research and development investment & finance definition

A company’s activities to discover new products and improve current products. These efforts also may focus on providing new services or marketing techniques. Many companies have R&D departments. In prosperous times, companies increase their R&D spending and often reduce their spending when economic conditions turn poor. R&D efforts usually are listed as a separate expense item on a company’s income statement. Some companies, such as those in the pharmaceutical industry, spend a large amount of money on R&D in order to always have new, leading-edge products and drugs coming to market. Other companies, such as technology companies, may spend a minimum amount on R&D efforts and instead focus on acquiring start-up companies that have new, innovative technology applications.