Research And Development - R&D

DEFINITION of 'Research And Development - R&D'

Investigative activities that a business chooses to conduct with the intention of making a discovery that can either lead to the development of new products or procedures, or to improvement of existing products or procedures. Research and development is one of the means by which business can experience future growth by developing new products or processes to improve and expand their operations.

BREAKING DOWN 'Research And Development - R&D'

While R&D is often thought of as synonymous with high-tech firms that are on the cutting edge of new technology, many established consumer goods companies spend large sums of money on improving old products. For example, Gillette spends quite a bit on R&D each year in ongoing attempts to design a more effective shaver.

On average, most companies spend only a small percentage of their revenue on R&D (usually under 5%). However, pharmaceuticals, software and semiconductor companies tend to spend quite a bit more.

RELATED TERMS
  1. Research And Development (R&D) ...

    Any expenses associated with the research and development of ...
  2. Development Stage

    A company that is in a preliminary or early state of its corporate ...
  3. Proprietary Technology

    A process, tool, system or similar item that is the property ...
  4. Stock And Warrant Off-Balance Sheet ...

    A financing option developed to help biotechnology companies ...
  5. Pure Play

    A publicly traded company that is focused on only one industry ...
  6. Price-To-Innovation-Adjusted Earnings

    A variation of the price-to-earnings ratio (P/E ratio) that takes ...
Related Articles
  1. Stock Analysis

    3 Chip Makers Betting on the Drone Industry in 2016 (INTC, QCOM)

    Find out which of the big chip makers are betting heavily on a burgeoning consumer drone market that could be the next big wave in consumer electronics.
  2. Stock Analysis

    Analyzing Yelp's Return on Equity (ROE) (YELP)

    Learn about Yelp's return on equity (ROE) and see how it compares to industry peers. See how net profit margin, asset turnover and financial leverage impact ROE.
  3. Fundamental Analysis

    How Pharmaceutical Companies Price Their Drugs

    Learn more about how pharmaceutical companies price drugs, why prices are often very high and why it can be difficult to settle on a suitable price.
  4. Stock Analysis

    AT&T Pumps the Brakes on 5G Technology (T)

    Read about the development of next-generation 5G mobile technology, and learn why AT&T has been actively lowering expectations in late 2015.
  5. Stock Analysis

    3 Changes to Watch at Sony (SNE)

    Learn how Sony's restructuring has returned the company to profitability, and what signs to watch for to see if Sony can achieve further improvements.
  6. Investing Basics

    How to Evaluate Stock Performance

    Learn how to evaluate stock performance. While what you look for in a stock could be different from another person, the way you analyze performance is the same.
  7. Economics

    Florida's Economy: The 6 Industries Driving GDP Growth

    Learn how tourism, agriculture, international trade, aerospace and aviation, and the life sciences industries drive Florida's economy.
  8. Economics

    New Mexico's Economy: The 6 Industries Driving GDP Growth

    Discover the four primary industries that are considered to be the most important drivers in the well-being of the economy of New Mexico.
  9. Personal Finance

    4 Famous People Whose Finances Were Under Conservatorship

    Understand what conservatorship is and how it comes about during the legal process. Learn about four celebrities who were placed under conservatorship.
  10. Entrepreneurship

    The Top 3 Women-Owned Businesses in Austin, Texas

    Read about several of the most successful women-owned businesses headquartered in Austin, and learn more about how these companies are finding success.
RELATED FAQS
  1. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  2. What level of research and development compares to sales is typical in the electronics ...

    The electronics sector averages spending 8 to 10% of sales revenue on research and development, although the semiconductor ... Read Full Answer >>
  3. What is the average return on equity for a company in the automotive sector?

    As of January 2015, the average return on equity, or ROE, for companies in the automotive sector was approximately 17%, which ... Read Full Answer >>
  4. Can I get a tax credit from conducting research and development?

    It is possible for a company to qualify for a research and development tax credit for conducting research and development. ... Read Full Answer >>
  5. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  6. What metrics are often used to evaluate companies in the drugs sector?

    Some of the equity valuation metrics that analysts and investors most commonly use to evaluate companies in the pharmaceutical ... Read Full Answer >>
  7. What are typical examples of capitalized costs within a company?

    Typical examples of capitalized costs are expenses associated with constructing a fixed asset and include materials, sales ... Read Full Answer >>
  8. What are the primary factors that drive share prices in the drugs sector?

    The primary factors that drive share prices in the drugs sector are mergers and acquisitions activity, spending on health ... Read Full Answer >>
  9. What type of funding options are available to a private company?

    Similar to public companies, private companies also need funding for various reasons. A business typically needs the greatest ... Read Full Answer >>
  10. Which KPIs (key performance metrics) should I use if I want to attract new customers?

    Some of the key performance indicators (KPIs) for businesses seeking to attract new customers are focused on effectiveness ... Read Full Answer >>
  11. Who are Honda's (HMC) main suppliers?

    Some of Honda Motor Co.'s main auto parts suppliers are American Mitsuba, AGC Automotive, Takata, Nippon Seiki, Nasco, ThyssenKrupp ... Read Full Answer >>
  12. How is marginal revenue used in business planning?

    A company should always be trying to maximize its marginal revenue. When a business is in its planning stage, it will look ... Read Full Answer >>
  13. Why should companies invest in research and development?

    Companies should invest in research and development (R&D) to create new and innovative products and add features to old ... Read Full Answer >>
  14. Which segments of the chemicals sector have the highest profit margins?

