CHAPTER ONE

                                                INTRODUCTION

1.1       Background of the study

Research and development is an emerging concept which is required by almost each and every firm in one manner or another. To succeed in this competitive and tough environment, there is an increased demand for research and development. Research and development affect the performance of the firms and is a means for improving performance.

The firms which allocate higher R&D expenditure are expected to earn more than those that do not. (Chao-Hung Wang, 2011). The performance of a firm will outweigh the costs of research and development. After reaching equilibrium, costs on R&D will be compensated by the benefits received.

Research and development is a must needed activity for survival in this increasingly competitive environment. R&D expenditures allows the firms to prevent imitation by the rivals and earn supra normal or above average returns. (Erickson and Jacobson, 1992)The complexity and competiveness of today’s business environment requires that companies continuously raise the bar on their effectiveness though research and development top performance increasingly demands excellence in all areas, including leadership, productivity, process improvement and capacity enhancement (knowledge, skills, abilities and competencies).

Research which overtime turned to research and development and held the central place in discourses and policies on science, technology and innovation. Research and Development also called Research and Technical Development or Research and Technological Development in Europe, is a specific group of activities within a business. The activities that are classified as research and development differ from organization to organization, but there are two primary models. In one model, the primary function of research and development is to develop new products; in the other model, the primary function of research and development is to discover and create new knowledge about scientific and technological topics for the purpose of uncovering and enabling development of valuable new products, processes and services to enhance effectiveness. Under both models, research and development differs from the vast majority of an organization’s activities which are intended to yield nearly immediate profits for immediate improvements in operations and involve little uncertainty as to return on investment.(Cameron&Whetten, 1983).

Present-day Research and Development is a core part of the modern business world, where major decisions in the organizations are made base on research and development. Research and development is of great importance in Organization as the level of competition, production processes and methods are rapidly increasing hence affecting the organizational effectiveness.

In general, it has been found that there is a positive relationship between research and development organization productivity across all sectors, but that this positive relationship is much stronger in high-tech organization than in low-tech organization (Luthan, 1989). Research and development is one of the means by which organization can experience growth by developing new products or processes to improve and expand their operations thus enhancing organization effectiveness.

1.2       Statement of the problem

The role of research and development in an organization cannot be over emphasized, so the problem to be focused in this study is: identification of research and development in the organization and exploring relationship with the effectiveness of the organization.

1.3       Objective of the study

The main objective of the study is to examine the Impact of research and development on Organisational Performance: Case study of Tripple A Microfinance Bank. The specific objectives of the study are stated below:

1. To evaluate the contributions of innovation and technology development to the effectiveness of the Organization.
2. To investigate the role of research and development in the day to day activities of the Organization.
3. To make recommendation as to how research and development could be improved to boost Organizational effectiveness.

1.4       Research questions

Corresponding to the objectives, the study is to provide answers to the following research questions:

1. How does research and development influence Organizational effectiveness?
2. In what way would technology development affectOrganization effectiveness?
3. What is the relationship between innovation development and Organizational effectiveness?

1.5       Research hypotheses

Hypothesis of the study are:

Hypothesis I:

H₀:      There is no significant relationship between research and development and organizationaleffectiveness.

Hypothesis II:

H₀:      There is no significant relationship between technologydevelopment and organizational effectiveness.

Hypothesis III:

H₀:      There is no significant relationship between innovation development and the organizational effectiveness.

1.6       Significance of the study

Research and Development is key to the success of any organization that depends a lot on innovation, science and technology to enhance productivity thus indicating organizational effectiveness.

The study is focused on evaluating the contributions of research and development to the organization and exploring its influence on the effectiveness of the organization. It will help administration, managers and organizations to develop high-technology research and development, which in turn will be useful for better effectiveness.