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{{short description|Expenditures on a firm's research and development divided by its sales}}
{{Expert-subject|Economics|date=January 2008}}
{{refimprove science}}
{{Cleanup|reason=subject coverage is superficial and relatively nescient, and is generally dated (despite impression of recentism imparted by web sources) |date=October 2015}}
{{Cleanup|reason=subject coverage is superficial and relatively nescient, and is generally dated (despite impression of recentism imparted by web sources) |date=October 2015}}
[[File:1953- Funding for research and development - US.svg|thumb|Since the 1960s, private businesses in the U.S. have provided an increasing share of funding for research and development, as direct federal funding waned.<ref name=NSF_R&D_2023>{{cite web |last1=Anderson |first1=G. |last2=Moris |first2=F. |title=Federally Funded R&D Declines as a Share of GDP and Total R&D |url=https://ncses.nsf.gov/pubs/nsf23339 |publisher=National Science Foundation, National Center for Science and Engineering Statistics |archive-url=https://web.archive.org/web/20231003235103/https://ncses.nsf.gov/pubs/nsf23339 |archive-date=3 October 2023 |date=2023 |quote=NSF 23-339 |url-status=live }}</ref>]]
{{Lead rewrite|reason=it inadequately reflects the content of the article, and it is based on generally dated sources}}


'''Research and development intensity''' or simply ''R&D intensity,'' is generally defined as expenditures by a firm on its research and development ([[R&D]]) relevant to sector and product knowledge, manufacturing, and technology, as a ratio, to the firm's sales. It is a metric that can be used to gauge the level of a company's R&D spending aimed at spurring innovation in and through basic and applied research. A further aim of such spending, ultimately, is to increase [[productivity]] (e.g., [[Factor of production|factor productivity]]), as well as the salable output of the organization.
'''Research and development intensity''' ('''R&D intensity''') is generally defined as expenditures by a firm on its research and development ([[R&D]]) divided by the firm's sales.<ref>{{Cite journal|last1=Yiu|first1=L. M. Daphne|last2=Lam|first2=Hugo K. S.|last3=Yeung|first3=Andy C. L.|last4=Cheng|first4=T. C. E.|date=2020|title=Enhancing the Financial Returns of R&D Investments through Operations Management|url=https://onlinelibrary.wiley.com/doi/abs/10.1111/poms.13186|journal=Production and Operations Management|language=en|volume=29|issue=7|pages=1658–1678|doi=10.1111/poms.13186|s2cid=216529963 |issn=1937-5956|hdl=10397/89881|hdl-access=free}}</ref> There are two types of R&D intensity: direct and indirect. R&D intensity varies, in general, according to a firm's industry sector, product knowledge, manufacturing, and technology, and is a metric that can be used to gauge the level of a company's investment to spur innovation in and through [[Basic research|basic]] and [[applied research]]. A further aim of R&D spending, ultimately, is to increase [[productivity]] (e.g., [[Factor of production|factor productivity]]) as well as an organization's salable output.


==Definition and aim of metric==
==Definition and aim of metric==
Generally speaking, R&D is seen as a main driver of societal and business innovation.{{cn}} The [[OECD]]'s ''Frascati Manual'' describes R&D as "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications."<ref name=OECD02Fr>OECD (2002) ''Frascati Manual 2002: Proposed Standard Practice for Surveys on Research and Experimental Development, The Measurement of Scientific and Technological Activities,'' p. 30, Paris, FR: OECD Publishing, DOI 10.1787/9789264199040-en, see [http://www.oecd-ilibrary.org/science-and-technology/frascati-manual-2002_9789264199040-en], accessed 13 October 2015.</ref>
Generally speaking, R&D is seen as a main driver of societal and business innovation.{{citation needed|date=October 2015}} The [[OECD]]'s ''Frascati Manual'' describes R&D as "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications."<ref name=OECD02Fr>OECD (2002) ''Frascati Manual 2002: Proposed Standard Practice for Surveys on Research and Experimental Development, The Measurement of Scientific and Technological Activities,'' p. 30, Paris, FR: OECD Publishing, DOI 10.1787/9789264199040-en, see [http://www.oecd-ilibrary.org/science-and-technology/frascati-manual-2002_9789264199040-en], accessed 13 October 2015.</ref>


