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Study: Rise In R & D Spending Matches Sales Growth

Booz Allen study of 1,000 corporations says R&D spending rose 10 percent in 2006 to $447 billion, with North American companies seeing the largest increase.

NEW YORK — Research and Development (R&D) spending for 2006 was on par with the rate of sales growth among the 1,000 corporations surveyed in a recent Booz Allen Hamilton study.
North American companies saw the largest increase in spending, rising 13 percent. R&D investment is growing rapidly in emerging markets, but is still a small percentage of the global total. China and India increased spending by $400 million.
Toyota was the largest corporate spender on R&D in 2006, moving up from third place in 2005.
R&D spending among the companies surveyed rose 10 percent to $447 billion. Sales growth for the same period was also 10 percent.  
The study also outlined three strategies the corporations employed for effective innovation: Need Seekers, Market Readers and Technology Drivers.
The Need Seekers engage current and potential customers to shape new products, services and process. Market Readers watch their markets carefully and drive value through incremental change. The Technology Drivers generate product ideas by deploying their technological skill and relying on unarticulated customer needs for product inspiration.
“While there is more than one innovation strategy that can win in the marketplace, it is clear that the key to superior performance lies in linking innovation strategy and corporate strategy — and in focusing on the customer in ways that can best promote strategic success,” said Barry Jaruzelski, Vice President and Booz Allen.
Companies that aligned their corporate and innovation strategies had a 40 percent higher operating income growth and twice the shareholder returns over the last three years.
“We found that companies place an increased value on innovation, but more spending doesn’t necessarily lead to smarter spending or better results,” said Kevin Dehoff, Booz Allen Vice President. “With increased competition leading to thousands of new products being released every year, companies must improve their innovation processes to succeed.”
(For more information on the study, click here.)
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