Change Management in R&D-Quality Costs in Challenges of the Global Economy Myroslava Bublyka, Volodymyr Mykhailova, Yurii Matseliukha, Tetiana Pihniakb, Andrii Selskyic and Igor Grybyka a Lviv Polytechnic National University, S. Bandera street, 12, Lviv, 79013, Ukraine b Khmelnytskyi University of Management and Law, Address, Khmelnytskyi, Index, Ukraine c National Academy for Public Administration under the President of Ukraine, A. Tsedika str. 20, Kyiv, 03057, Ukraine Abstract The article considers the problems of R&D-quality costs management tools application in terms of entering new international markets. In the context of globalization of national economies, a key factor in the economic growth of any country is to ensure the sustainability and efficiency of innovation processes in enterprises. A necessary prerequisite for innovative activities of enterprises are R&D activities, for the conduct of which enterprises need certain resources, which ultimately identifies focus of research on R&D-quality costs management. The studied problem is widely discussed in Ukraine given the current geopolitical and socio- economic transformation. The article considers the current specifics of the problems that arise in enterprises which apply various tools to manage the cost of R&D quality in terms of entering new international markets. The main tools, features and problems in the process of R&D-quality costs management tools application, the level of support for innovation by business entities and research are analyzed. Trend models based on indicators of Ukrainian enterprises performing R&D activities are built. Keywords 1 Private R&D, Research and Development Activities; Research and Development Costs; Quality Cost Management Tools, Entrepreneurship, International Markets, Business Entities. 1. Introduction The current state of the global environment is undergoing continuous and dynamic changes, while the problem of depletion of material economic resources remains particularly relevant, forcing countries to apply non-standard innovative, and to some extent, radical solutions. The main focus of most countries remains on ensuring sustainable development, which in turn depends on maintaining constant growth in international markets for innovative products, goods, processes, and services. This indicates that the determining factor in the economic growth of any country is to maintain a consistently high level of innovation through research and development. In order to implement such state policy in the field of entrepreneurship as a driving force of innovation processes in a competitive environment, it is necessary to effectively manage available resources and costs of innovation. The problem of applying cost management tools for research and development (which are the main component of innovation costs of economic entities) is especially important for Ukraine, which is determined by the adaptation to the requirements of the European Economic Area, the achievement of regulatory standards for its competitiveness innovative development of enterprises. Given these circumstances, Ukrainian enterprises should become highly efficient economic units that are able to COLINS-2021: 5th International Conference on Computational Linguistics and Intelligent Systems, April 22–23, 2021, Kharkiv, Ukraine EMAIL: : my.bublyk@gmail.com (M.Bublyk); mykhailovvolodymyr@gmail.com (V.Mykhailov); indeed.post@gmail.com (Y.Matseliukh); t_pikhniak@univer.km.ua (T.Pihniak,); andriy.saa@gmail.com (A.Selskyi); gribik@ukr.net (I. Grybyk) ORCID: 0000-0003-2403-0784 (M. Bublyk); 0000-0001-8799-5087 (V.Mykhailov); 0000-0002-1721-7703 (Y. Matseliukh); 0000-0002-3301-3495 (T.Pihniak,); 0000-0002-7373-0472 (A.Selskyi); 0000-0002-8726-509X (I. Grybyk) ©️ 2021 Copyright for this paper by its authors. Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0). CEUR Workshop Proceedings (CEUR-WS.org) ensure a stable high level of economic growth through the development and implementation of innovative products by choosing economically effective cost management tools that will maximize the economic results of research and development and turn them to extremely profitable and successful developments. The purpose of this work is to analyze the features and problems of enterprises using cost management tools for research and development in terms of entering new international markets and select those tools that will maximize the economic and technological results of scientific developments and research for enterprises, industries and countries. 2. Analysis of recent research and publications In the context of global transformations of the world economy, the tendency to actualize the problems of application and development of effective cost management tools is inherent in research and publications, both for countries with economies in transition and for developed countries. The main tools for managing R&D-quality costs are reflected in the works of many foreign scientists [1-3, 6, 8, 13-20, 22, 25-31, 36, 48, 56]. Among them are the most famous works: Shahsi Niyai [48], A. Henriksen [18], Afcha S. [1], Xin Jin [56], Kotter J.P. [25-31], A. Aristovnik [2], O. Limanli [36], O. Karahan [20], P. Dobrzansky [13], Erdal L. [14] and others. Among the Ukrainian authors who study the problems of managing R&D expenditures are the works of N. Chukhray [11], Berko A. [4], O. Bisikalo [7], L. Chyrun [12], І. Gerashchenko [16], O. Kasyanov [21], Kozyk V. [32], V. Krush [33], O. Kuzmin [35], S. Zhukevych [57] and others. The value of cost management tools for research and development is revealed through the systematization of methods for estimating these costs, the calculation of performance indicators of this type of costs. Krush and Pashkov [33] divided the costs of R&D into internal and external for the company. The cost structuring mechanism is one of the methods of managing the efficiency of development and research costs. The process of structuring goes in search of the optimal ratio of component costs, which allows the company to achieve maximum financial results. Cost management aims to ensure control over the redistribution of enterprise resources intended for research and development, according to international standards. The essence of the tools for managing the costs of enterprises for research and development