Abstract

It can be seen from the above analysis that industry structure and earnings performance do affect R&D activity. In particular, those companies that are faced with especially intense competition are constantly working to reduce costs to improve competitiveness. The creation of an efficient global network of R&D and production facilities can help these companies to ensure that the right products are being produced in the most appropriate manner; the restructuring of R&D activities can provide a significant boost to value creation. In the software industry, which is dominated by Microsoft, in the early days the main incentive for investing in R&D was the opportunity to reduce costs. In the Internet era, Microsoft has expanded into new application field in order to maintain high growth rates and strengthen its dominant position in the industry; this process has involved the establishment of new overseas R&D centers that can take advantage of local factor endowments, thereby ensuring that Microsoft will gain maximum benefit from its investment. 

If technology is not a key focus of competition, or if differentiation provides only a limited boost to competitiveness, then companies will have less incentive to undertake R&D activity. For many PC system vendors, the main focus of competition is production and new product development, so R&D activity tends to be concentrated on these areas.