what are research and development r d expenses 
research and development r d expenses are associated directly with the research and development of a company s goods or services and any intellectual property generated in the process a company generally incurs r d expenses in the process of finding and creating new products or services as a common type of operating expense a company may capitalize r d expenses understanding research and development expensesresearch and development is a systematic activity that combines basic and applied research to discover solutions to new or existing problems or to create or update goods and services when a company conducts its own r d it often results in the ownership of intellectual property in the form of patents or copyrights that result from discoveries or inventions an essential component of a company s research and development arm is its direct r d expenses which can range on a spectrum from relatively minor costs to several billions of dollars for large research focused corporations companies in the industrial technological health care and pharmaceutical sectors usually have the highest levels of r d expenses some companies for example those in technology reinvest a significant portion of their profits back into research and development as an investment in their continued growth large companies have also been able to conduct r d through acquisition by investing in or subsidizing some of those smaller companies costs or acquiring them outright real world example of r d expensestech companies rely heavily on their research and development capabilities so they have relatively outsized r d expenses in a constantly changing environment it s important for such a company to remain on the bleeding edge of innovation for example meta meta formerly facebook invests heavily in the research and development of products such as virtual reality and predictive ai chatbots 3 these endeavors allow meta to diversify its business and find new growth opportunities as technology continues to evolve meta s 2014 acquisition of oculus rift is an example of r d expenses through acquisition 4 meta already had the internal resources necessary to build out a virtual reality division but by acquiring an existing virtual reality company it was able to expedite the time it took them to develop this capability reasons to conduct r dbusinesses conduct r d for many reasons the first and foremost being new product research and development before any new product is released into the marketplace it goes through significant research and development phases which include a product s market opportunity cost and production timeline after adequate research a new product enters the development phase where a company creates the product or service using the concept laid out during the research phase some companies use r d to update existing products or conduct quality checks in which a business evaluates a product to ensure that it is still adequate and discusses any improvements if the improvements are cost effective they will be implemented during the development phase 