R D expenditures

Fig. 4. R D expenditure vs capital spending for 12 U.S. chemical companies where ( — —) is capital spending and (—) is R D expenditure.

The FCCSET Committee on Industry and Technology, which I chaired, undertook to inventory what the Federal Government was doing in a variety of critical technology areas. Materials science is obviously one of these areas. In fiscal year 1991—1992 the Federal Government funded 1.66 billion in materials R D. That figure has remained fairly constant since approximately 1976. Materials now account for about 2.3% of the federal R D expenditures. 

Bursting strength, of paper, 18 100-101 Burton process, 18 648 Busheling scrap, 21 408-409 Bushveld Igneous Complex, 19 604 Business form inks, 14 321 Business R D expenditures, 21 612. 

According to the Council on Wage and Price stability "Studies of business innovation suggest that over the long term companies treat their research and development budgets like other investments and adjust R D expenditures so that the return is comparable to that earned on other corporate investments", (2). 

Roads2HyCom (2007). R D Expenditure for Hydrogen and Fuel Cells as Indicator for Political Will, eds. Lako, P. and Ros, M. E., Roads2HyCom. www.roads2hy.com. 

The findings of these studies are in accordance with an earlier study performed by the British economists Taylor and Silberston. Based on a survey of R D managers in the United Kingdom, they estimated that pharmaceutical R D expenditures would be reduced by 64% in the absence of patent protections. By contrast, the corresponding reduction was only 8% across all industries. Similar findings were reported by Edwin Mansfield, in a survey of the research directors of 100 U.S. corporations. ... 

In 2006 the company spent US 7.6 billion on R D and its income for that year was US 48.4 billion. Table 1.7 clearly demonstrates that pharmaceutical companies are heavily research based Pfizer s R D expenditure is head and shoulders above other technology companies with much higher market capitalization. 

Company Market Capitalization US billion (July 2007) Revenue, US billion (2006) R D Expenditure, US billion (2006)... 

The pharmaceutical R D expenditure, at more than 10% of revenue, is higher than many other technology-based industries. 

The annual R D expenditure for biopharmaceuticals is around US 19-20 billion. There are estimated to be 2500 biopharmaceuticals in the discovery phase, 900 in preclinical trials, and 1600 in clinical trials. This represents 44% of all drugs in the development phase and 27% of all drugs in both preclinical and clinical trials. The most common target is cancer and monoclonal antibodies and vaccines have the largest amount of R D activities. 

Some chemical companies spend a very high percentage of sales on R D expenditures. Almost all of these companies are pharmaceutical companies, that portion of the industry that is highly competitive technically and requires substantial basic research to remain competitive. These types of companies can spend large percentages of their sales on R D Pfizer, 17% Bristol-Myers Squibb, 9% Eli Lilly, 18%. Most general large U.S. chemical companies spend a smaller portion of their sales on R D Du Pont, 6% Dow, 5% Rohm and Haas, 4% Eastman Chemical, 4%. 

Judging from the relatively larger share of R D expenditures of total pharmaceutical firms sales revenues, it would appear that the market mechanism functions fairly well in providing financial incentives for R D. However, the... 

More recently, DiMasi, Hansen, and Grabowski (2003) employ a similar methodology to provide updated estimates of research costs. They examine development expenditures for a sample of 68 randomly selected new drugs introduced by 10 leading pharmaceutical companies during the 1990s. These firms accounted for 42% of industry R D expenditures (p. 157). They then... 

While their previous study estimated R D expenditures per new drug at 231 million in 1987 dollars, their more recent one provides an estimate of 802 million in 2000 dollars. These figures indicate sharply higher costs for new product development. From this vantage point as well, the growth of a science-based research effort has not reduced research costs but led to higher ones. 

R D expenditures - that is, R D spending is relatively productive - rewards should go to the manufacturers to stimulate research and development. However, when such spending is not as productive, consumers should receive higher relative rewards in the form of a lower price. 

However, on the brighter side, firms make estimates of the marginal product of R D expenditures prior to making such investments. Especially because many outside experts are likely to have had prior experience on the inside, insiders may not have a large advantage over outside experts in making such estimates. 

Expansion of the government s role is likely to crowd out private investment. Lichtenberg (1984) provides estimates of the relationship between company and federal R D, based on data compiled by the National Science Foundation for the period 1967-1977. The availability of firm-level panel data on both R D expenditure and employment permitted investigation... 

The project portfolio enables an overview on the ongoing research activities. Numerous economic and technical parameters have been proposed to provide a meaningful picture. Examples are attractiveness, strategic fit, innovation, gross/net present value, expected profits, R D expenditures, development stage, probability of success, technology fit, and realization time. Most of these parameters cannot be determined quantitatively, at least during the early phases of a project. 

Despite a high and rapidly raising R D expenditure, the number of NCE approvals dropped from an all-time high of 51 in 1997 to an all-time low of 15 in 2005... 

Changes in the Ability of Firms to Calculate Payoffs from Research. As we have already mentioned, most firms appear to consider their R D expenditures to constitute investments designed to generate future streams of income. As such, their research decisions must meet the test of any investment—the discounted present value of their anticipated future revenues must exceed the discounted present value of their future costs. 

However, despite these variations in accounting, the financial data presented in the annual reports of the sample firms provided a basis for establishing R D expenditure patterns. No attempt was made to compare one firm to another. Instead, the data were used to access the pattern of R D expenditures for each individual firm for the years 1970-1976 and for the sample firms as a whole. 

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