14 November 2006

EIRMA on Booz Allen study on R&D spending

The conclusions from the Booz Allen Hamilton study - as mentioned in yesterday's post on this blog ("R&D spending doess not necessarlity increase profits") are quite in line with the points I make in public events. However, the Booz Allen study is often being misquoted, and one needs also to understand the context in which the DTI study is being prepared. The BA study does demonstrate that companies need to manage their investment on R&D as part of an overall effective innovation process. So when people quote as its conclusion that there is 'no correlation with performance', this is misleading.

The study simply demonstrates that throwing more money at R&D without attention to the rest of thechain will be ineffective. Ditto throwing less money at it. There is a sweet spot which is strategy dependent. The UK DTI scoreboard is a 'straight down the line' tabulation from companies' accounts. It is an important reference document, as the alternative national statistics do not break the figures per company. (The DTI figures are highly misleading if looked at 'per country'.)

Taken together, national and company statistics are helpful in trying toget a sense of what is going on. The DTI's main headline this year, which is that countries face a historic sector bias, was pointed out by EIRMA in 2001/2002. It has taken five years for most policy people to accept this. Second point about the UK scoreboard is to understand that it is part of an on-going process to get many companies to understand that R&D *at any level* matters as part of a robust business strategy. In that sense, I'm prepared to live with a certain ambiguity and slight overstatement.

Andrew Dearing, EIRMA (European Industrial Research Management Association)

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