Performance measurement in industrial R&D

Currently, the need for R&D performance measurements that are both practically useful and theoretically sound seems to be generally acknowledged; indeed, the rising cost of R&D, greater emphasis on value management and a trend towards decentralization are escalating the need for ways of evaluating the contribution of R&D to corporate performance. However, although recent research and writing on the subject shows that the challenge of developing such sound measurements has been taken up by many academics and organizations, it is also clear that there is no generally applicable approach. In this review, we consider various approaches for measuring the performance in industrial R&D and identify their key characteristics. We also include a brief summary of the ‘history’ of performance measurement in R&D, which shows that although there are some new ways of looking at the issue there are many examples from the past that can contribute to our current thinking. The approaches found in the literature and practice are very varied in their application, some being more suitable for the project level, others for the R&D department, and some for the development process or for the organization as a whole. Furthermore, the uses of the approaches tend to be different. For example, some approaches are intended to justify the continuation of investment in R&D to upper management, whilst others are more suited to support learning and self‐correction by empowered R&D teams. In this paper these uses, or ‘functions’, of performance measurement and a taxonomy of typical subjects of measurement in R&D environments are explored. Finally, we conclude the review with a discussion of some limitations of the growing literature on R&D performance measurement.