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Concepts and definitions

Extramural research and development

Extramural R&D means R&D projects or services which have been acquired outside of the unit and which from the point of view of the service provider are its intramural R&D. Extramural R&D is characterized by the fact that the developer largely determines the implementation of the project content.

Innovation

A business innovation is a new or improved product or business process (or combination thereof) that differs significantly from the firm's previous products or business processes and that has been introduced on the market or brought into use by the firm.

Innovation activity

Innovation activity includes all developmental, financial and commercial activities, undertaken by a firm, which are intended to or result in an innovation.

Process innovation

A process innovation is a new or improved business process for one or more business functions that differs significantly from the firm’s previous business processes and which has been implemented within the firm.

Process innovations for business processes may be directed at methods for production of goods or services, logistics, delivery or distribution methods, information or communication systems, administration and management including business practices for organising procedures or external relations and methods of organising work responsibility, decision making or human resource management, and at methods of product and business process development.

Product innovation

A product innovation is a new or improved good or service that differs significantly from the firm’s previous goods or services and which has been implemented on the market.

Product innovations include significant changes to the design of products, and digital goods or services.

Product innovations exclude the simple re-sale of new goods, and changes of a solely aesthetic nature

Research and development activity

Research and experimental development (R&D) comprise creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge.

The five criteria for identifying R&D:

To be aimed at new findings (novel)

The aim of the R&D is to produce new knowledge and novelties. Mere application of the existing knowledge in development of new solutions, products or procedures is not R&D activity.

To be based on original, not obvious, concepts and hypotheses (creative)

Characteristic to R&D activity is creativity, setting and testing of new hypothesis and concepts. Routine activities in the development of products, processes or other procedures in not R&D activity.

To be uncertain about the final outcome (uncertain)

R&D involves uncertainty regarding outcomes and costs.

To be planned and budgeted (systematic)

R&D is conducted in a planned way, with records kept of both the process followed and the outcome. The purpose of the R&D project and the sources of funding for the R&D performed should be identified. R&D is often organized as a project, but it can also be goal-oriented activity of a person or a group.

To lead to results that could be possibly reproduced (transferable and/or reproducible)

An R&D project should result in the potential for the transfer of the new knowledge which also can be reproduced.

Distribution by type of R&D

Basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view.

Applied research is original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specific, practical aim or objective.

Experimental development is systematic work, drawing on knowledge gained from research and practical experience and producing additional knowledge, which is directed to producing new products or processes or to improving existing products or processes.

Research and development expenditure

Labour costs of internal R&D personnel

Share of R&D work in annual wages according to R&D person-years. Labour costs include actual wages, fringe benefits in actual value, holiday pay and holiday bonuses. They also include social security payments, contributions to unemployment insurance and compulsory and voluntary pension contributions.

Materials, equipment and other current expenditure

Materials and equipment needed for R&D activities including acquisition of machinery and equipment with operating life at most one year. Other current expenditure includes the share of R&D activity in cost items such as buildings and premises, information technology, travel and administrative costs (also labour costs of administrative and maintenance personnel, which are not included in the R&D wages).

Purchased services

Purchases of services integrated into enterprise's own R&D activities. Services that are produced by external personnel, but which are closely linked to the intramural R&D of an enterprise. They may include software services, consultancy and other planning services, which are not considered as intramural R&D activities from the point of view of the service provider.

Capital costs (acquisition of machinery, equipment, buildings and the like)

Acquisitions which serve R&D only are included in total, in other cases the share of R&D is estimated by the share of use for R&D purposes. Item covers also acquisition of software for R&D activities along with licence fees.