Research and development

"R&D" can also mean a video game mod. See Research and Development (Half-Life 2: Episode Two) for more information.

Research and development (R&D or R+D) is the work that companies, rich people like Alfred Lee Loomis, or governments do to create new services or products. It is the first step in making something new, whether it is a product or a way to make things better.

Even though R&D looks different for different businesses, the main job of an R&D team is to develop new products and services. They try to answer questions, solve problems, and come up with new ideas.

Unlike most things a company does, R&D does not aim to make money right away. It is risky and it is not always clear if the work will pay off. But R&D is very important because it helps companies create new products that can help them get more customers and grow bigger in the market. R&D&I includes R&D and also focuses on turning ideas into real innovations.

Background

Creating new products is very important for a company to stay successful, especially in a fast-changing world with lots of competition. Companies need to keep updating what they offer to meet what customers want. Without special programs for creating new ideas, a company has to depend on working with other companies or buying others to get new innovations.

In business, "research and development" means working on new projects that can take a long time. These projects use science and technology to try to create things that will be useful and can make money. In the United States, companies usually spend about 3.5% of what they earn on research and development. Some technology companies spend much more, like computer makers or medicine companies. Spending more than 15% on research and development is unusual and shows a company is very focused on new technology.

Doing research and development helps companies grow and become more profitable. Studies show that companies that keep investing in new ideas do better than those that don’t. It can be hard to measure exactly how much research and development helps because new ideas can spread and change over time. Some ways to measure it include looking at how much money is spent, how many new ideas are shared, or looking at financial records.

Business R&D

Benefit by sector

Studies show that spending on research and development helps companies grow, especially in high-tech industries. In these industries, extra support often goes to companies that deserve it. Even in lower-tech industries, research and development can help companies learn new things and improve.

Risks

Managing research and development can be tricky because it's hard to know exactly how things will turn out. Sometimes, even a lot of money spent on research doesn't lead to new ideas, better profits, or a bigger share of the market. There are also risks if other companies try to take over a business that is doing research and development. One way to lower these risks is to buy licenses that already include useful knowledge, but this works best when combined with a company's own research efforts.

Global

Global R&D management is about organizing research and development across different countries and cultures. There are several ways companies handle research worldwide. Some keep all their research in one country, while others spread out their labs to serve different markets. A more modern approach connects research centers all around the world, allowing knowledge to flow in many directions.

Government expenditures

Further information: Public research and development

United States

See also: Federally funded research and development centers

Former President Barack Obama asked for $147.696 billion for research and development in FY2012, with 21% going to basic research. In 2015, the federal government spent $54 billion and local governments $0.6 billion on R&D. By 2020, the federal budget for R&D was $156 billion, with 41.4% going to the Department of Defense (DOD). The DOD spent about $108.5 billion on research, development, testing, and evaluation. In 2023, the U.S. spent $937 billion on R&D, including $138 billion for basic research, $174 billion for applied research, and $625 billion for experimental development.

• .jpg)

  The Jet Propulsion Laboratory, California

Learning Research and Development Center, Pittsburg

• .jpg)

  Mercedes Benz Research Development North America

National Museum of the U.S. Air Force-Research and Development Gallery

Israel

See also: Science and technology in Israel

Israel leads the world in R&D spending as a share of its economy, spending 6.02% of its GDP in 2022. Starting in the 1970s and 1980s, Israel built its research infrastructure, especially in defense. A 1984 law encouraged businesses to invest in R&D. In the 1980s to 1992, the Chief Scientist of Israel helped grow R&D subsidies. Israel created startup clusters and supported venture capital. The Yozma program in 1993 helped double the value of ten new venture capital funds in three years. By the late 1990s, Israel was second only to the U.S. in private equity. The high-tech sector, known as Silicon Wadi, earned Israel the nickname Start-up Nation. In 2023, it was ranked the fourth best startup ecosystem globally, with a value of $253 billion.

• .jpg)

  Microsoft Israel R&D Center

[General Motors](/wiki/General_Motors) R&D, Israel

[Technion](/wiki/Technion_–_Israel_Institute_of_Technology), Computer Science faculty

[Weizmann Institute](/wiki/Weizmann_Institute_of_Science), koffler accelerator

Israeli StemRad astronaut anti radiation suit, picture by [NASA](/wiki/NASA)

South Korea

South Korea spends a lot on R&D and has high levels of innovation. However, recently, its R&D efficiency has slowed. In 2023, the OECD suggested South Korea shift from improving existing technology to making original, high-risk discoveries. The OECD also advised strengthening the research system and staying updated with societal needs to keep R&D efforts effective.

European Union

Europe has not met its goal of spending 3% of its GDP on R&D by 2020. This gap creates differences among countries, with only a few EU members reaching this level. Research and innovation in Europe are supported by the Horizon 2020 program, open to participants worldwide.

One example is European environmental research and innovation policy, part of the Europe 2020 strategy from 2014 to 2020. It aims to find safe, affordable, and environmentally friendly solutions for human activities.

Companies using advanced digital technology spend more on R&D. A survey from 2021/2022 found that 14% of businesses in Central, Eastern, and South Eastern Europe were active innovators, lower than the EU average of 18%. In 2022, 67% of businesses in these regions used advanced digital technology, compared to 69% in the EU.

As of 2023, European companies make up 18% of the world's top 2,500 R&D firms but only 10% of new ones, compared to 45% in the United States and 32% in China.

In 2024, the electronics sector leads in R&D investment with 28% of its total spending, followed by textiles (19%), digital (18%), and aerospace (15%). Other sectors spend less than 10% on R&D.

Although 17% of the world's top R&D investors are in the EU, they accounted for just 1% of acquisitions of EU-based companies from 2013 to 2023.

Secop R&D Center in Gleisdorf Austria

IBM Germany Research & Development

Worldwide

In 2015, R&D made up an average of 2.2% of global GDP. By 2018, this fell to 1.79%. In 2015, countries agreed to track their progress in increasing research intensity and the number of researchers as part of the Sustainable Development Goals to be reached by 2030. However, reporting has not increased. In 2015, 99 countries reported data on R&D spending, but only 69 did in 2018. The number of countries reporting researcher numbers also dropped from 90 in 2015 to 59 in 2018.

Developing countries

Research and development (R&D) spending helps rich countries a lot, but it might not work the same way for poorer countries. These countries can sometimes do better by focusing on new ideas and building up their resources instead of spending a lot on R&D.

Studies show that for poorer countries, the benefits of R&D can go up and down. Some poor countries that spend less on R&D can still create new and useful ideas. For example, a study from 2013 found that Bangladesh, a poorer country, had a 25.2% chance of creating something new when they focused on innovation. In contrast, Malaysia, a more developed country, had only an 11.7% chance of creating something new when they spent more on R&D. This means that sometimes, poorer countries can get more value from new ideas than richer countries that spend a lot on R&D.