ANALYZE AND MEASURE THE EFFECTIVENESS OF A FIRM’S R&D
FREE TO ACADEMIC INSTITUTIONS maintaining current subscription to S&P Capital IQ Compustat
WHAT IS RQ?
Research Quotient = percentage increase in revenue from a 1% increase in R&D.
RQ is the output elasticity of R&D. RQ offers a universal, uniform, and reliable measure of a firm’s R&D productivity.
• Link R&D spending to firm growth
• Link R&D spending to market value
• Derive a firm’s optimal R&D spending
• Predicts monthly returns
• Estimated for all firms conducting R&D
• Only 50% of firms patent their R&D
• Essentially, the ratio of inputs to outputs—interpretation is the same across all firms
• Compare firms across industries
Firm behavior and economic outcomes consistent with endogenous growth theory (and validated over 47 years):
• Optimal R&D increases in RQ
• Market value increases in RQ
• Firm growth increases in RQ
COVERAGE from 1972-2010
RESEARCH WITH RQ
Measuring Innovation, Cooper, Knott, Yang
R&D Returns Causality: Absorptive Capacity or Organizational IQ, Knott
The Puzzle of Market Value from R&D, Knott, Vieregger
Outsourced R&D and GDP Growth, Knott
Reconciling the Firm Size and Innovation Debate, Knott, Vieregger
ABOUT PROFESSOR ANNE MARIE KNOTT
Professor of Strategy at Olin Business School
• Research area: innovation—both entrepreneurship and large scale R&D
• Formerly Assistant Professor at Wharton
Numerous articles on innovation and entrepreneurship
• Management Science, Organization Science, Strategic Management Journal, Small Business Economics, Research and Technology Management, Harvard Business Review
Two National Science Foundation grants for RQTM:
• NSF Award 0965147: Firm IQ: A Universal, Uniform and Reliable Measure of R&D Effectiveness
• NSF Award 1246893: The Impact of R&D Practices on R&D Effectiveness
BS, Math University of Utah; MBA and Ph.D. from UCLA
Prior industry career motivates her work
• Engineer, Program Manager at Hughes Aircraft Company (missile guidance)
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