Development work consist in the use of the existing body of knowledge for the development of new or significantly improve existing products, processes or services. This is also the production of prototypes and pilot plants.
Research and development is related to the development of new products (product innovation) and processes (process innovation), performed by company's development team or acquired from other units should be seen as a kind of innovative activity. Research and development are the first stage of product life cycle.
Research and development facilities
Following organizations are involved in various research and development activities:
- R & D units - units separated in terms of organizational, legal and financial state.
- Public and private universities, carrying out research and development,
- Research libraries and archives
- Industrial companies, usually with their own R & D facilities (laboratories, offices, engineering, technology development facilities, etc.) leading R & D next to their core business,
- Other, including hospitals conducting research and development alongside its core business.
Objectives of research & development processes
Expenditures on Research and Development activities include current expenditure incurred for basic research, applied research and development and capital expenditures on fixed assets associated with R & D activities, regardless of source of funds. The measure used to determine their size is the ratio of GERD (Gross Domestic Expenditure on R & D).
Concluding remarks on research and development definition
According to a study commissioned by the European Commission in 2005 the companies issued on research and development a total of 371 billion EUR, i.e. about 7% more than in 2004. European companies increased their spending for this purpose in the previous year by 5.5%. Most investments in R & D takes place in industries such as automotive, pharmaceutical and IT.
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- Bhagat, S., & Welch, I. (1995). Corporate research & development investments international comparisons. Journal of Accounting and Economics, 19(2), 443-470.
- Cantwell, J., & Piscitello, L. (2005). Recent location of foreign-owned research and development activities by large multinational corporations in the European regions: the role of spillovers and externalities. Regional Studies, 39(1), 1-16.
- Levin, R. C., Klevorick, A. K., Nelson, R. R., Winter, S. G., Gilbert, R., & Griliches, Z. (1987). Appropriating the returns from industrial research and development. Brookings papers on economic activity, 1987(3), 783-831.
Author: Katarzyna Mizera