Research and development (R&D) are activities undertaken by companies for innovation and the introduction of new products or services. R&D is the first stage in any development process before new products/services are introduced to the market.
For example, Amazon's R&D projects involve developments in cloud computing and a cashier-less store ecosystem. While this can take up significant costs, the outcome is estimated to fetch a substantial bottom line for the business.
Why it matters
Due to fast-paced technological advancements, companies need to focus on their R&D to remain competitive. It allows companies to develop products/services that their competitors may be unable to replicate. It can also result in higher productivity to achieve increased margins and thereby better performance than competitors.