The Relationship between Research and Development (R&D) and Innovation

Science refers to knowledge about the observable world. Technology refers to material goods or methods used to carry out human ends. R&D couples scientific research with the development of technology. R&D comprises creative work undertaken on a systematic basis. It's not conducted necessarily in a spontaneous manner or unsystematic matter. It's done with an agenda in mind: to increase the stock of knowledge and to use that knowledge to devise new applications. In general, R&D is conducted by specialized units or centers belonging to companies, universities, and state agencies. Business firms are very important in conducting investigative work which is of actual or potential use in the development of new or enhanced products. In the business context, R&D refers to future-oriented long-term activities involving S&T or applying S&T techniques to scientific research with the outcomes unknown in advance and with broad forecasts of commercial yield.

We can measure R&D in companies, universities, or state agencies or on an economy-wide basis. It is often measured as a gross domestic expenditure. Gross means it covers the entire economy. Domestic means within a country. The acronym for measuring gross expenditure on R&D is GERD and usually it is 1% to 3% for most countries as a percentage of the gross domestic product (GDP). The absolute numbers vary significantly.

For instance, the USA has the world's largest economy. It has the largest GDP of any country in the world, much larger than the 2^nd place economy, China. The absolute expenditure that the USA spends on R&D is far larger than any other country but the amount as a percentage of its GDP does not match some other countries’ investments. 

GERD is commonly broken down into three parts; the business sector (BERD), higher education sector (HERD) and the government sector (GOVERD) as to how much each of these three sectors spend on R&D. Businesses are the main performers especially in advanced industrialized economies.

Invention and innovation both require creativity. A distinction between invention and innovation is that the first appearance of a new idea is an invention but innovation refers to the widespread dissemination and/or commercialization of a new idea. For something to be classified as an innovation it either has to be sold in the marketplace or it has to be used by a large group of people. An innovation is a translation and a transformation of a new idea into something that other people use or adopt. This journey from invention to innovation is not a simple one. There are very few inventions that can be successfully transformed into innovations.

In the modern world, innovation has become central to economic development. Private business firms have taken on the responsibility of turning inventions into innovations in order to make profits. It’s crucial, not only for those companies, but for governments because economic success depends, on a large part, on these private firms. Prior to the Industrial Revolution, 250 years ago, innovation was not so central to society. Even today, there are some societies in which tradition is considered to be more important than doing something new.
from Coursera course, Science and Technology and Society in China. Week 3. by Naubahar Sharif, The Hong Kong University of Science and Technology

[Links to OECD.org :The 34 member-countries include many of the world's most advanced countries and some developing economies like Mexico, Chile and Turkey. They do work closely with China, India and Brazil, 3 giants but non-member states, and with other countries around the world.]