What Is Research and Development (R&D)?

Research and development (R&D) is when businesses gather knowledge to create new products or discover new ways to improve their existing products and services. Larger companies may have their own research and development team that will test and refine products or processes before commercial use. However, many companies outsource this work to universities due to a lack of in-house capacity and to access the expertise and advanced research equipment they possess.

Some companies invest far more in R&D than others due to the competitiveness and demands of their industry. For example, a consumer technology company is always trying to release devices that are more appealing than its competitors so will invest heavily on product design research to make their devices more innovative. 

Businesses of all sizes need to invest in research and development if they want to achieve future growth, stay abreast of developments in their industry and reduce production costs. Fortunately, Brunel University London is a world leading research institution dedicated to delivering solutions to a broad range of organisations of all sizes. We have academics from a wide range of disciplines that are bringing significant benefits to our business partners.

Understanding Research and Development (R&D)

The term R&D is widely linked to innovation both in the corporate and government sectors. R&D allows a company to stay ahead of its competition. Without an R&D program, a company may not survive on its own and may have to rely on other ways to innovate such as engaging in mergers and acquisitions (M&A) or partnerships. Through R&D, companies can design new products and improve their existing offerings.

R&D is separate from most operational activities performed by a corporation. The research and/or development is typically not performed with the expectation of immediate profit. Instead, it is expected to contribute to the long-term profitability of a company. R&D may lead to patents, copyrights, and trademarks as discoveries are made and products created.

Companies that set up and employ entire R&D departments commit substantial capital to the effort. They must estimate the risk-adjusted return on their R&D expenditures—which inevitably involves risk of capital—because there is no immediate payoff, and the return on investment (ROI) is uncertain. As more money is invested in R&D, the level of capital risk increases. Other companies may choose to outsource their R&D for a variety of reasons including size and cost.

Why invest in research and development?

While the overarching goal of research and development is to add to a company's bottom line, companies undertake R&D for a variety of reasons.

  • Create new and improved products: Whether you're starting a new company, or looking to expand your existing offerings, innovation research can help you meet customer demands for new and better products that solve their problems more quickly and easily.
  • Increase business efficiency: R&D can help you gain knowledge about your production processes, business structure, and place in the market, providing insights that increase productivity by eliminating time-consuming inefficiencies and allocating resources to the most impactful projects.
  • Reduce costs: Profits aren't the only way that research and development can pay off. In fact, many companies focus their R&D on improving existing technologies and processes for internal use, reducing the overall cost of bringing your products to market.
  • Remain competitive: Research and development is a great way to stay ahead of the competition. By investing in emerging technologies that improve your products, you can gain a competitive edge over even the most established firms.
  • Secure investment: Even if your research efforts aren't immediately profitable, they may point to future innovations or developments that investors are excited to support.

Basic vs. applied research

Research and development comes in two main types: basic, and applied.

Basic research (also known as fundamental research) is focused on improving our understanding of a particular problem or phenomenon through exploration of big questions. Some examples of basic research questions are:

  • Why do mice get caught in traps?
  • Why are some people allergic to gluten?

While basic research can certainly help a company acquire new knowledge, its focus on research for its own sake means that the financial benefits are uncertain. Consequently, this type of research and development is primarily performed by large corporations, universities, and government agencies.

Applied research is also done to acquire knowledge. But unlike basic research, it's done with a specific goal, use, or product in mind. Where basic research is theoretical, applied research is practical, with a focus on finding workable solutions for current problems. Some examples of applied research questions include:

  • How can we build a better mousetrap?
  • What combination of flours will produce the best gluten-free pie crust?