How Companies Respond To Growing Research Costs: Cost Control Or Value Creation?

Over the last two decades, R&D costs have been increasing significantly across almost all industries. While there is much literature studying different strategies to exploit R&D investments, we know little about the relative importance of controlling costs. Based on case studies of European and US multinational, R&D intensive companies, we study how firms deal with growing R&D costs. We investigate different strategies companies can employ to respond to growing research costs. Such strategies can be oriented towards controlling cost or focused on opportunities to create value. The case studies reveal that company spending on R&D is not perceived as a cost per se, but rather as an investment. Cost considerations are secondary factors and the main drivers of research investments are based on the expected value of innovations, risk and strategic competence development, and anticipating uncertainty concerning the kind of research that might be needed in the future.