Controversial Finding: R&D Doesn't Drive Corporate Performance

Oct. 12, 2005
A Booz Allen Hamilton study generally finds no direct correlation between R&D investment and such key corporate performance measures as sales growth, earnings and shareholder returns. That controversial conclusion was based on data from the world's 1,000 ...

A Booz Allen Hamilton study generally finds no direct correlation between R&D investment and such key corporate performance measures as sales growth, earnings and shareholder returns. That controversial conclusion was based on data from the world's 1,000 largest publicly traded R&D spenders from 1999 through 2004.

"R&D spending appears to yield better gross margins," a report released October 11 notes. "This narrow . . . success, however, is not generally translated into overall corporate performance."

At the same time, many companies are spending more and more on R&D, notes the Booz Allen Hamilton report. It relates the $384 billion spent on R&D in 2004 by the 1,000 firms it studied represented an annual growth rate of 6.5% since 1999 and an annual growth of 11% since 2002.

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