Why invest in R&D when you can let others do it?

Image by Atsutaka Odaira

Throughout history, innovation has had a significant influence on economic development, but many analysts believe it is now difficult to extract significant benefits from a new idea than it was in the past. Technologies such as steam power and electricity converted countries such as the UK and the US from agrarian societies into manufacturing powerhouses during the industrial revolutions of the 18th and 19th centuries, changing living standards in the process. In the 20th century, motor cars, antibiotics, and aviation had equally immense impacts, transforming the way we employed and helping to stimulate high economic growth rates in the developed world.

Contrary to the belief of analysts, Research and Development has being increasing for past decade from companies backed by the respective governments. Even though analysts might say innovation is lacking in this era; in reality, however, technological progress continues rapidly, with innovative new companies constantly influencing the way we travel, shop, eat, and socialize. And while innovation may not produce the returns it used to, not only in the developed world, but also in fast-growing economies such as China and India, it continues to play a critical role in driving growth and employment.

This is represented in the report published by the R&D World magazine (this magazine has been forecasting annual global R&D funding for 61 years). This prediction provides unique statistics on the combined capital expected to be spent by over 115 nations, various businesses, universities and governments and various industries over the next twelve months. Since their first $12 billion R&D prediction was created in January 1959 (in the first edition of R&D Environment magazine), the world and the research and inventions created in R&D labs have undergone drastic shifts. And these developments in technologies and economy continue to amaze people. For 2020, these developments are projected to result in more than $2.4 trillion in global R&D spending, a 2.7 percent, or $64 billion, monetary rise from what was spent in 2019 by the same organisations.

So why is everyone doing it if it is not necessarily beneficial for economy (according to some analysts). Before we answer that let’s define what is R&D: Research and Development is done to produce and discover new products that are greater quality than those that currently exist or revolutionize the field provide totally different alternative such like the iPhone. This area often includes the creation or exploration of better methods of manufacturing such goods. This suggests that the R&D method results in new knowledge as well as new products, as well as improved ways to establish methods for producing new products and developing those that already exist.

Steve Jobs during his first iPhone presentation

So why is it important? The R&D process is considered to be a first step in the development of technical advances within an organization. A long-term vision and strategy are necessary, while creativity usually works with a shorter-term economic model. This means that in order to achieve advancement in its goods, systems and services, a corporation would need to spend capital in its R&D. It should eventually translate to higher income. By encouraging to increase the capacity to innovate, R&D would add to the expertise and experience of business. The R&D investment helps the business to increase the level of technology and the opportunities the business will provide in the future.

Let’s take a look at Amazon which is at top of investments made in R&D. In 2017, Amazon was the top research and development (R&D) company in the country. Its spending in research and development has been double that of 2015, five times that of 2012, and ten times that of 2011. The issue of a new concept and emphasis on R&D in the digital economy has been posed by such a fast and major rise in R&D spending, which Amazon insists involves both “routine or periodic changes” (traditionally known as non-R&D) and “significant improvement” (classified as R&D).

Jeff Bezos

Amazon, which is focused on R&D as a culture, has encouraged company-wide experimentation to make purchasing choices obsessed with consumers. This fascination has made it possible for Amazon to deploy a system that makes the most of emerging technology by harnessing users’ resources. The dramatic development of the Internet has intensified such user-driven creativity, which in turn has accelerated the co-emergence of soft innovation capital in the marketplace. A self-powering mechanism that has caused functionality growth has been enabled by this growth, leading to supra-functionality (attributes that satisfy the user beyond the utilitarian functional needs). Although this method relies on the integration potential of soft innovation, a high degree of capacity has been built by Amazon, backed by a fast and important growth in R&D expenditure. In a virtuous cycle, the latter efforts contribute to the turn of “routine or periodic changes” into “significant improvement.”

All Japanese businesses combined are expected to be outspend by Amazon, Facebook, Apple, Microsoft and Alphabet alone. New technologies such as self-driving vehicles and the “internet of things” have changed traditional market models where Japanese businesses had an advantage in world with high product quality. Markets are now dominated by corporations with access to patented technology and big data, making R&D spending much more crucial. If companies like in Japan needs to step up its spending in the digital technology revolution, or it will not be able to keep up with competition. By investing an immense amount of money, creating better technology will enable businesses to produce income from new services. That’s the thinking behind the biggest tech firms in the United States and why R&D is important.

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Written by Wanonno Iqtyider

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