Rating R&D: How Companies Get The Biggest Bang For The Buck

In most companies, research and development funding seems to become especially vulnerable at the first sign of financial trouble. Largely that's because the value of R&D is hard to pin down. So Pittiglio Rabin Todd McGrath, a high-tech consulting company in Weston, Mass., is proposing a simple benchmark called the Index of R&D Effectiveness. It is calculated by dividing the percentage of total revenue spent on R&D into new-product profitability, which is also expressed as a percentage. PRTM recently applied this measure to 45 large electronics makers--with sobering results.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.