Why have governments and private industries included research and development in economic planning?

Governments and private industries integrate research and development (R&D) into economic planning primarily to drive economic growth, maintain national security, and secure competitive advantages in the global marketplace.1

The rationale for this inclusion is based on several key factors:

• Technological Progress and Innovation: R&D is the foundation of industrial production. By fostering inventions and applying them to market needs as innovations, firms can create new products and more efficient manufacturing processes. Industries with high R&D components in their costs typically experience the most rapid technological progress.23
• Competitive Advantage: Government-funded R&D often produces "spin-offs"—civilian and commercial applications derived from defense or space research. These advancements provide participating industries with a crucial edge over international competitors.1
• National Security: Since World War I, governments have recognized the necessity of supporting industries that utilize advanced scientific techniques to ensure military readiness. Because modern military equipment is highly complex, the requirements for an efficient armament industry often overlap with those of the civilian sector, leading governments to become major sponsors of industrial research.1
• Efficiency: By investing in R&D, both public and private sectors aim to improve the quality of capital and labor, ultimately increasing productivity and output.3