that the claimant has an agenda that conflicts with the goal of truly assessing the costs and benefits of R&D. I say this because research—especially long-term research—is highly uncertain, and also because the benefits of research are highly complex, going well beyond the abilities of most models to comprehend them except in a crude probabilistic sense.

As a historian, I cannot—and I will not—say that history "proves" my argument. But I can definitely say that in the past, some very smart people have wrestled with the issue of measuring the return on investment in R&D and have frankly admitted that it is an intractable problem. Moreover, they concluded that any scheme they might develop was so flawed as to be dangerous if used alone for decision making; consequently, they relied on other criteria.

This paper centers principally on the case of the DuPont Company, which until relatively recently has consistently been one of the nation's leaders in industrial research. In 2002 the company will celebrate the bicentennial of its founding and the centennial of the founding of its first major industrial research laboratory. DuPont was among a handful of what I have elsewhere termed "the R&D pioneers" in the United States.2 DuPont's scientific and technological achievements are many, and some have even become legendary.3 DuPont also holds a special place in the annals of business history, for as Alfred D. Chandler, the dean of American business history, has shown, DuPont pioneered in 1921 the organizational innovation of the multidivisional governance structure for a diversified multiproduct firm—the classic M-form organization.4 Even though both structural developments and fashion have served in recent years to undermine the extent and stability of the diversified, multidivisional firm—especially the vertically integrated firm—the M-form remains a fundamental organizational framework in business today.

Research in the Dupont Company

Even before DuPont arrived at the M-form of organization, its executives had been pioneers in another area of business management: the formulation of a method to calculate return on investment and the development of decision rules or norms based on ROI calculations. The DuPont innovation of ROI calculations represents one of the most significant turning points in the history of modern accounting and management. As Chandler emphasizes, it allowed for the first time the integration of financial accounting, capital accounting, and cost accounting. 5 I suppose one might be tempted to leap to the conclusion that this development marks the triumph of the bean counters, but that would be a dangerous conclusion to reach in the case of DuPont, at least for much of its history. The development of the ROI calculation was the work of F. Donaldson Brown, an executive in DuPont's Treasurer's Office. Brown became treasurer of DuPont during World War I and in 1921 vice president for finance at General Motors, a company then headed toward bankruptcy but rescued by DuPont and an alliance of DuPont family members and executives, who together gained controlling interest of the automaker.


David A. Hounshell, "The Evolution of Industrial Research in the United States," in Richard S. Rosenbloom and William Spencer, eds., Engines of Innovation: U.S. Industrial Research at the End of an Era (Boston: Harvard Business School Press, 1996).


For a review of some of these achievements, see David A. Hounshell and John Kenly Smith, Jr., Science and Corporate Strategy: DuPont R&D, 1902-1980 (New York: Cambridge University Press, 1988).


Alfred D. Chandler, Jr., Strategy and Structure: Chapters in the History of the American Enterprise (Cambridge. Mass.: MIT Press, 1962), Chapter 2. pp. 52-113. See also Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass.: Belknap Press, 1977), pp. 438-483.


Chandler, The Visible Hand, pp. 445-448.

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