Determining R&D intensity under different market conditions

This paper develops a dynamic simulation to aid exploration of research and development (R&D) intensity, the percentage of revenue which an organisation invests in R&D. Simple analytic results for R&D intensity are obtained under the assumption that there is no market restriction on revenues per unit technology stock of the organisation. This indicates that early investment creates most value for an organisation. Several investment policies are then considered under differing market dynamics. No one policy is ideal under all market conditions, however the three policies of; tracking market growth, investing for value creation and targeting profit are all shown to provide guidance.