R&D intensity
 | This article needs attention from an expert in Economics. Please add a reason or a talk parameter to this template to explain the issue with the article. (January 2008) |
Research and Development intensity or simply, R&D intensity is "a measure of company R&D spending in knowledge and technology to increase factor productivity and salable output."[1]
R&D intensity for enterprises and companies
A simple definition of R&D intensity is "the ratio of expenditures by a firm on research and development to the firm's sales"[2] Generally speaking, R & D is the main driver of innovation, and R & D expenditure and intensity are two of the key indicators used to monitor resources devoted to science and technology worldwide.
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."[3]
Economics professor William N. Leonard conducted research which found research intensity is "measured usually by ratios of scientific personnel to total employment or by R&D expenditures/sales, and gains in" such variables as productivity, profits, sales, assets, and other variables. In the sixteen industries Leonard studied in depth, "the relation appears two years after R&D spending and increases thereafter", although "research intensity, related by manpower ratios, relates less effectively."[1]
Correlates of R&D intensity
Several factors have been demonstrated to affect R&D intensity. For example, Reinhard Angelmar's study titled "Market Structure and Research Intensity in High-Technological-Opportunities Industries", which investigated the research intensity (defined in his study as non-government-financed R&D expenditures as a percentage of sales) of 160 business units drawn from the Strategic Planning Institute's PIMS database that were in industries which had recently undergone significant technological changes, found: "Where the cost and uncertainty of R&D are high and conditions favor speedy imitation by competitors, concentration has a statistically significant and substantial positive impact on research intensity. But its impact is clearly negative when R&D cost and uncertainty are low, and where high barriers to imitation exist."[4]
R&D intensity 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.[5] 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.[5]
R&D intensity by countries and regions
R&D intensity for a country is defined as the R & D expenditure as a percentage of gross domestic product (GDP). Generally speaking, developed countries have higher R&D intensities than developing countries. "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."[6]
The gross domestic expenditure on R&D (GERD) is mainly used for international comparisons of R&D expenditures.[7] Frascati Manual 2002 methodology described 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". GERD could be broken down among four sectors of performance: business enterprise, higher education, government and private not-for-profit institutions serving households (PNP).[8]
See also
References
- ^ a b William N. Leonard (Mar–Apr 1971). "Research and Development in Industrial Growth". Journal of Political Economy. 79 (2): 232–256 (25 pages). doi:10.1086/259741. JSTOR 1832108.
- ^ "About.com Economics Glossary". Retrieved 27 Apr 2013.
- ^ National Science Foundation: National Center for Science and Engineering Statistics: National Science Board (NSB) (January 2010). "Science and Engineering Indicators 2010". Arlington, VA (NSB 10-01). Retrieved 27 Apr 2013.
{{cite web}}:|chapter=ignored (help)CS1 maint: location (link) - ^ Reinhard Angelmar (September 1985). "Market Structure and Research Intensity in High-Technological-Opportunities Industries". The Journal of Industrial Economics. XXXIV (1). Wiley-Blackwell: 69–79. JSTOR 2098482.
- ^ a b "Reviewing the nomenclature for high-technology trade – the sectoral approach". European Commission. Retrieved 13 December 2013.
- ^ "Glossary:R & D intensity". Eurostat. Retrieved 13 December 2013.
- ^ Aristovnik, Aleksander (2014). "Efficiency of the R&D Sector in the EU-27 at the Regional Level: An Application of DEA". Lex Localis. 12 (3): 519–531. doi:10.4335/12.3.519-531(2014).
- ^ "R&D expenditure". OECD iLibrary. Retrieved 13 December 2013.