The economics of R&D

 

In times like the present, when the economic system is the first factor to be determined in any productive calculation, it is of no less interest to study the causes and effects obtained in the direct and indirect expenses within the business activity in the private sector. The search to reduce the existence of this variable, expenditure, to its minimum expression becomes the main task of the company's management group. This reduction of overheads leads to cuts in non-productive systems, such as product or process research.

 

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Research or R&D should not only be considered as a system where the search for new products or production technologies that can provide a higher profit or low-cost production processes or materials is developed, but should also include non-technological research models such as marketing systems or increasing market share. In 2012, 20.5 % of the innovation produced in companies was based on non-technological systems, with 16.9 % for organisational systems (of which 52 % for responding to customer needs and 56.8 % for quality) and 11.2 % for trading systems, where 48.1 1 % sought an increase in market share.Among the industrial sectors that invested most in non-technological systems was the aeronautical sector with 54.4 % of the total investments.

Studying the productive sectors and the investments made in research, it is known that it is the companies dedicated to high or medium-high technology production that have made the greatest commitment to the development and search for new elements that offer competitiveness and profitability both in manufacturing and in commercial and management systems.

 

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Spending on research should not only apply to spending on manufactured output, but is a composite of other important variables that need to be taken into account.

Mainly, it is necessary to take into account the expenditure deducted for the personnel necessary for R&D development. For the year 2012, 12.1 x 1000 of the employed population was dedicated exclusively to R & D.

 

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Obtaining the means by which the needs produced in research can be met, financing, usually comes mainly from within the company, although public administrations are often involved and are of great help in this respect. In 2012, the aid obtained and business funding in the country was divided between public administrations with 43.1 %, funds from abroad 6.6 %, from higher education 3.9 % and private non-profit institutions accounted for 0.6 %. Funding at national level from companies accounted for 45.6 % of the total, with the important fact that 80.4 % of R&D funding in the private sector came from within the company itself.

 

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One of the main values that is usually taken into account when it comes to research in the private sector is to ensure commercial competitiveness for the company, providing it with means and resources where production is effective and profitable, increasing the profit/expense ratio as much as possible. But the costs incurred in research for a company are an effort that has to be assumed before reaching definitive conclusions that can bring benefits and therefore it is a very important study for the company's management group.

The company's management must seriously ask itself the question: how far should the profit factor take precedence over the research factor? The profit percentage of the company is the main objective of the company's operation, and the management group sets the limits of this percentage in order to determine the profitability of production and processes. This percentage has to be reduced when the company makes the decision to finance an R&D project, taking into account the data on where the funding comes from, in what percentage, what is the necessary expenditure for it, profitability.

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Data source: INE, National Statistics Institute.

 

 

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