[[R&D expenditure]] and R&D intensity are two of the key indicators used to monitor resources devoted to science and technology worldwide.{{cn}} R&D intensity has been defined as "the ratio of expenditures by a firm on research and development to the firm's sales."<ref name=Meyer05>Meyer, Peter B., Ed. (2005). "R&D intensity," In ''Glossary of Research Economics'' (online), see [http://econterms.com/econtent.html], accessed 13 October 2015.</ref> William Leonard has described research intensity as "measured usually by ratios of scientific personnel to total employment or by R&D expenditures/sales" to gains in such variables as productivity, profits, sales, and asset status.<ref name=Leonard71/> R&D intensity is therefore a measure of a company's [[R&D]] spending toward activities aimed at expanding sector and product knowledge, manufacturing, and technology,{{cn}} and so aimed at spurring innovation in and through basic and applied research.<ref name=CohenLevinthal90>Cohen, Wesley M. & Levinthal, Daniel A. (1990). "Absorptive Capacity: A New Perspective on Learning and Innovation," ''Administrative Science Quarterly,'' '''35''', pp. 128-152;{{verify source}}{{page needed}} presented as a reading in Burgelman, et al., op. cit.</ref>{{verify source}}{{page needed}} <ref name=Burgelman0208>Burgelman, Robert A.; Christensen, Clayton & Wheelwright, Steven (2008). ''Strategic Management of Technology and Innovation,'' 5th Edn., pp. ca. 748-772 (pp. 716ff in 4th Edn., ISBN 0072536950) New York, NY, USA: McGraw-Hill, ISBN 9780073381541 and ISBN 0073381543, see [https://books.google.com/books?isbn=0073381543], accessed 13 October 2015.{{verify source}}{{page needed}}</ref>{{verify source}}{{page needed}} Furthermore, it is aimed at increasing "[[Factor of production|factor]] [[productivity]] and salable output."<ref name=Leonard71>{{cite journal | jstor = 1832108 |journal=Journal of Political Economy|volume= 79|number= 2; March-April|date=1971|title= Research and Development in Industrial Growth |author=William N. Leonard |pages= 232–256|doi=10.1086/259741}}{{primary source-inline}}{{page needed}}</ref>{{primary source-inline}}{{page needed}}
R&D expenditure and R&D intensity are two of the key indicators used to monitor resources devoted to science and technology worldwide.{{citation needed|date=October 2015}} R&D intensity has been defined as "the ratio of expenditures by a firm on research and development to the firm's sales."<ref name=Meyer05>{{cite news|author=Meyer, Peter B. (Editor)|date=2005|title=R&D intensity|work=Glossary of Research Economics|url=http://econterms.com/econtent.html|access-date= October 13, 2015}}</ref> William Leonard has described research intensity as "measured usually by ratios of scientific personnel to total employment or by R&D expenditures/sales" to gains in such variables as productivity, profits, sales, and asset status.<ref name=Leonard71/> R&D intensity is therefore a measure of a company's [[R&D]] spending toward activities aimed at expanding sector and product knowledge, manufacturing, and technology,{{citation needed|date=October 2015}} and so aimed at spurring innovation in and through basic and applied research.<ref name=CohenLevinthal90>{{cite journal|author1=Cohen, Wesley M. |author2=Levinthal, Daniel A. |date=1990|title=Absorptive Capacity: A New Perspective on Learning and Innovation|journal=Administrative Science Quarterly|volume=35|issue=1 |pages= 128–152|doi=10.2307/2393553|jstor=2393553 }}</ref><ref name=Burgelman0208>{{cite news|author1=Burgelman, Robert A. |author2=Christensen, Clayton |author3=Wheelwright, Steven |date=2008|title=Strategic Management of Technology and Innovation|edition= 5th |pages=748–772|location= New York, NY|publisher= McGraw-Hill|isbn= 9780073381541 }}</ref> Furthermore, it is aimed at increasing "[[Factor of production|factor]] [[productivity]] and salable output".<ref name=Leonard71>{{cite journal | jstor = 1832108 |journal=Journal of Political Economy|volume= 79|number= 2; March–April|date=1971|title= Research and Development in Industrial Growth |author=William N. Leonard |pages= 232–256|doi=10.1086/259741|s2cid=154996996 }}{{primary source inline|date=October 2015}}{{page needed|date=October 2015}}</ref>{{primary source inline|date=October 2015}}{{page needed|date=October 2015}}

