MIT Sloan Management Review Article on The Promise of Targeted Innovation

Who are the kings of R&D spending? High tech and health care, of course. These sectors each account for nearly one-quarter of global R&D.1 Consumer goods companies? They’re near the bottom, at just less than 3%.2 But what they do spend is hardly trivial. The largest consumer goods companies each lay out more than $1 billion annually. Spending by one of the biggest, Procter & Gamble, has averaged about $2 billion per year for the past decade.

What have these behemoths gotten in return for their hefty R&D outlays? Virtually nothing from a sales perspective. In an industry analysis, we found that the consumer packaged goods sector’s biggest R&D spenders saw no appreciable impact on revenue. That’s troubling for companies whose growth has plateaued over the past five years, as new competitors have challenged established brands.

About the Author

Marcel Corstjens is the Unilever professor of marketing emeritus at INSEAD in Fontainebleau, France. Gregory S. Carpenter is the James Farley/Booz Allen Hamilton professor of marketing strategy at the Kellogg School of Management at Northwestern University in Chicago. Tushmit M. Hasan is a doctoral student in marketing at the University of Texas, Austin.

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