    The two segments of the chemicals sector that have the highest profit margins are agricultural chemicals and pharmaceuticals, ... Read Full Answer >>
  15. What are some ways a company can expand its product line?

    While a company can expand its product line in many ways, there are four strategies a company should consider when expanding ... Read Full Answer >>
  16. How much of a drug company's spending is allocated to research and development on ...

    Pharmaceutical companies spend, on average, about 18% of revenues on research and development (R&D), making the pharmaceutical ... Read Full Answer >>
  17. What percentage of an electronics company's spending is typically spent on research ...

    The average amount of spending allocated to research and development in the electronics sector is approximately 7-8%. However, ... Read Full Answer >>
  18. How can a growing business avoid stagnation when using zero-based budgeting?

    Zero-based budgeting is commonly used by companies to review expenses in their annual budgets and create cost management ... Read Full Answer >>
  19. What are the revenue recognition criteria in accrual accounting?

    The major advantages of zero-based budgeting are flexible budgets, focused operations, lower costs and more disciplined execution, ... Read Full Answer >>
  20. What are the major types of insurance policies that insurance companies will offer?

    The principal commodities used in producing chemicals are oil, natural gas, coal and a wide variety of metals and minerals. ... Read Full Answer >>
  21. How strong are the barriers to entry for new companies in the chemicals sector?

    The American chemical industry is a significant player in the economy of the United States and the rest of the world. Although ... Read Full Answer >>
  22. What are the benefits of research and development for a company?

    Some advantages of research and development are clear, such as the possibility for increased productivity or new product ... Read Full Answer >>
  23. How do companies identify and manage business risk?

    In each stage of the business life cycle, companies face both internal and external risks that can have detrimental effects ... Read Full Answer >>
  24. What is the difference between research and development and product development?

    The difference between research and development and product development is that research and development is the conception ... Read Full Answer >>
  25. How do environmental regulations affect profitability in the chemicals sector?

    Environmental regulations typically have a negative effect on the profitability of the chemicals sector, because of the added ... Read Full Answer >>
  26. What are some common risks that are unique to investing in the electronics sector?

    The electronics sector presents several potential risks for investors. Variable costs associated with production may vary, ... Read Full Answer >>
  27. What commodities are the main inputs for the electronics sector?

    A variety of metals, plastics, raw materials and chemicals are used by the electronics industry. Some of the more common ... Read Full Answer >>
  28. What other sectors are most highly correlated with the aerospace sector?

    Sectors that correlate closely with the aerospace sector include the aviation and defense industries. These industries all ... Read Full Answer >>
  29. What are the most popular ETFs that track the aerospace sector?

    Exchange-traded funds (ETFs) are popular with investors who want a reduced-risk means of investing in a sector. ETFs lower ... Read Full Answer >>
  30. How does government regulation impact the aerospace sector?

    The aerospace sector, primarily including companies operating airlines as well as aircraft manufacturers, is heavily regulated ... Read Full Answer >>
  31. How much revenue in the airline industry comes from business travelers compared to ...

    Airlines receive about 60 percent of their revenue from consumers directly and the other 40 percent from selling frequent-flier ... Read Full Answer >>
  32. How has Larry Page's vision for Google differed from that of Sergey Brin?

    As of March 2015, Larry Page's vision for Google (GOOG) appears to be even more ambitious and diversified than that of Sergey ... Read Full Answer >>
  33. What is the difference between a biotechnology company and a pharmaceutical company?

    While biotechnology and pharmaceutical companies both produce medicine, biotechnology companies' medicines have a biological ... Read Full Answer >>
  34. What are the primary advantages of forming a joint venture?

    As an alternative to a business merger or acquisition, forming a joint venture is a common business strategy used among companies ... Read Full Answer >>
  35. What does it mean when a company in the drug sector has orphan drugs?

    Biotechnology firms and companies in the pharmaceutical industry are actively seeking methods to mitigate the risk associated ... Read Full Answer >>
  36. How does it affect a company's credit rating to buy back shares?

    A stock buyback affects a company's credit rating when it uses debt to repurchase its own shares. Many companies prefer to ... Read Full Answer >>
  37. Which other sectors benefit the most from advances in biotechnology?

    Pharmaceuticals Benefit from Advances in Biotechnology One of the sectors that benefits most strongly from advances in biotechnology ... Read Full Answer >>
  38. What are the primary risks associated with investing in the drugs sector?

    Investors in the drug sector must be aware of the regulatory challenges, competition and financial concerns associated with ... Read Full Answer >>
  39. How does government regulation impact the drugs sector?

    Government regulation lengthens the process for bringing new pharmaceuticals to market and restricts the drugs sector to ... Read Full Answer >>
  40. What is the drugs sector?

    The drugs sector is the portion of industry that develops and produces pharmaceuticals. This sector includes both major corporations ... Read Full Answer >>
  41. Why does Berkshire Hathaway prefer to buy back shares instead of paying dividends?

    Methods by which companies reward shareholders with cash include paying dividends and buying back stock. One of the most ... Read Full Answer >>
  42. What is the best software to use for business analytics?

    The market for business analytics and business intelligence software is dynamic. New products and technologies are constantly ... Read Full Answer >>
  43. Why would a company want to do an acquisition of another company?

    In general, a company only pursues an activity to increase its short- or long-term profitability, stability or competitiveness. ... Read Full Answer >>
  44. What country spends the most on research and development?

    South Korea is the world’s leading spender on research and development (R&D) as a percentage of gross domestic product ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center