There are two types of R&D intensity, calculated as follows:<ref name="European Commission"/>
* Direct R&D intensity, calculated by dividing R&D expenditure by output
* Indirect R&D intensity, which quantifies the R&D expenditure embodied in the intermediate goods used in the production of another sector and can be calculated using Input-Output Tables


==In enterprises and companies==
==In enterprises and companies==
As the [[National Science Foundation]] explains: absolute levels of "R&D expenditures indicate the level of effort dedicated to producing future products and [[process improvement]]s while maintaining current [[market share]] and increasing operating [[efficiency]]. By extension, such expenditures may reflect firms' perceptions of the market's demand for new and improved technology." However, R&D intensity is the most frequently used measure "to gauge the relative importance of R&D across industries and among firms in the same industry."<ref name=NSF10>{{cite book |last1=NSF |author-link1=National Science Foundation |year=2010 |chapter= Research and Development: National Trends and International Linkages (Ch. 4) |title= Science and Engineering Indicators 2010 |location= Arlington, VA, USA|publisher= National Science Foundation, National Center for Science and Engineering Statistics, National Science Board | url=http://www.nsf.gov/statistics/seind10/c4/c4h.htm | page= |access-date= 13 October 2015 }}{{page needed}}</ref>{{page needed}} Economic research on sixteen industries by William Leonard, "the relation [between investment and gains] appears two years after R&D spending and increases thereafter", although research intensity relates "less effectively" to "[[Human resources|manpower]] ratios [ratios of scientific personnel to total employment]."<ref name=Leonard71/>
As the [[National Science Foundation]] explains: absolute levels of "R&D expenditures indicate the level of effort dedicated to producing future products and process improvements while maintaining current [[market share]] and increasing operating [[efficiency]]. By extension, such expenditures may reflect firms' perceptions of the market's demand for new and improved technology." However, R&D intensity is the most frequently used measure "to gauge the relative importance of R&D across industries and among firms in the same industry."<ref name=NSF10>{{cite book |last1=NSF |author-link1=National Science Foundation |year=2010 |chapter= Research and Development: National Trends and International Linkages (Ch. 4) |title= Science and Engineering Indicators 2010 |location= Arlington, VA, USA|publisher= National Science Foundation, National Center for Science and Engineering Statistics, National Science Board | url=https://www.nsf.gov/statistics/seind10/c4/c4h.htm |access-date= 13 October 2015 }}{{page needed|date=October 2015}}</ref>{{page needed|date=October 2015}} Economic research on sixteen industries by William Leonard, "the relation [between investment and gains] appears two years after R&D spending and increases thereafter", although research intensity relates "less effectively" to "[[Human resources|manpower]] ratios [ratios of scientific personnel to total employment]."<ref name=Leonard71/>


