Title: Determining R&D intensity under different market conditions

Authors: Mike Towler, Jonathan D. Moizer

Addresses: BPP College of Professional Studies, 68-70 Red Lion Street, London WC1R 4NY, UK. ' Plymouth Business School, University of Plymouth, Plymouth PL4 8AA, UK

Abstract: This paper develops a dynamic simulation to aid exploration of research and development (R&D) intensity, the percentage of revenue which an organisation invests in R&D. Simple analytic results for R&D intensity are obtained under the assumption that there is no market restriction on revenues per unit technology stock of the organisation. This indicates that early investment creates most value for an organisation. Several investment policies are then considered under differing market dynamics. No one policy is ideal under all market conditions, however the three policies of; tracking market growth, investing for value creation and targeting profit are all shown to provide guidance.

Keywords: research and development investment; R&D intensity; revenue management; value creation; market growth; profit targets; revenue growth; technology stock; system dynamics.

DOI: 10.1504/IJRM.2010.030029

International Journal of Revenue Management, 2010 Vol.4 No.1, pp.22 - 41

Published online: 03 Dec 2009 *

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