Consequently, project evaluation must be performed along two separate dimensions: technical evaluation, to establish the probability of technical success; and business evaluation, to establish the payoff and the probabilities of commercial and financial success. Once the expected value of a project has been determined it can be compared with the projected cost of the technical effort. Given a company's usual rate of return on investment, the cost may not be worth the expected value given the risks.
Needless to say, such statistical approaches to evaluation are not silver bullets but as good as the guesses that go into the formula. Businesses use such evaluations, however, when many projects compete for money and some kind of disciplined approach is needed to make choices.
Termination of projects is a difficult subject because of the political repercussions on the laboratory. Theoretically, a project should be discontinued for one of the following three reasons:. Due to organizational inertia, and the fear of antagonizing senior researchers or executives with pet projects, there is often the tendency to let a project continue, hoping for a miraculous breakthrough that seldom happens.
In theory, an optimal number of projects should be initiated and this number should be gradually reduced over time to make room for more deserving projects. Also, the monthly cost of a project is much lower in the early stages than in the later stages, when more personnel and equipment have been committed. Thus, from a financial risk management viewpoint, it is better to waste money on several promising young projects than on a few maturing "dogs" with low payoff and high expense.
In practice, in many laboratories it is difficult to start a new project because all the resources have already been committed and just as difficult to terminate a project, for the reasons given above. The tax credit was renewed in and lasted through , but the tax bill signed in May of left the provision out.
This outcome no doubt pleased those who thought that government subsidies of corporate development were out of place—and energized those who saw the credit as nationally important to attempt to have the credit reinstated. Research and development in public the public domain as well as in the media suggests big business, huge labs, vast testing fields, wind tunnels, and crash dummies flailing around as autos are crashed into walls.
To be sure, a vast amount of the money expended on formal research is expended by large corporations—often on relatively trivial improvements of products already doing quite a good job—and by government on weapons systems and space exploration.
The glory and the power thus displayed before our eyes on television fail to remind us that the crucial research and development on which much else is based has been—and continues to be—the work of small entrepreneurs. The explosive development of the oil industry was triggered by the invention of an effective kerosene lamp by Michael Dietz in Dietz ran a small lamp production business.
Oil drilling began in earnest to support such lighting applications. An unwanted residue of kerosene refining was—gasoline, burned off as useless waste—until the first cars came along. Chester Carlson, the inventory of xerography, perfected his invention in part-time labors in a makeshift lab while working as a patent attorney.
The computer revolution came about because two young men, Steve Wozniak and Steve Jobs, put together a personal computer in a garage and thus triggered the Information Age. Countless innovations large and small were made by tinkering individuals or small business people trying something new. Bock, Peter. Academic Press, Kuemmerle, W. Foreign direct investment in industrial research in the pharmaceuticals and electronics industries — Results from a survey of multinational firms.
The drivers of foreign direct investment into research and development: An empirical investigation. Journal of International Business Studies 1— Kuznets, S. Inventive activity: Problems of definition and measurement. Lerner, J. Review of Economics and Statistics — Levinthal, D. The myopia of learning.
Strategic Management Journal 95— Milgrom, P. Economics, organization and management. Englewood Cliffs: Prentice Hall. Nelson, R. Capitalism as an engine of progress. An evolutionary theory of economic change. Cambridge, MA: Belknap. Nerkar, A. Reagans, R. Organization Science — Rosenkopf, L. Beyond local search: Boundary-spanning, exploration, and impact in the optical disk industry. Siggelkow, N. Misperceiving interactions between substitutes and complements: Organizational consequences.
Singh, J. Collaborative networks as determinants of knowledge diffusion patterns. Research Policy 77— Thompson, J.
Organizations in action: Social science bases of administrative theory. New York: McGraw-Hill. Tushman, M. Ambidextrous organizations: Managing evolutionary and revolutionary change. California Management Review 8— Von Hippel, E. The sources of innovation. Research creates knowledge and development designs,and builds prototypes to prove their feasibility.
Engineering then converts these prototypes into products or services that can be offered to the marketplace or into processes that can be used to produce commercial products and services. The importance of research and development has become more evident everyday among the factors that directly related to the good economic performance of the emerging countries of 21st centuries.
In any industry whether an old or emerging,must continually revise their design and range of products. Research has always been important aspect for any organisation — big or small. It is not restricted only to medical or science fields. Many organisations in industries like pharmaceuticals have a full fledged research and development division with quality control to ensure quality of product and invention of new technologies and products.
Importance of Research and Development for economic growth. The future economic progress for any country will be driven by the invention and application of new technologies. The importance of research and development lies there,as it is one category of spending that develops and drives these new technologies.
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