==Among sectors==
==Among sectors==
R&D intensity differs between different sectors. High-tech sectors lead the R&D intensity, such as pharmaceuticals, aircraft & spacecraft and electrical equipment. Low-tech sectors usually have low R&D intensity, such as food products, textiles and iron & steel.<ref name="European Commission">{{cite web|title=Reviewing the nomenclature for high-technology trade – the sectoral approach|url=http://www.oecd.org/std/its/41419823.ppt|publisher=European Commission|accessdate=13 December 2013}}</ref> R&D intensity could be used as the sole indicator to identify high-tech sectors. The direct R&D intensity is calculated R&D expenditure divided by output. Indirect R&D intensities, which is the R&D expenditure embodied in the intermediate goods used in the profuction of another sector, could be calculated using the Input-Output Tables.<ref name="European Commission"/>
R&D intensity differs between different sectors: [[High tech|high-tech]] sectors (such as aircraft & spacecraft, electrical equipment, and pharmaceuticals) are characterized by the highest R&D intensity, while [[Low tech|low-tech]] sectors (such as food products, iron and steel, and textiles) usually have low R&D intensity.<ref name="European Commission">{{cite web|title=Reviewing the nomenclature for high-technology trade – the sectoral approach|url=http://www.oecd.org/std/its/41419823.ppt|publisher=European Commission|access-date=13 December 2013}}</ref> In fact, R&D intensity could be used as the sole indicator to identify high-tech sectors.<ref name="European Commission"/>


==By countries and regions==
==By countries and regions==
R&D intensity for a ''country'' or larger political or geographical entity is defined as its R&D expenditure as a percentage of [[gross domestic product]] (GDP) of the entity. Generally speaking, developed countries have higher R&D intensities than developing countries.{{cn}} As Eurostat noted in 2013, for a preceding period,{{when?}}{{quote|1=The European Union (EU) is currently lagging behind both the USA and Japan in terms of expenditure on R&D as a proportion of GDP, primarily due to slow relative growth in business R&D expenditure. The European Council set an overall target of 3% of GDP by the year 2010, with industry asked to contribute two thirds of this objective.<ref>{{cite web|author=Anon.|date=2013|title=Glossary: R&D intensity|url=http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:R_%26_D_intensity|publisher=Eurostat|accessdate=13 December 2013}}</ref>}}
R&D intensity for a ''country'' or larger political or geographical entity is defined as its R&D expenditure as a percentage of [[gross domestic product]] (GDP) of the entity. Generally speaking, developed countries have higher R&D intensities than developing countries.{{citation needed|date=October 2015}} As Eurostat noted in 2013, for a preceding period,{{when|date=October 2015}}{{blockquote|1=The European Union (EU) is currently lagging behind both the USA and Japan in terms of expenditure on R&D as a proportion of GDP, primarily due to slow relative growth in business R&D expenditure. The European Council set an overall target of 3% of GDP by the year 2010, with industry asked to contribute two thirds of this objective.<ref>{{cite web|author=Anon.|date=2013|title=Glossary: R&D intensity|url=http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:R_%26_D_intensity|publisher=Eurostat|access-date=13 December 2013}}</ref>}}


The gross domestic expenditure on R&D (GERD) is mainly used for international comparisons of R&D expenditures.<ref>{{cite journal |last=Aristovnik |first=Aleksander |date=2014 |title= Efficiency of the R&D Sector in the EU-27 at the Regional Level: An Application of DEA |url= |journal=Lex Localis|publisher= |volume=12 |issue=3 |pages=519–531 |doi= 10.4335/12.3.519-531(2014)}}{{primary source-inline}}{{better source}}</ref>{{primary source-inline}}{{better source}} GERD can be broken down among four sectors of performance: business enterprise, higher education, government, and private not-for-profit institutions serving households (PNP).<ref name=OECD13>OECD (2013). "2. Building Knowledge, 5. R&D expenditure," In ''OECD Science, Technology and Industry Scorecard 2013, OECD Publishing,'' Paris, FR: OECD Publishing, DOI 10.1787/20725345 or DOI 10.1787/sti_scoreboard-2013-en, ISSN 2072-5345 or ISSN 1562-983X, ISBN 9789264203181 or ISBN 9789264205000 or ISBN 9789264200739, see [http://www.oecd-ilibrary.org/sites/sti_scoreboard-2011-en/02/05/index.html?itemId=/content/chapter/sti_scoreboard-2011-16-en] or [http://www.oecd-ilibrary.org/science-and-technology/oecd-science-technology-and-industry-scoreboard_20725345;jsessionid=3onnh4h4aqjfj.x-oecd-live-03], accessed 13 October 2015.</ref>
GERD can be broken down among four sectors of performance: business enterprise, higher education, government, and private not-for-profit institutions serving households (PNP).<ref name=OECD13>OECD (2013). "2. Building Knowledge, 5. R&D expenditure," In ''OECD Science, Technology and Industry Scorecard 2013, OECD Publishing,'' Paris, FR: OECD Publishing, DOI 10.1787/20725345 or DOI 10.1787/sti_scoreboard-2013-en, ISSN 2072-5345 or ISSN 1562-983X, {{ISBN|9789264203181}} or {{ISBN|9789264205000}} or {{ISBN|9789264200739}}, see [http://www.oecd-ilibrary.org/sites/sti_scoreboard-2011-en/02/05/index.html?itemId=/content/chapter/sti_scoreboard-2011-16-en] or [http://www.oecd-ilibrary.org/science-and-technology/oecd-science-technology-and-industry-scoreboard_20725345;jsessionid=3onnh4h4aqjfj.x-oecd-live-03], accessed 13 October 2015.</ref>

