Research and development (R&D)

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Research and development (R&D) is the process of research in scientific and technical knowledge, with the aim of developing technologies to obtain new products, materials or processes. For this, in R&D activities, it will be essential that a significant level of creativity or novelty can be appreciated.

The objective pursued with investment in research and development is to achieve an innovation that increases the company's sales. This can be through an improvement in the quality of the product or service, or by reducing its price. That is, to achieve a competitive advantage.

In recent years, reference has been made to R + D + i, the last element being innovation (i).

Governments often facilitate companies' R&D expenses through tax advantages. You can read more about accounting for R&D expenses.

Types of Research and development (R&D)

Among the types of research found, the following should be highlighted:

  • Basic or fundamental research: Seeks to acquire new knowledge. Through it, it is intended to formulate hypotheses, laws and theories.
  • Applied research: From what is obtained in basic research, practical applications are sought. Knowledge is used to obtain practical objects. The research results are capable of being patented to be exploited commercially.
  • Technological development: It involves the use of knowledge acquired in applied research. At this stage, the company has obtained the knowledge «Know how »(Know-how) and prototypes are developed.

Advantages of R&D for companies

Among the advantages of R&D, the following should be highlighted:

  • Exclusive knowledge of the technology generated.
  • Technological independence of the company.
  • Possibility of commercially exploiting innovations.
  • You can access tax benefits for investment in R + D + i.
  • Experience effect.

Disadvantages of R&D for companies

Despite the large number of advantages, investing in research and development (R&D) has some drawbacks, including the following:

  • It involves a significant investment of resources.
  • Long-term fruits.
  • High level of risk.

The importance of R&D in the company

New technologies have made it possible to achieve significant increases in productivity. On the other hand, companies have managed to reduce costs, improve the quality of the products offered and expand markets. That is why its survival, and continuity, is strongly linked to research and development.

The decision of which projects will be developed in the company depends on the following factors:

  • Volume of financial resources available.
  • Project costs.
  • Company capabilities to deal with projects.

In order to verify the achievement of the project, it will be necessary to establish a control system (GANTT, PERT).

The budget allocated to the research and development department will be prepared as follows:

  • Applying a coefficient to the total budget.
  • Application of a percentage on the total budget that is similar to that of competing companies.
  • A percentage of the billing volume.
  • Depending on the established objectives.

In English: research and development (R&D)

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