Research and Development

Research and development (R&D) refers to the process of discovering new knowledge about natural and social reality. It is usually related to the application of such knowledge to create new and improved products, processes, and services that fill market needs or improve efficiency and profitability of a production process. Along with human capital accumulation, R&D activity is considered to be a primary determinant of economic growth.

The complexity of research operation has increased during the last couple of decades. Consequently, the length of time to develop an innovation and the costs of undertaking R&D have risen dramatically. Simultaneously, the life span of new innovations has significantly shortened and the rate of technological change has sped up.

In the conventional understanding of R&D as a product development, three phases can be identified in this complex process. The first phase is concerned with applied science or marketing research. Here, the basic need is for access to the basic sources of science and marketing information. The second phase is product design and development. This usually requires large-scale teamwork because it needs a large supply of skilled labor. The third phase is concerned with adjusting product to a particular consumer. This phase requires contact with the user of the innovation.

From the point of view of a position of a locality in the international division of labor, it is crucial to keep or attract R&D activities for local economic development. From the point of view of mobile capital, the major locational criteria for the R&D activities are the availability of highly skilled scientists and engineers, access to the sources of basic scientific and technical developments (usually universities and private research laboratories), and an appropriate infrastructure. So far, R&D has tended to be concentrated in the developed countries, often in a firm's parent country.

With the rise of the so-called knowledge-based economy, there is a new emphasis on the importance of R&D for national competitiveness. Thus, states transform their R&D facilities at the universities to meet the perceived needs of businesses. They engage in different forms of partnership with businesses, which not only increases innovation potential of local capital but also embeds it in the locality, making its departure less likely. However, this may raise serious concerns about the role of the university system in a society, as its priorities are likely to be determined less by the long-term, public interest (e.g., sustainabledevelopment research) than by short-term, private, profit-oriented preferences.