⚫
==References==
⚫
{{reflist}}


==See also==
==See also==
⚫
* [[Research and Development]]
* [[Innovation]]
* [[Innovation]]
⚫
* [[Research and Development]]

⚫
==References==
⚫
{{reflist}}


{{DEFAULTSORT:RandD intensity}}
{{DEFAULTSORT:RandD intensity}}

Latest revision as of 19:35, 15 February 2024

Since the 1960s, private businesses in the U.S. have provided an increasing share of funding for research and development, as direct federal funding waned.[1]

Research and development intensity (R&D intensity) is generally defined as expenditures by a firm on its research and development (R&D) divided by the firm's sales.[2] There are two types of R&D intensity: direct and indirect. R&D intensity varies, in general, according to a firm's industry sector, product knowledge, manufacturing, and technology, and is a metric that can be used to gauge the level of a company's investment to spur innovation in and through basic and applied research. A further aim of R&D spending, ultimately, is to increase productivity (e.g., factor productivity) as well as an organization's salable output.

Definition and aim of metric

[edit]

Generally speaking, R&D is seen as a main driver of societal and business innovation.[citation needed] The OECD's Frascati Manual describes R&D as "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications."[3]

R&D expenditure and R&D intensity are two of the key indicators used to monitor resources devoted to science and technology worldwide.[citation needed] R&D intensity has been defined as "the ratio of expenditures by a firm on research and development to the firm's sales."[4] William Leonard has described research intensity as "measured usually by ratios of scientific personnel to total employment or by R&D expenditures/sales" to gains in such variables as productivity, profits, sales, and asset status.[5] R&D intensity is therefore a measure of a company's R&D spending toward activities aimed at expanding sector and product knowledge, manufacturing, and technology,[citation needed] and so aimed at spurring innovation in and through basic and applied research.[6][7] Furthermore, it is aimed at increasing "factor productivity and salable output".[5][non-primary source needed][page needed]

There are two types of R&D intensity, calculated as follows:[8]

  • Direct R&D intensity, calculated by dividing R&D expenditure by output
  • Indirect R&D intensity, which quantifies the R&D expenditure embodied in the intermediate goods used in the production of another sector and can be calculated using Input-Output Tables

In enterprises and companies

[edit]

As the National Science Foundation explains: absolute levels of "R&D expenditures indicate the level of effort dedicated to producing future products and process improvements while maintaining current market share and increasing operating efficiency. By extension, such expenditures may reflect firms' perceptions of the market's demand for new and improved technology." However, R&D intensity is the most frequently used measure "to gauge the relative importance of R&D across industries and among firms in the same industry."[9][page needed] Economic research on sixteen industries by William Leonard, "the relation [between investment and gains] appears two years after R&D spending and increases thereafter", although research intensity relates "less effectively" to "manpower ratios [ratios of scientific personnel to total employment]."[5]

Among sectors

[edit]

R&D intensity differs between different sectors: high-tech sectors (such as aircraft & spacecraft, electrical equipment, and pharmaceuticals) are characterized by the highest R&D intensity, while low-tech sectors (such as food products, iron and steel, and textiles) usually have low R&D intensity.[8] In fact, R&D intensity could be used as the sole indicator to identify high-tech sectors.[8]

By countries and regions

[edit]

R&D intensity for a country or larger political or geographical entity is defined as its R&D expenditure as a percentage of gross domestic product (GDP) of the entity. Generally speaking, developed countries have higher R&D intensities than developing countries.[citation needed] As Eurostat noted in 2013, for a preceding period,[when?]

