How does research and development help to improve efficiency of resource allocation?  

Expert Answers
boomer-sooner eNotes educator| Certified Educator

Research and development departments have various goals depending on the organization.  However, there are two general goals of every R&D facility.  The first is to generate new products or improvements for the organization to sell in the marketplace.  This is generally deemed the development side.  The second goal is to determine what products are desired, how to meet customer demand and anticipating trends.  The second part is the research portion of the department.  Although there appears to be two separate missions, the interaction between the two is seamless and should be seen as one unit.

R&D departments can greatly influence resource allocation efficiency through trend prediction and technology investment.  Trend prediction relies on R&D to understand upcoming changes to the marketplace which will affect the organizations bottom line.  For example, print newspapers have dwindled dramatically over the last few decades with the rise of the internet.  News organization that did not invest in an online edition simply failed to survive the consumer driven change in the marketplace.  Instead of allocating resources to beat reporters, it may have been more efficient to invest in an online presence.

Technology investment focuses resource allocation on the most efficient means of producing a new or improved product for the marketplace.  When there are multiple competing projects R&D should be able to analyze the cost benefit of each by calculating the production cost, time delay and launch projections.  This allows the company to focus resources on projects with an expected return versus the "long shot" project.