Can investment in R&D provide a competitive advantage?

Can a technology business achieve sustainable competitive advantage without making significant upfront investment in research & development (“R&D”)?

Samsung, with is engaged in a bitter fight with Apple in the smartphone and tablet computer market certainly sees the need to substantially increase its R&S spending. According to this article, Samsung plans to spend as much as $9.3 billion on R&S, which is equivalent to around 6-7% of annual revenues. That investment is not just on smartphones and tablets. Samsung’s product range includes a wide range of home appliances, television & audio devices, printers & software - a much broader range than Apple. Apple is estimated to have spent around $2.3 billion last year on R&D, a smaller percentage of annual revenues. So there is a real sense of Samsung attempting to at least catch up with its rival.

Students who have followed the story of Nokia’s strategic problems will be aware of the challenges facing competitors in the mobile phone market. Nokia CEO Stephen Elop has described the battle as essentially one of “eco-systems” (e.g. mobile operating systems and their associated apps). Samsung has built its success to-date by using Google’s Android operating system. It is thought that Samsung may decide to take on Apple (and Microsoft) directly by buying HP’s WebOS.

The media’s attention may have been on Nokia in recent months - not surprisingly given its significant problems. But watch out for Samsung to see if it can challenge Apple.