CNBC unveiled a new ranking of the most innovative companies in the market based on research and a ranking system devised by Olin professor of strategy Anne Marie Knott. The CNBC RQ 50 includes companies from a wide swath of industries from oil, gas, and defense to Silicon Valley’s stars. RQ stands for Research Quotient.
The CNBC RQ 50 is a unique list of publicly traded companies that derive the greatest shareholder value from their research and development spending (at a minimum of $100M annually), created in partnership with Washington University in St. Louis professor Anne Marie Knott, inventor of the Research Quotient (RQ). The RQ is calculated based on Professor Knott’s proprietary formula and is designed to help investors know what a company can expect to gain in revenue from an increase in R&D investment. – CNBC website
“Economic growth comes from innovation and R&D is the biggest source of innovation,” says Prof. Knott. “So if we can get each firm to increase their RQ a little bit that will lead to a permanent increase in economic growth.”
Prof. Anne Marie Knott
“The longer-term benefits are even greater,” Knott says, “as RQ also allows companies to more closely link changes in R&D strategy, practices and processes to profitability and value.”
Knott’s research led to the development of the RQ measurement tool. It is designed to help companies address several key questions that underlie R&D strategy:
- How does a company know what kind of return it is getting from R&D?
- Is it better at R&D than the competition?
- How much should it be spending and what can it do to improve the effectiveness of those investments?
“I had been hoping for a measure like this since before becoming an academic,” Knott says. “Existing measures of innovation, such as R&D intensity and product/patent counts, don’t allow firms, policy makers or academics to know the answers to these big questions.”
Knott’s RQ metric allows companies to estimate the effectiveness of R&D investment relative to the competition.
“It lets them see how changes in their R&D expenditure affect the bottom line and, most important, their company’s market value,” Knott says.
Images: CNBC video screen shot from CNBC website