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Published: November 30, 2006

 
 

Smart Spenders: The Global Innovation 1000

 

Booz Allen Hamilton Global Innovation 1000: Methodology

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.

Reprint No. 06405

Author Profiles:


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.
 
 
 
 
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Resources

  1. Kevin Dehoff and Vikas Sehgal, “Innovators without Borders,” s+b, Autumn 2006: A study by Booz Allen Hamilton and India’s National Association of Software and Service Companies (NASSCOM) on the expanding geographic footprint of innovation sourcing. Click here.
  2. Yves Doz, Keeley Wilson, Steven Veldhoen, Thomas Goldbrunner, and Georg Altman, “Innovation: Is Global the Way Forward?” A joint study by Booz Allen Hamilton and INSEAD, 2006: Global companies’ current and future innovation and R&D dispersion. Click here.
  3. Jules Duga and Tim Studt, “The State of Global R&D: 2005 Global R&D Report,” R&D Magazine, September 2005: Battelle Institute study shows how government and business R&D spending has spread around the globe.
  4. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Money Isn’t Everything: The Booz Allen Hamilton Global Innovation 1000,” s+b, Winter 2005: The first Global Innovation 1000 report. Click here.
  5. Jonathan Schwartz, “The Five Founding Principles That Drive Innovation,” Financial Times, September 12, 2006: Sun Microsystems’ chief executive officer on managing the process of innovation.
  6. Manufacturing Extension Partnership overview, National Institute of Standards and Technology (NIST): Information about NIST’s outreach program for small and medium-sized manufacturers. Click here.
  7. St. Jude Children’s Research Hospital, 2005 Annual Report: Research highlights, plus organizational and financial information. Click here.
  8. The 2006 Patent Scorecard: ipIQ, a technology analysis firm that produces the world’s most comprehensive patent database, from which data was drawn for the Global Innovation 1000 analyses, ranks corporate innovation within 15 industries by patent quality, technological strength, and breadth of impact. Click here.
  9. “The 2005 R&D Scoreboard: The Top 750 U.K. and 1000 Global Companies by R&D,”: This study from the U.K. Department of Trade and Industry provides detailed data and analysis and claims a link between R&D and financial performance that our study did not detect. Click here.
 
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