The European Union (EU) is currently lagging behind both the USA and Japan in terms of expenditure on R&D as a proportion of GDP, primarily due to slow relative growth in business R&D expenditure. The European Council set an overall target of 3% of GDP by the year 2010, with industry asked to contribute two thirds of this objective.[10]

GERD can be broken down among four sectors of performance: business enterprise, higher education, government, and private not-for-profit institutions serving households (PNP).[11]

See also

[edit]

References

[edit]
  1. ^ Anderson, G.; Moris, F. (2023). "Federally Funded R&D Declines as a Share of GDP and Total R&D". National Science Foundation, National Center for Science and Engineering Statistics. Archived from the original on 3 October 2023. NSF 23-339
  2. ^ Yiu, L. M. Daphne; Lam, Hugo K. S.; Yeung, Andy C. L.; Cheng, T. C. E. (2020). "Enhancing the Financial Returns of R&D Investments through Operations Management". Production and Operations Management. 29 (7): 1658–1678. doi:10.1111/poms.13186. hdl:10397/89881. ISSN 1937-5956. S2CID 216529963.
  3. ^ OECD (2002) Frascati Manual 2002: Proposed Standard Practice for Surveys on Research and Experimental Development, The Measurement of Scientific and Technological Activities, p. 30, Paris, FR: OECD Publishing, DOI 10.1787/9789264199040-en, see [1], accessed 13 October 2015.
  4. ^ Meyer, Peter B. (Editor) (2005). "R&D intensity". Glossary of Research Economics. Retrieved October 13, 2015. {{cite news}}: |author= has generic name (help)
  5. ^ a b c William N. Leonard (1971). "Research and Development in Industrial Growth". Journal of Political Economy. 79 (2, March–April): 232–256. doi:10.1086/259741. JSTOR 1832108. S2CID 154996996.[non-primary source needed][page needed]
  6. ^ Cohen, Wesley M.; Levinthal, Daniel A. (1990). "Absorptive Capacity: A New Perspective on Learning and Innovation". Administrative Science Quarterly. 35 (1): 128–152. doi:10.2307/2393553. JSTOR 2393553.
  7. ^ Burgelman, Robert A.; Christensen, Clayton; Wheelwright, Steven (2008). "Strategic Management of Technology and Innovation" (5th ed.). New York, NY: McGraw-Hill. pp. 748–772. ISBN 9780073381541.
  8. ^ a b c "Reviewing the nomenclature for high-technology trade – the sectoral approach". European Commission. Retrieved 13 December 2013.
  9. ^ NSF (2010). "Research and Development: National Trends and International Linkages (Ch. 4)". Science and Engineering Indicators 2010. Arlington, VA, USA: National Science Foundation, National Center for Science and Engineering Statistics, National Science Board. Retrieved 13 October 2015.[page needed]
  10. ^ Anon. (2013). "Glossary: R&D intensity". Eurostat. Retrieved 13 December 2013.
  11. ^ OECD (2013). "2. Building Knowledge, 5. R&D expenditure," In OECD Science, Technology and Industry Scorecard 2013, OECD Publishing, Paris, FR: OECD Publishing, DOI 10.1787/20725345 or DOI 10.1787/sti_scoreboard-2013-en, ISSN 2072-5345 or ISSN 1562-983X, ISBN 9789264203181 or ISBN 9789264205000 or ISBN 9789264200739, see [2] or [3], accessed 13 October 2015.
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