In contrast, Ford's description of its impressive R&D program can charitably be described as perfunctory. It simply lists, in two brief paragraphs, how much it spends and where it spends it. Ford does not provide a rationale for last year's 10 percent cut, nor does it try to play up the company's continuing position as one of the most R&D-intense companies in the world. Ford's brevity may reflect other, competing goals in such financial disclosures; the company may, for instance, wish to keep its competitors in the dark.

Fortunately for investors, most other automakers provide a level of detail that is closer to Toyota's than to Ford's. Indeed, many companies cite their R&D ranking as a source of strength. For example, Samsung Electronics Co. says in its filing, “In 2006, the Financial Times ranked Samsung Electronics ninth in R&D investment among 1250 companies around the world…. This newspaper reported that over the past four years, Samsung's massive investment in R&D has had a great impact on the electronics industry, prompting competitors to spend more on R&D.” As Spectrum reported last year, Samsung surpassed Intel as the leading spender on R&D in the semiconductor industry, a position the South Korean company maintained this year in spite of double-digit growth in Intel's spending [see “IBM Takes the Guesswork Out of Services Consulting,” Spectrum Online, December 2006].

Another metric of R&D is the number of patents that come out of it. Of course here, too, there must necessarily be a lag between the investment and the result. Samsung boasts of registering 2474 new patents in the United States during 2006, raising it three notches to place second, behind IBM, the world leader for the 14th year in a row. The problem is that the business value of patents varies greatly, so the sheer number of patents correlates loosely at best with a firm's actual performance [see “Keeping Score in the IP Game,” Spectrum, November].

The filings also provide a window into R&D collaborations between companies. For example, Motorola highlighted its creation of a new joint research facility with Huawei Technologies, in Shanghai, to bring the Universal Mobile Telecommunications System and High-Speed Downlink Packet Access cellphone technologies to market. Intel touts its collaboration with Micron Technology to develop NAND flash-memory technologies.

One more point: the year-by-year filings provide a kind of slide show of the process of globalization. The top R&D spenders are all multinational corporations, and their R&D operations are themselves increasingly dispersed around the world. Microsoft has R&D facilities in Canada, China, Denmark, India, Ireland, Israel, and the United Kingdom. Even upstart Google has R&D centers in China, India, Israel, Japan, and Russia.

How Wall Street's pros evaluate R&D depends on the industry, the company, and the individual analyst. R&D Intensity is always the analyst's main benchmark, but the key question is what, exactly, it is supposed to be measuring. R&D is an investment in the future and also an expense against current earnings. An analyst may choose to favor either side of the equation.

Stephen R. Biggar, director of U.S. equity research for Standard & Poor's (which is separate from the data-generating arm of the company that supplied the R&D statistics for this article) says that Wall Street's desire for “instant gratification” is too high, and it's getting higher. He blames a short-term outlook that puts pressure on companies to shoot for ever-quicker payoffs, which in turn tends to make them shortchange R&D. The reason is that lag time again: it takes a long time to yield profits—up to 15 years in the pharmaceutical industry. That's forever to most analysts, who generally forecast revenues and earnings just two or three years out. He says those pressures are stronger in the United States than in other countries (perhaps because boards of directors in those countries are less in thrall to shareholders).

Biggar says pressure for quick payoffs isn't all bad. It induces companies to try to squeeze what they can out of the plant and equipment they already have, which is good for efficiency so long as no technological revolution intervenes to render that equipment obsolete. He also notes that R&D is viewed differently in each sector. He says a good rule of thumb is that the higher a sector's average R&D Intensity tends to be, the more important R&D will be to analysts.