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What is Research and Development?

By Jane Harmon
Updated May 16, 2024
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Research and development, often called R&D, is a phrase that means different things in different applications. In the world of business, it's the phase in a product's life that might be considered the product's "conception." That is, basic science must exist to support the product's viability, and if the science is lacking, it must be discovered; this is considered the research phase. If the science exists, then turning it into a useful product is the development phase. Further terminology refinements might call it engineering to refine production so that the product can be made for a cost that appeals to consumers.

R&D is an investment in a company's future. Companies that do not spend sufficiently in this phase are often said to be "eating the seed corn" — that is, when their current product lines become outdated and overtaken by their competitors, they will not have viable successors in the pipeline. How much is reasonable to spend on research and development is highly dependent both on the technology area and how fast the market is moving. It might be enough to spend 2% of company revenue, not profit, in a fairly sedate market, but to keep up in rapidly changing markets, companies should expect to spend 15% or more, just to keep up with the rest of the pack.

There is considerable debate over which is the "R" and which is the "D" in R&D. Traditionally, research was broken into basic research and applied research, with basic research delving into basic scientific principles and applied research looking for ways to use the basic science to better human lives. More recently, there is very little truly basic research being done in the corporate world; it is mainly the province of academia, often with corporate or government funding support.

Older standards hold that research looked at least five to ten years into the future, and development one to five years, but those time frames have shortened as the speed of technology has increased. It is always difficult, in times of tight money, to justify spending significant sums on something that may not yield returns for another ten to 15 years, if ever. Spending on research and development is vital to continued growth and prosperity, however, both for a company and for a country.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
By Chidire — On Jul 05, 2011

To what extent does lack of freedom of information affect R&D in developing countries?

By anon151210 — On Feb 09, 2011

please help me what is "new product R&D"?

By drowntrack — On Jan 29, 2011

Where do the billions of dollars funding for R&D come from to fund young entrepreneurs companies to jump start the future of technology?

By anon146801 — On Jan 27, 2011

what is the role of a microbiologist in an R&D lab in the pharmaceutical industry

By anon118918 — On Oct 15, 2010

research and development is a good area of learning.

By anon72653 — On Mar 24, 2010

What is the new product research and development?

By anon68922 — On Mar 05, 2010

what is the component that the research and development center need to design it (number of labs, conference halls, lecture halls)?

By anon65246 — On Feb 11, 2010

what are the possible effects a corrupt society can have on research and development?

By anon49939 — On Oct 24, 2009

what is the role of engineers in the research and development department? and which type of jobs are there?

By anon48057 — On Oct 09, 2009

what is the importance of research and development?

By anon41023 — On Aug 12, 2009

Research and development is for the organization to look at the product life cycle from the stage of development to the final stage of consumption. a manager would want to make sure that the product contributed meaningfully to the organization, the research cost will take the profit and loss into account while development costs will be amortised.

By marlene7 — On Jun 16, 2009

Should small companies do research and development considering that it entails a lot of money? How should they do research and development?

By anon21434 — On Nov 16, 2008

Why should managers be acquainted with research and development?

By anon18158 — On Sep 16, 2008

what is the purpose of research and development in the business field?

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