DEFINITION of 'Return On Innovation Investment'

A performance measure used to evaluate the effectiveness of a company's investment in new products or services. The return on innovation investment is calculated by comparing the profits of new product or service sales to the research, development and other direct expenditures
generated in creating these new products or services.

Also referred to as "R2I" or "ROI2."

BREAKING DOWN 'Return On Innovation Investment'

The focus of this metric is not only to determine how well a company is turning its investments in new products or services into additional profit for the company, but also how efficient it is in its R&D spending. The better a company is able to forecast the demand for its new offerings, as well as how efficient it is in allocating resources, the better its return on innovation investment should be.

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

    Any expenses associated with the research and development of ...
  2. Price/Growth Flow

    A measure formulated to identify companies that are producing ...
  3. Financial Innovation

    Advances over time in the financial instruments and payment systems ...
  4. Disruptive Innovation

    A disruptive innovation is a new use for a technology that breaks ...
  5. Total Return

    When measuring performance, the actual rate of return of an investment ...
  6. Production Cost

    A cost incurred by a business when manufacturing a good or producing ...
Related Articles
  1. Investing

    Key Financial Ratios for Pharmaceutical Companies

    Because of the unique requirements for bringing products to market, pharmaceutical industry stocks are best analyzed by using certain key financial ratios.
  2. Investing

    Buying Into Corporate Research & Development (R&D)

    Investors take note: companies that cut research and development are in danger of saving today but losing big tomorrow.
  3. Investing

    4 Tips to Evaluate Growth Companies (KO, AAPL)

    Discover the best metrics for stock investors to utilize when selecting and evaluating the best opportunities in growth investing.
  4. Investing

    5 Stock Market Metrics Explained

    Learn how to evaluate a company's performance using metrics such as ROE, EPS and P/E ratio.
  5. Investing

    R&D Spending And Profitability: What's The Link?

    Return on research capital (RORC), can help investors measure how much profit R&D spending actually generates.
  6. Financial Advisor

    How To Calculate Return On Investment (ROI)

    Return on investment allows an investor to evaluate the performance of an investment and compare it to others in his or her portfolio. Find out how to calculate ROI and how to use to your advantage. ...
  7. Financial Advisor

    How to Create a New Financial Product in 10 Steps

    The 10 steps outlined here are essential to the creation of a new financial product.
  8. Investing

    Understanding Production Efficiency

    Production efficiency is the point at which an economy cannot increase output of a good or service without lowering the production of another product.
  9. Investing

    The Gross Margin

    A business's "gross margin" is a rough gauge of how profitable its operations are. It measures how much sales revenue the company retains after all of the direct costs associated with making ...
  10. Investing

    Impact Investing: Improve the World and Your Portfolio

    Socially responsible investing allows you to make a difference in the world or your community while potentially improving your portfolio.
  1. What are the benefits of R&D (research and development)?

    Learn about the many benefits of research and development (R&D) efforts for companies in competitive markets, including the ... Read Answer >>
  2. What is the difference between research and development and product development?

    Understand the difference between research and development and product development. Learn why a company would want to invest ... Read Answer >>
  3. How should I analyze a company's financial statements?

    Discover how investors and analysts use a company’s financial statements to evaluate a company's financial health and investment ... Read Answer >>
  4. What are some of the limitations of only looking at the rate of return for an investment?

    Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >>
  5. What price metrics can be used to compare companies in the industrial sector?

    Discover some of the best equity evaluation measures that investors and analysts commonly use for comparing companies in ... Read Answer >>
  6. What metrics can be used to evaluate companies in the forest products sector?

    Understand some of the best financial and equity valuation measurements that can be utilized to evaluate companies in the ... Read Answer >>
Hot Definitions
  1. Liquidity

    Liquidity is the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's ...
  2. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  5. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center