is to constantly monitor the amount and structure of costs and ways to influence them. Cost management aims to reduce inefficient costs and prevent the impact of cost reduction on the deterioration of the quality of scientific and technical developments, underproduction of competitive innovative products, which is the result of development and research. Modern mechanisms for managing the cost of research and development are designed to achieve the planned level of competitiveness of enterprises in market conditions. The change in the cost structure caused by innovative processes will ensure greater cost efficiency of enterprises that actively participate in R&D [57]. A. Bin and others [6] through the implementation of fundamental analysis and evaluation of research projects proposed to manage the cost of research. The method makes it possible to choose the best combination of the proposed research projects according to their usefulness and to select each project separately according to the established criteria and restrictions (number of employees, time allocated for project implementation and implementation, budget). The method is designed for efficient use of resources allocated by the enterprise for development and research and, as a consequence, allow to eliminate inefficient costs. The method proposed by M. Shahsi-Niyai, Torabi and Iranmanesh [48] is used in conditions of uncertainty of the enterprise budget and uncertain availability of resources required for the research project. This model is to identify the problem of organizing the project with the lowest costs in a crisis situation and the urgent need for savings, reducing all types of losses on the accumulation of resources. It is based on the ranking of scientific developments by the ratio of their costs and economic benefits as a result of implementation and adoption of R&D ultimate results (e.g. new product or process). The project portfolio decision-making method involves allocating a limited set of resources for research and development in such a way as to balance risk and reward [3]. The problem of applying this method is the complex interdependence between research projects and available resources, which complicates the choice of tools to find the optimal point between the level of costs and effectiveness of research, and the simultaneous management of several R&D using shared resources. The state's support for innovation processes in enterprises is to provide them with resources, provide tax and personal benefits, which allows them to optimize the cost of research and development. There is a significant positive correlation between the intensity of research and development and the number of enterprises engaged in R&D activities. Creating a corporate network of such enterprises will help increase the efficiency of R&D [56]. Erdogan and Yamaltdinova [15] investigated the impact of R&D expenditures on the financial performance of Turkish firms in 2008-2017. It is established that the increase in R&D expenditures was a consequence of the increase in return on assets and equity. With this dependency, firms can change the share of R&D costs by purchasing additional assets. Henriksen and Traynor [18] proposed a method for estimating R&D costs using scoring models for cost analysis. To manage the costs of research and development used a cost function that combines 2 factors - the value and cost of resources. The problem that arises in the process of applying this method is the reduction of scientific return and the return from the implementation of the program of scientific research and development (programmatic return). Erdal and Geser [14] found a direct relationship between foreign direct investment on the level of R&D expenditure, the number of patents and the intensity of research and development on the example of 10 developing countries in Asia. R&D expenditure management under such conditions is possible by applying the method of cointegration and dynamic least squares. As foreign direct investment increased for the host country, R&D spending was reduced. The cost management tool according to Limanley [36] is the influence on the determinants of enterprise costs for research and development. The problem with this method is that it can be effectively applied to the developer rather than at the planning stage. If the method is used by a large enterprise, then another problem of applying the method is the existence of a direct dependence of the market share of the enterprise on the level of R & D costs. Afha and Lopez [1] with the help of a multi-nominal logistics model for estimating R&D costs as a result of a combination of internal and external research have established the modality of eliminating inefficient R&D costs. The main problem with this model is the uneven access to information on the demand for technological innovation and technical and legal barriers in the technology market. The problems that arise in the application of the tool for managing R & D costs, which is to reduce the time from research to market entry of innovative products while maintaining a constant level of costs by dividing research into discrete stages, which can be performed sequentially or in parallel, are low level of automation, access to information and insufficient level of staffing [17]. Karahan [20] proposed a tool for managing R&D costs, which is the integrated development of innovative products or processes that are complementary to each other. The problem which arises in the application of this method is the insufficient level of technical equipment. The volumetric data analysis model was used to assess the efficiency and cost management of R&D enterprises in ASEAN countries. A significant obstacle to the effective application of the method is the problem of lack of effective new technologies [13]. For countries with low technical efficiency, the tool for managing R&D costs is the reduction of research staff, the maintenance and salary of which is a significant share of R&D costs [2]. Gerashchenko [16] developed a mechanism for managing R&D costs by assessing the technical parameters of input resources and outputs, which avoids the cost of unpromising and inefficient research and development. Other analyzed tools for managing R&D costs are cooperation with venture firms, the creation