Corporate R&D Spending During a Recession

OVERVIEW:Although many studies have reported the influence of R&D on company performance in periods of economic growth, no previous study has been carried out in a recession. Successful R&D, which provides new products and processes, should improve company performance during a recession. This study shows that most companies, which invest heavily in R&D, do perform well in a recession. Furthermore, company performance during a single recessionary year can dominate its overall performance over a decade. The study also investigated company R&D funding in a recession. Company decisions on R&D funding do not seem to be greatly influenced by company profitability, but the analysis does suggest that highly diversified companies may withdraw R&D support from some of their product lines in a recession. On the other hand, companies with strong market share of a concentrated industry fully support their products with R&D during a recession.