Research and development performance measurement: a case study

Abstract

The rising costs of Research and Development (R&D) and the increasing dependence of companies on technology for competitive advantage are causing both external investors and managers to seek better measures of R&D productivity and effectiveness. One major difficulty in evaluating R&D performance is that it is simply one of several activities in successful product development. However, notwithstanding the practical difficulties and limitations of R&D evaluation, the use of financial appraisal methods can assist communication, build consensus and provide a context which decision-makers can use to evaluate the more subjective dimensions of projects. The case study reported here exemplifies the relevance of features generally associated with good performance measurement; it also highlights the role of management accounting, especially target costing, when cost is a critical design parameter. The longitudinal view of the specific product development project examined in this case highlights a fusion of management accounting and design techniques as well as the role of accounting as an integrating vernacular that links all project team participants.