processes and on developing new ones. Some 

 R&D in the form of basic research is performed 

 to gain new insights into areas of company 

 interest, and the resuhs from these efforts may 

 be incorporated eventually into new or improved 

 products. In this way, R&D assists companies to 

 maintain existing markets or to expand into new 

 ones, to reduce production costs, and to increase 

 profits. 



The importance of improving and developing 

 new products and processes, and the associated 

 levels of R&D, vary among industries. In 

 addition, the emphasis placed on new 

 developments versus improvements differs — 

 over time and among individual companies and 

 industries. Some indication of the relative 

 emphasis of the R&D programs of manufac- 

 turing industries during 1974 is indicated 

 below.-- 



on the improvement of existing ones. Although 

 data are lacking on actual sales from new 

 products, information is available on the sales 

 expected from such products. These estimates, 

 expressed as a percentage of total expected sales, 

 are summarized in the table below.-' As 

 indicated, the most R&D-intensive industries 

 have expected a higher proportion of their sales 

 to be in new products than the two groups of less 

 R&D-intensive industries. 



Expected sales from new 



products'^ as a percent 



of future sales 



Mean percent 



R&D intensity 



Group I 



Group II 



Group 111 



1969-70 1971-72 1973-74 



27 

 15 

 11 



26 

 15 

 15 



24 

 20 

 11 



Objectives of industrial R&D 

 programs, 1974 



Objective 



Improving existing prcxducts 

 Developing new products . 

 Developmg new processes . 



Percent of 

 R&D expenditures 



50 

 36 

 14 



As shown in the table, one-half of the R&D 

 expenditures are aimed at improving existing 

 products. Only three industries— electrical 

 equipment and communication, professional and 

 scientific instruments, and food and kindred 

 products — reported new product development 

 as the principal objective of their R&D 

 programs. Petroleum refining and extraction 

 and the nonferrous metals industries were the 

 only two in which new process developments 

 received the largest share of R&D funds. All 

 other manufacturing industries in 1974 

 emphasized the improvement of existing 

 products in their R&D programs. Product 

 improvements were also the predominant type 

 of innovations found in a sample of major 

 innovations reported later in this chapter under 

 "Technological innovation." 



Some industries depend upon R&Dmore than 

 others. This dependency might be expected to be 

 greatest among those industries relying most 

 heavily on sales from new products, rather than 



I- BusiHiis' Plum, for R&D Expendilures, ! 9 75-78, McGraw-Hill 

 Publications Co., May, 1975. (Strictly comparable data are 

 not available for earlier years.) 



The three industries reporting the highest 

 proportion of R&D expenditures for new 

 product development (electrical equipment and 

 communications, machinery, and professional 

 and scientific instruments) are among the five 

 industries expecting the largest proportion of 

 sales from new products during the 1969-74 

 period. 



The expected level of new product sales 

 appears to have declined slightly for Group I 

 industries overall, and increased for Group II 

 industries since 1969-70. This decline in Group I 

 industries may result from a longer term shift 

 away from the development of new products 

 toward innovations representing improvements 

 in existing technologies. (See the later section in 

 this chapter entitled "Radicalness of the in- 

 novations.") 



Patented inventions 



Patented inventions are one of the more direct 

 outputs of industrial R&D. They often represent 

 actual or potential advances in technology, and 

 thus indicate, to some extent, the level, direc- 



-.' The data presented m the table are based on an analysis, 

 commissioned especially for this report, of information from 

 Business' Plcim for R&D Expeniiiiurei, McGraw-Hill Publications 

 Co., Economics Department, annual surveys, 1960-74. 



24 "New products" were defined as those expected to be 

 introduced into the market within three years following the 

 timeof the survey. What constitutes a "new product "and the 

 extent to which it differs from previously existing products 

 may vary among industries and/or companies. 



96 



