Funding for Research and Development is an Investment

Introduction

Research is the systematic investigation and study of materials and sources to establish facts and reach new conclusions, so it shapes people’s understanding of the world around them. Through research findings, psychologists are able to explain individuals’ behaviors, including how people think and act in certain ways. This helps to determine disorders and their impact on the person and society, thus developing appropriate treatments to improve the individual’s quality of life. In business, market research helps companies to make projections and formulate appropriate strategies to ensure survival. Businesses conduct surveys to understand the needs of the community and consumption habits. Likewise educationists are striving to find the ways to enhance the quality of education.

If schools had the R&D and PR departments that private industry has – and were equally responsive to “customers” – education might be as cutting edge as your doctored ads suggest! By Diane (2007).

Few Basic Defining Terms

            Before we proceed forward, it is pertinent that we must understand some terminologies which will be used in subsequent paragraphs. These are[1]:-

1.            ROI.    The return on investment (ROI) is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.

2.            Development.          The process of developing; growth, directed change.

3.            Research.     Diligent inquiry or examination to seek or revise facts, principles, theories, and applications; laborious or continued search after truth.

Definition of 'Research and Development - R&D'

Investigative activities that a business chooses to conduct with the intention of making a discovery that can either lead to the development of new products or procedures, or to improvement of existing products or procedures. Research and development is one of the means by which business can experience future growth by developing new products or processes to improve and expand their operations[2].

Research and development refers to “the creation of new knowledge or the application of existing knowledge to improve products, processes and/or services to affect economic outcomes”[3].

What is R&D and its Models/Functions

            The term R&D or research and development refer to a specific group of activities within any sort of business. The activities that are classified as R&D differ from company to company and sector to sector, but there are two primary models. These two models are as under:-

1.            The primary function of an R&D group is to develop new products.

2.            The primary function of an R&D group is to discover and create new knowledge about scientific and technological topics for the purpose of uncovering and enabling development of valuable new products, processes, and services.

Under both models, R&D differs from the vast majority of a company's / sector’s activities which are intended to yield nearly immediate gains or immediate improvements in operations and involve little uncertainty as to the return on investment (ROI). The first model of R&D is generally staffed by engineers while the second model may be staffed with scientists as per the nature of sector. R&D activities are carried out by corporate and governmental entities[4].

R&D and International Scenario

            World Bank (2008) “knowledge has become perhaps the most important factor determining the standard of living more than land, tools and labour. Today’s most technically advanced economies are truly knowledge based.” The successful economies in the world have been transformed from the investment of Research and Development. World Bank has highlighted the four pillars for knowledge economy.

1.             Economic and Institution management

2.             Education and Skill

3.             Information and Communication Infrastructure

4.             Innovative System i.e. Research

            The green revolution delivered results in shape of increase in the grain production in Asia. It failed in Africa due to absentee of industrial and technical education as well as the required know how techniques and high education institutions[5].

Enhancing Research Content and Relevance

The research community must respond to the challenges and opportunities of sustainable development by increasing content and ensuring relevance, key aspects include[6]:

1.            Implementing research for sustainable development, including promoting sustainable practices among researchers, strategy to complement cross-cutting approaches, and raising the profile of researchers;

2.            Designing research policy for sustainable development, including foresight to identify needs, research-led social shaping of concepts and knowledge brokering; and

3.            Measuring the contribution of research to sustainable development, including proxy indicators linked to research results, completed by result analysis by a jury in a debate.

Higher Education and R&D

            Since now it has been understood that the research and development importance cannot be ruled out in any society and in any sector. Higher Education Commission is also striving for the same. R&D in the context of HEC is as under[7]:-

1.            Research is essential to the acquisition of new knowledge and a dynamic world class R&D sector is not only vital for the nation’s academic health but crucial to economic and social cohesion.

2.            Higher Education Commission clearly recognizes the imperative and has placed research and development as a strategic core aim for the improvement of higher education and technological advancement in Pakistan.

3.            HEC aims to develop such higher education system that provides world class research, capable of competing internationally.

Various Percentages of R&D Spending

            Internationally a typical ratio of research and development for an industrial company is about 3.5% of revenues. A high technology company such as a computer manufacturer might spend 7%. Anything over 15% is remarkable and usually gains a reputation for being a high technology company. Companies in this category include pharmaceutical companies such as Merck & Marker (14.1%) or Novartis (15.1%), and engineering companies like Ericsson (24.9%). Such companies are often seen as credit risks because their spending ratios are so unusual[8].

Conclusion

            Hence at the end we can conclude that the spending done on R&D are not dead investments. R&D improves quality of products and at the same time innovate new products, thus this is important investment. Dearth of research literature / equipment is a major impediment to the productivity of many creative and talented faculty members / researchers in all disciplines in Universities/Degree awarding institutions. In most cases these researchers need substantial financial support for research projects to allow them in their research pursuits.

            In the absence of such facilities the researchers, specifically the young ones, are discouraged and are looking for better opportunities in developed countries. Hence it is the responsibility of the government in general and higher education commission in particular to provide requisite facilities and grants to such scholars to avoid the brain drain.

References

1. Sustainable Agriculture through Learning, Discovery and out reach, (Vision 2030) Univ. of Faisalabad.

2. Inclusive Education and Relevance, Academy of Educational Planning, Islamabad, 2014.

3. Pakistan Education for All (Review Report 2015). Academy of Education Planning and Management, Islamabad, September 2014.

4. Human Development Report 2014, UNDP (Sustaining Human Progress).

5. HEC, “Knowledge Exchange Strategic Plan (KESP) Developed by Jo Chaffer with HEC, Feb., 2012.

6. Fred M Hayward, “Higher Education Transformation in Pakistan” Political and Economic Instability 2008, Islamabad.

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[1] https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/controlling-and-reporting-of-intangible-assets-7/research-development-cost-53/what-is-r-d-268-3722/

[2] http://www.investopedia.com/terms/r/randd.asp

[3] Derived from OECD, “Frascati Manual: Proposed Standard Practice for Surveys on Research and Experimental Development, 2002

[4] Boundless. “What Is R&D?.” Boundless Accounting. Boundless, 20 Jan. 2015

[5] World bank report 2008

[6] http://ec.europa.eu/environment/ecoap/about-eco-innovation/research-developments/eu/427_en.htm

[7] http://www.wipo.int/edocs/mdocs/aspac/en/wipo_ip_cm_09/wipo_ip_cm_09_topic12_pakistan.pdf

[8] What Is R&D?.” Boundless Accounting. Boundless, 20 Jan. 2015. https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/controlling-and-reporting-of-intangible-assets-7/research-development-cost-53/what-is-r-d-268-3722/