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.

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