The problems of justifying expenditure on research and development are discussed, showing that if properly carried out, the gains should outweigh the costs. The relationship between the fundamental, strategic and applied levels of research activity is explained. It is pointed out that many discoveries made by fundamental research which (however interesting in purely scientific terms) initially appeared to have no practical significance have since proved to be highly useful, albeit sometimes only after many years (for instance, cyclodextrins were first discovered in 1891, but their ability to trap other compounds, known since the 1920s, has only recently been put to practical use in the production of stabilized standard flavours for taster training and of complexed hop aroma preparations), and also that innovative ideas and the preliminary research required to ascertain whether they have any practical applicability are relatively cheap, so that if large numbers of ideas are generated and tested there is a greater likelihood that some of them will prove useful and that the benefits gained from them will outweigh the costs of those which fail. The integration of research and development into the company's other activities, the evaluation of past research and development work and the prediction of the potential benefits obtainable from a project are discussed. Attention is drawn to a recent British Psychological Society publication, in which it was pointed out that although the type of person most able to produce useful innovative ideas is often unconventional by an ordinary businessperson's standards, the recruitment of such individuals and the creation of working conditions in which they are free to make the best use of their abilities are essential for successful innovation, while failure in this regard may lead to stagnation and a loss of competitiveness.
Keywords : costs economics management research development survey