Research pick: The true cost of R&D - "How companies respond to growing research costs: cost control or value creation?"

An analysis of case studies of research and development intensive companies published in the International Journal of Technology Management reveals that companies do not necessarily perceive R&D as a cost, per se. The international team reports and assesses the different strategies companies can employ to respond to growing research costs. Because on the bottom line, R&D is a cost.

Their work shows that companies do see the expense of R&D as a secondary factor. “The main drivers of research investments are based on the expected value of innovations, risk and strategic competence development, and anticipating uncertainty concerning the kind of research that might be needed in the future,” the team writes.

Karl-Heinz Leitner of the Center for Innovation Systems and Policy, at the AIT Austrian Institute of Technology, in Vienna and the Center for Entrepreneurship and Applied Business Studies at the University of Graz, also in Austria, and colleagues in Italy, The Netherlands, and the USA, emphasise that while there is a large body of research literature on studying the different strategies that might be used to exploit R&D investments, researchers actually know little about the relative importance of controlling costs. Their analysis of case studies of European and US firms that are R&D intensive reveals much about how R&D costs are perceived.

They found that “value creation” is the predominant emphasis of R&D managers and cost does not appear to be a key factor in directing and managing R&D nor in their response to growing R&D costs. However, there is no binary decision to be made between cost control and value creation. They conclude that it is important for R&D managers to develop dynamic capabilities and business models that can adjust the company’s R&D agenda to the changing technological, market and regulatory environment.

Leitner, K-H., Poti, B.M., Wintjes, R.J.M. and Youtie, J. (2020) ‘How companies respond to growing research costs: cost control or value creation?’, Int. J. Technology Management, Vol. 82, No. 1, pp.1–25.