Does R&D Spending Mean Better Innovation?

Can companies expect to be better at innovation if they pour more money into the department?


The Research and Development department has for a long time been seen as a major driver of new ideas. Its role is to keep tabs on market conditions, allowing the company to deliver products that are in line with the ever fluctuating demands of consumers.

Today's perception of the R+D team is a positive one, with an Economist Intelligence Unit survey putting it second only behind employee insights as the main source of new ideas.

Therefore, it would be logical to assume that investment would improve the function's ability to foster innovation. This theory holds considerable weight when we look at the companies that consistently top the R+D charts. There's no doubt that Google, Microsoft and Samsung are some of the most innovative companies in the world and they all spend in excess of $10 billion on R+D annually.

But does pouring money into R+D necessarily hold the key to your innovation attempts? There are countless examples of newfound companies that have experienced a short path to success because they were built on an innovative idea, which involved only a small amount of investment.

As we go towards customer-led innovation, traditional R+D processes may become less important, but they unquestionably hold weight in the current climate. It's a proven fact that there's a strong correlation between R+D expenditure and company performance; the more money you invest, the more profits you make. This resonates even more with large companies, with several products, R+D furthers company objectives and allows for adaptability.

For small companies built on technological innovation, the time for R+D will come. The same Economist Intelligence Unit I mentioned earlier states that R+D will fall to the third most important source of ideas, with customer data becoming the primary driver. It may well be the case that when customer-led innovation is in full flow that the R+D department might become less important, but it'll still play an important role.

Google, Microsoft and Samsung can't all be wrong, at the moment it seems that the more you spend, the better you are at maintaining an innovative culture. 

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