We know innovation drives corporate growth. As Strategy& reported in its 2015 survey of 1,757 executives, “innovation today is a key driver of organic growth for all companies — regardless of sector or geography.” According to that report, the top 1,000 R&D spenders invested $680 billion in R&D that year, up 5% from the prior year. Historically, R&D has been viewed as the engine of national economic growth as well.
Is R&D Getting Harder, or Are Companies Just Getting Worse At It?
Returns to innovation appear to be declining.
March 21, 2017
Summary.
Historically, R&D has been viewed as an engine of national economic growth as well as corporate growth. Yet the research shows that returns to companies’ R&D spending have declined 65% over the past three decades. This decline in companies’ research quotient or RQ mimics the decline in U.S. GDP growth over the past thirty years. One possible explanation is that R&D has gotten harder; another is that companies have simply gotten worse at R&D. After looking at the data, it seems that what’s happening is a mix of both: while R&D within industries gets harder over time, as these opportunities dry up, companies respond by creating new industries with greater technological opportunity. So the good news is that while industries may be doomed, companies don’t have to be.