Booz Allen Hamilton identified the 1,000 public companies around the world that spent the most on research and development in 2005 (companies for which public data on R&D spending was available). The last full-year data reported up to June 30, 2006, was considered the R&D spend for the company for 2005. Subsidiaries that were more than 50 percent owned by a single corporate parent were excluded because their financial results were included in the parent company’s reports.
For each of the top 1,000 companies, we obtained key financial metrics for 2001 through 2005: sales, gross profit, operating profit, net profit, historical R&D expenditures, and market capitalization. All foreign currency sales and R&D expenditure figures prior to 2005 were translated into U.S. dollars according to the 2005 exchange rate. In addition, total shareholder return was gathered and adjusted for each company’s corresponding local market total shareholder return.
Each company was coded into one of 10 industry sectors (or “other”) according to Bloomberg’s industry designations, and into one of five regional designations according to reported headquarters locations for each company. To enable meaningful comparisons across industries on R&D spending levels, we indexed the R&D spending level for each company against the median R&D spending level for that industry. A similar approach was employed for financial metrics. Approximately 10,000 analyses were required to explore all combinations of regions, performance variables, and industries.
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Barry Jaruzelski ([email protected]), a vice president with Booz Allen Hamilton in New York, is the firm’s lead marketing officer. He concentrates on corporate strategy, organizational transformation, and time-to-market improvement for companies in high-technology industries and manufacturers of highly engineered products.
Kevin Dehoff ([email protected]), a vice president with Booz Allen Hamilton in New York, is the global leader of the firm’s innovation service offering. He has spent more than 15 years helping clients improve efficiency and effectiveness in product development.
Rakesh Bordia ([email protected]) is a principal with Booz Allen Hamilton in New York. He specializes in improving innovation effectiveness and efficiency for clients in engineered products industries.
Also contributing to this article were Booz Allen Hamilton Vice President Alexander Kandybin and Associate Owen Ward, and Rob Norton.