Definitions of R & D : report with evidence.
- Great Britain. Parliament. House of Lords. Science and Technology Committee.
- Date:
- 1990
Licence: Open Government Licence
Credit: Definitions of R & D : report with evidence. Source: Wellcome Collection.
76/148 (page 74)
![7 December 1989] [Lord Clitheroe contd.] 185. Can I ask how the City reacts to this or how they are going to react to this? (Dr Acres) Those of us that responded to putting R&D costs into annual reports before it became a requirement and then when it became a requirement to add a little more commentary to that one line than we might have done previously, anticipated having a positive reaction from the City. But I think most people have found that having put it in (with one or two notable exceptions that you are all probably aware of) it has not had the sort of effect we anticipated! 186. Do you read that that the analysts are incapable of analysing this problem or people are wanting money today and not tomorrow? (Dr Acres) When a group from the CBI were discussing this very issue with the Department of Trade and Industry—we emphasised that a single number for R&D, although it was a useful figure to have and to be able to compare across sectors of industry, it did not tell you a lot as to what a company was actually doing with the X million that it identified. You would need to have a commentary on that and if it was an analyst they would need to have much more information before they could relate that to the short term as well as the long term performance. It might all, for instance, be in technical support in which case there would be no _ new business coming from the R&D effort. Alternatively, it might all be in the applied research end in which case it would be very interesting to know when that was going to be exploited. The two extremes do not happen, there is a balance. I think _ the analysis will come. As some of you are aware, in America there is a good deal of analysis of these very figures. Various consulting groups can relate not only how much one is spending but the balance of how one is spending it to the type of business you are or they think you are, and even to the way that they perceive that has influenced one’s share price and the performance of the company. Lord Nelson of Stafford 187. SSAP 13 does not require a differentiation between R&D? (Dr Acres) No. 188. Is this a mistake? (Dr Acres) | think we were discussing this earlier. If one’s initial objective is to get a company basis for definining R&D. in UK industry then SSAP will succeed. If you want to analyse that in terms of short term/long-term/existing business/new business, all the usual management criteria, then you get into the second phase. There are many companies at this moment that do not work on a single figure, they obviously break it down. Companies that have not arrived at the total figure required by SSAP13, who are not required to do it, underlines that once they have got this single figure—I ‘dm sure this is true— they will want to analyse it, if they are not doing it already. Hence the sort of information that say the Science Policy Research Unit or CBI or DTI might wish to take from that information will become increasingly available. [Continued 189. What you are saying is it would be a good idea to have the split, but I suppose the argument is what is the split between R&D? (Dr Tidd) 1 do not think that is the argument really. If we are to accept it is an imperfect measure then the Frascati or accounting standards practice definition is fine as it stands, but to have any more fine detail might confuse matters. Small companies are excluded but a lot of the businesses at the moment who do not provide that information, and they are not obliged to, will be encouraged to do so. I think that the burden is great enough at this stage. If they suddenly are given this new figure at board level then they might want, for management accounting internally, to know more details, but for public and external requirements the accounting practice standards are probably fine and more than adequate, given R&D is an imperfect measure. You could argue as easily why do we stop at R&D; why do we not ask for total innovation spend and on patents and licensing? How far do you go? I think you have to accept we want an easy to understand measure for people like analysts, major shareholders, academics and researchers, who want more detail; they will follow that up. I think for public information the accounting practice is probably sufficient as it currently stands. 190. Would you say the same is true of the use of the word “experimental” in the Frascati definition in conjunction with development? (Dr Acres) Yes. My own view is that the majority of people directly involved in defining what R&D spend is of a particular company would not have a problem with the word “experimental” in front of development. 191. Not even in the defence field? (Dr Acres) If I take the spirit of Frascati which I think most of us in the industry accept, and I am sure the academics will also accept, then R&D is defined by a contribution to innovation and whether you put the word “‘experimenta!” in front of development or whether you do not to me is not of major importance. If one is saying to oneself does the development activity contribute an innovative component, then if it does it is R&D or it is development; if it does not it is something else. The key thing that Frascati is built on, rightly or wrongly, is innovation. ‘ Lord Sherfield 192. Sir Robin Nicholson is reported to have said this summer that: “‘simple R&D statistics have their merits in that they are understood by Select Committees. However, from an industry standpoint what is important is the total spent on innovation.” I think you may have answered the substance of this question already but do you agree with this statement? Would you like to comment on it further? (Dr Tidd) We have covered the ground. In essence, yes, R&D figures and their values are relatively easy to interpret and they are readily available in most companies and will become increasingly so as the accounting practice spreads throughout the UK. But we have to recognise their limitations and that they represent one input into the process of innovation, not the entire range of inputs. Nor can they measure](https://iiif.wellcomecollection.org/image/b32218540_0076.jp2/full/800%2C/0/default.jpg)
