One standard definition of research and development states that research is an undirected basic science or a directed or applied science where development in research can result in innovative products and processes from either of these sources.

Research differs from development of a product in that it is an exploration of ideas rather than a tangible output to be marketed. There is no guarantee that a new idea will be successful. R&D must provide a high degree of insurance so that future gaps can be closed to meet corporate goals, such as profitability. Therefore, many innovations are necessary and should be allowed to flourish to assure the achievement of these goals.

Invention is an idea that must be converted to practice, i.e., one must show that the technical idea is feasible and can be demonstrated. The payoff of a timely invention can make a firm gain a market edge by lowering price, even with a strategy that places it below production cost. The belief is that increased sales would ensure future cost reductions from increased volume of output due to increased sales.