R&D Intensity

This is a re-write of the article that appeared on March 18.  I had a wrong understanding of the Russian acronym ОКР (Опытно Конструкторские Работы).  Gurgen Mardoyan pointed out my misunderstanding of the term.  The confusion came from the fact that in Russian the word “Опыт” is not the same as the word “Эксперимент”.  “Эксперимент” is part of Research, whereas “Опыт” is part of Development. Hence, some points of the original article had to be corrected.

Let’s first decipher the acronym R&D.

In Russian it is about Научно Исследовательские Работы (НИР) and Опытно Конструкторские Работы (ОКР), or taken together- НИОКР.  Here it should be mentioned that in Russian the word “Опыт” is not the same as the word “Эксперимент”.  So, “опытный образед” is what we call “engineering unit”.  This is the unit that comes out of the “development phase” and is ready to be passed on to manufacturing where it will go through the process of DFM (Design for Manufacture).   The “эксперимент” stage, on the other hand, is part of the Research phase and is close to what we call "Proof of Concept" and “Prototype” in English.

In Armenian it is about Գիտահետազոտական Աշխատանք (ԳՀԱ) ու Փորձակոնստրուկտորական Աշխատանք(ՓԿԱ), or taken together - ԳՀՓԿԱ.

The Research phase could be summarized as in the below picture:

The Development phase could be summarized as in the below picture:  

Together, the R&D could be summarized as in the below picture:

For an organization, R&D intensity is the ratio of a firm’s R&D investment to its revenue  (the percentage of revenue that is reinvested in R&D).  For example, the R&D Intensity for National Instruments was around 20%.

For a country, R&D intensity is defined as its R&D expenditure as a percentage of GDP.  Below is the R&D Intensity for European countries. For comparison purposes I added Armenia’s number in red. 

Interesting to see how the smaller countries have higher R&D Intensities.  Check out Belgium, Finland, Denmark, Slovenia, Estonia.

When speaking about the R&D Intensity on a country level, you may ask what gets measured – governmental investment or private investment?  The answer is – both.  In the below graph you can see the R&D investment in the US and how the contribution of private investment in R&D has risen from 1% of total to 74% of total, whereas government investment in R&D has declined to 19%.

Armenia’s R&D Intencity is 0.21%.  This is very, very low.  But I don’t believe that this number reflects reality.  The problem in Armenia is that few companies report the investment that goes into R&D.  For example, in the EC most of the works is R&D, but I am not sure how does this get reported.

We must change this.  But not only to reflect the reality, but also because the new high-tech law, if it passes, has a clause that the government may provide subsidies for R&D.  So, we must learn how to report on our R&D. 

There are two components to report on R&D – an accounting component and a proof component. 

For the accounting component it is a matter of clearly dividing the R&D phase from the rest of the phases and report it as such.  So, it is about the picture below.  

The second component is the proof that what we are doing here is really R&D (НИОКР).  The best way of proving that, is by publishing articles, for example in the EC Journal.  Here there are clearly two logical places that can generate research articles – right after the POC, or right after the Prototype.  And on the way towards the articles, there is a place that can generate a slide presentation (a lecture) – right after the technical exploration.

I believe that if we can show the published articles and interim lecture slide-presentations, then we may have a solid proof of an R&D work and claim governmental subsidy or any other monetary compensation from donors.

For the purpose of completion, I am also showing below a detailed lifecycle from R&D to Deployment.  Please note that this is a general view and may change from case to case.

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