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Research and development can be thought of as passing through various stages. We now identify these stages and focus on the final stage, the diffusion or spread of an innovation. The quicker a new technology can be adopted or adapted to various uses, the greater the benefits to firms, industries, consumers and the wider economy. One possible cause for the slow rate of diffusion is the existence of patents. However, patents can also be viewed positively as an important stimulus for investments in innovation. • Basic research This refers to what may be termed as ‘inventive activity’. An invention is the creation of an idea and its first reduction to practice. At its extreme, such activity is carried out regardless of any practical application in view. Hence basic research in molecular physics was carried out without any foreknowledge of the development of the valve to be used in broadcasting and communications. This type of research is unattractive to industrial firms due to the uncertainty of outcome. Consequently, it is normally carried out by government agencies and universities. • Applied research As opposed to basic research, applied research has a stated objective. Following an investigation of potential economic returns, research is undertaken to determine the technological feasibility of the proposed application. • Development work Generally, this can be considered as the bringing of an idea or invention to the stage of commercial production and, together with stage two, this can be referred to as innovatory activity. It is at this stage that resources are committed, as pilot plants or prototypes may have to be built. Although it is clear that at every stage of research and development the firm must review its progress, it is here that the selection process for the next stage is at its most important. A new product failure at the next stage would be very costly to the organization. • Commercial production This stage refers to the full-scale production of the new product or application of a new process. Notwithstanding the level of research and development carried out into the technical characteristics of the new ideas and the amount of market research undertaken, there still exists an element of uncertainty. We can thus define the difference between invention and innovation as the level of risk. Typically, the innovating firm must bear a degree of risk in the development and launch of a new product. The ‘pure’ inventor, however, is not interested in commercial applications, as his or her interest is in the generation of ideas and not the production of goods and services. Risks in this case are thus appreciably lower. • Diffusion The final stage refers to the spread of the new idea through the firm as well as the copying and adoption of the techniques and products by other firms in the industry and other industries in the economy. One can also identify spatial diffusion, whereby ideas spread to other countries through transfers such as foreign direct investment, licensing agreement and joint ventures. This article has been compiled by Classof1.com; they offer economics homework online help.
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