“…the tough get going,” goes the saying. Does this hold for innovators and R&D?  Apparently not.

According to the Financial Times (Monday March 17), America’s 10 leading technology companies are reining in their R&D spending in the face of the American and global economic slowdown. Last year, 2007, these companies spent $40 b. on R&D, out of $426 b. in revenues, or less than 10%. While revenues rose by some 9%, R&D spending grew only by 4%. Look for further restraint on R&D this year, as the dollar plunges and global markets become more uncertain. 

An exception among the ten was Google, which raised its R&D spending by 73% last year, to $16 b. That sum, however, is small compared to the R&D spending leader, HP, where over $100 b. was invested in R&D. 

Years ago, TIM took a group of its startup companies on a benchmarking visit to Boston. We went to Teradyne, leading supplier of semiconductor equipment. There were told that Teradyne maintained its R&D spending in the face of a drastic drop in revenues in the wake of the 2000/1 recession.

Why? Simple, we were told. Recessions are an ideal time for great companies to gain market share, by boosting its innovation efforts while others are cutting back on them. It worked. Teradyne today is stronger than ever.  
As we face a global downturn, companies would do well to maintain and perhaps even increase their R&D budgets. Especially when it appears that most R&D-intensive firms are doing the opposite. 

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