BGEN50101 Business Operations: Link Between Profitability and R&D Spending
Throughout the course we have discussed situations where research and development (R&D) spending by companies
enables the contribution of innovative products to capture significant market share. In doing so, companies are able
to sell these products exclusively which can increase their gross profitability overtime. We have observed that
funding such programs requires significant investment by companies and this R&D is done with some risk since the
product may fail during advanced stages of development and clinical trials. For example, companies that invested in
mRNA vaccine R&D were well positioned to provide much needed products during the COVID pandemic.
For this assignment, you will write your opinion on advantages and risks associated with R&D spending by reflecting
on a recent analysis by Mironiuc et al. (2022) on the “Financial Market Reaction to R&D Volatility in the
Pharmaceutical Industry. A Multi-Country Study”.
Due Sunday March 17, 2024 before 11:59PM
Review the journal article by Mironiuc et al. (2022) on the “Financial Market Reaction to R&D Volatility in the
Pharmaceutical Industry. A Multi-Country Study”. The article by Mironiuc et al. (2022) provides many important
points on the importance of pursuing R&D investment by companies and some of the risks associated with
overspending in such programs. For this essay, please include the following in a document that is no more than 1000
words, double spaced:
1) Provide a summary of 3 to 5 advantages and opportunities associated with investing in R&D
2) Discuss the inherent risks that companies face in pursuing R&D in a regulated industry. You can also refer to
material that we discussed during our lectures and cite in the reference section.
3) Reflect on the advantages and challenges associated with R&D investment. Write your opinion on the
importance of R&D investments to drive innovation. Then, select one challenge which companies encounter
when pursuing R&D programs, discuss the issue, and propose how the company can mitigate the associated
risk. You could consider a scenario where the company you work for is considering the pursuit of a new
product and wishes to establish a new R&D program. Considering the costs associated with the development
of an R&D program, a challenge could be financial, so you could ask whether the company has enough cash
to ensure they do not fall into too much debt to finance R&D investments. You could propose that the
company consider grants that may be available to support such R&D efforts to help cover costs etc. This is
just an example, but you can select any challenge and discuss ways to help a company manage risks by
applying what you learned in class.
***Please refer to the rubric for information on how this assignment will be evaluated. ***
