New study links R&D spending, profitability

  • 24-Nov-2010 03:13 EST

The GM Fuel Cell Development Center in Honeoye Falls, NY, develops fuel cell stacks and the systems around them for commercial use.  A new report shows that R&D spending in the auto industry was down 14.3 % in 2009.

The impact of the 2008-2009 global recession on corporate R&D spending–and how reduced R&D outlays affected financial performance–is the subject of a study released recently by Booz & Co. For its 2010 Global Innovation 1000, the consulting firm analyzed R&D spending by the world's top 1000 public corporations in 2009 to assess the link between innovation and corporate performance. Total R&D spending by the group overall dropped 3.5% ($18 billion) in 2009, with more than half of the companies surveyed cutting their R&D spending. Within the auto industry, however, R&D spending dropped by 14.3%. At the same time, total revenues of the companies surveyed plunged 11%, from $15.1 trillion in 2008 to $13.4 trillion in 2009–nearly three times the rate of decline in R&D spending. The auto industry accounted for two-thirds of the total R&D contraction. Its 14.3% decrease in R&D spending slightly outpaced its 12.7% drop in revenue. Despite the decline, the auto industry still ranked third in total R&D spending, behind computing/electronics and healthcare. The survey found that companies that keep their innovation strategies focused and tightly aligned with overall corporate strategy outperform their rivals–and that decreased R&D spending does not necessarily lead to decreased revenue.

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