Innovation beats acquisition: Study finds that R&D and capital investment is the more effective way to increase shareholder value

Abstract

The fact that UK companies, in general, under invest in R&D as compared to international competition is probably no surprise. That many UK CEOs have tended to look for a quick fix to this under investment by concentrating on acquisitions rather than investing more in R&D and capital expenditure is also probably no surprise. And, it should hardly be a surprise that analysis now shows that this approach does not work, with growth by acquisition frequently inferior to that achieved by “organic” investment in R&D and capital spending. These findings are some of the main points raised by the 2002 R&D Scoreboard, which has been produced by the UK Government’s Department of Trade and Industry. The production of the annual scoreboard, now in its 12th year, offers companies a unique international benchmarking tool. The analysis provides insights into R&D dependent sectors of the economy and is aimed at helping UK companies determine if they are investing the right amount compared to competitors within their sector as part of their overall business strategy. The latest scoreboard contains 600 UK and 600 international companies for the first time, with the total R&D for the UK at £16bn, as opposed to £206bn for the international 600.

Citation

(2003), "Innovation beats acquisition: Study finds that R&D and capital investment is the more effective way to increase shareholder value", Strategic Direction, Vol. 19 No. 2, pp. 37-39. https://doi.org/10.1108/02580540310794354