Research and Development

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About the Term: Research and Development

The expression research and development (R&D) refers to investment in research in scientific and technical knowledge and the development of these technologies to obtain new products, materials or processes. For this, in R&D activities it'll be essential that an important level of creativity or novelty can be appreciated.

The objective pursued with investment in research and development is to achieve an innovation that manages to increase the company's sales. This can be through an improvement in the quality of the product or service or the reduction of its price, that is, it achieves a competitive advantage.

In recent years, reference has been made to R & D & I, innovation being the last element (i).

Governments often facilitate business R&D expenses through tax advantages. You can read more about accounting for R&D expenses.

Types of Research and Development (R&D)

- Basic or fundamental research: Seeks to acquire new knowledge. Through it they intend to formulate hypotheses, laws and theories.
- Applied research: From what is obtained in basic research, practical applications are sought. Knowledge is used to obtain practical objects. The results of the investigation are likely to be patented for commercial exploitation.
- Technological development: It implies the use of knowledge acquired in applied research. At this stage, the company has achieved knowledge " Know How " (skills) and develop prototypes.

Advantages of R&D for companies

The advantages of R&D are:

- Exclusive knowledge of the technology generated.
- Technological independence of the company.
- Possibility of commercially exploiting innovations.
- Tax advantages can be accessed through investment in R & D & I.
- Experience effect

Disadvantages of R&D for companies

Despite the large number of advantages, investment in research and development (R&D) has some drawbacks:

- It involves a significant investment of resources.
- Long-term fruits.
- High level of risk.

The importance of R&D in the company

The new technologies have allowed us to achieve significant increases in productivity. On the other hand, companies have managed to reduce costs, improve the quality of the products offered and expand markets. That's why its survival and continuity is strongly linked to research and development.

The decision of which projects will be developed in the company depends on the following factors:

- Volume of financial resources available.
- Project costs
- Capabilities of the company to deal with the projects.

To verify the achievement of the project it'll be necessary to establish a control system (GANTT, PERT).

The budget allocated to the research and development department will be prepared as follows:

- Application of a coefficient to the total budget.
- Application of a percentage on the total budget that's similar to that of competing companies.
- A percentage of the turnover.
- Depending on the established objectives.

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