and maintenance of research technology parks. Chukhrai and others [11] developed a method for assessing the readiness of research and development results for transfer, using 5 criteria that were measures of the readiness of research products for commercialization. The level of technological analytical, patent readiness, the level of readiness on demand and the impact of R & D results on society were chosen as criteria for assessing the readiness of R & D results for transfer. In the developed model, the level of readiness on demand characterizes the level of market readiness for technology transfer. The impact on society takes into account primarily the level of technical and scientific progress resulting from the application of technology, as well as changes that have occurred as a result of the use of technology (process, product, service) in households. The authors pointed out that R&D results become a product when they have a consumer value, which consists in the corresponding benefits and costs. Benefits and costs are two categories of economic evaluation of technologies that are interdependent. Cost-benefit analysis, which consists in calculating the net benefit by subtracting the amount of costs from the amount of benefits, is a necessary step before making management decisions. Change management is the process of finding and solving problems [37, 43]. Managing change means moving from a problem state to a problem state. Three types of actions are involved in this process: transformation, reduction and application [3, 5, 45]. The goals and actions of transformation are related to the identification of the difference between two states: the problem and the solved problem [48, 52, 54]. Reducing goals refers to finding ways to eliminate this difference. The application of goals is associated with the activation of operators, which will eliminate this difference [49, 53]. However, the problems of applying cost management tools for research and development in terms of entering new international markets remain insufficiently studied. 3. Results Based on a study of the features and problems of application of tools to reduce the cost of development and research used in developed countries, it is established that they are all based on state support for innovation processes [21]. In particular, the United States does not include R&D expenditures related to trade and operating activities to the amount of taxable income. In the United Kingdom, R&D costs are deducted from the cost of products (services). In France, an effective tool was to provide a tax credit for the increase in development and research costs. In addition to these tools to reduce the cost of development and research, it was found that for a long time a fairly effective mechanism were depreciation and tax benefits, which allowed to cover from 10 to 20% of total R&D costs in the United States. As a result of this mechanism, companies in the United States have focused their resources on conducting research and development with a rapid return on capital [83]. There are 4 groups of international standards of the World Intellectual Property Organization, which also include methods for evaluating research and development, estimating the cost of research and management methods. WIPO has developed 52 normative documents that contain requirements for standardization of research and development, of which 50 are actual standards related to the processes of design and implementation of development, creation of industrial (design) model, and 2 annexes to these standards. These standards include requirements for the preparation of documentation for the processing of information on the use of industrial property of enterprises, the preparation and execution of patent information and patent documents, the creation and registration of documentation on trademarks [55]. In accordance with international and national standards for the evaluation of innovation and technological projects, including research and development, there are 4 methods of evaluation - revenue, market, cost and combined [32]. Evaluation of innovation and technological projects includes methods and tools that take into account various parameters of innovation activities of enterprises, including such a category as costs. It is in this direction - the analysis and evaluation of the costs of innovation projects, which in turn include the cost of research and development, using the cost method of evaluation. Features of the application of cost management tools are given in Table 1. Table 2 lists the advantages and disadvantages of tools and methods for managing R&D costs. In 2015 in Ukraine, the amount of expenditures on research carried out by organizations at their own expense amounted to 12224.9 million UAH, including labor costs - 5483.0 million UAH, material costs - 2472.0 million UAH , capital costs - 340.8 million UAH, of which the cost of purchasing equipment - 285.5 million UAH. In 2018 the total amount of expenditures for research in Ukraine at the own expense of organizations amounted to 16773.7 million UAH, including labor costs - 8553.0 million UAH, other current expenses - 7456.3 million UAH, capital expenditures - 764 , UAH 4 million, of which the cost of purchasing equipment - UAH 588.0 million (State Statistics Service, 2020a). Table 1 Application of tools and methods of R&D cost management Method / Tool The problem that arises The explanation of the solution Decision making on Complex interdependencies Gives the opportunity to form an optimal the project portfolio between research projects set of innovative development projects, and available resources and taking into account the availability of in the simultaneous resources and the need for each project management of several R&D to maximize the efficient use of these using shared resources resources and the results of complex projects The method of scoring Reduction of scientific return Gives the opportunity to find reserves to models of cost and return from the reduce (eliminate) inefficient costs, analysis for the implementation of the without reducing the volume of research evaluation of research program of scientific and development, the main task of projects developments. which is to maintain and increase the competitiveness of the enterprise Method of influencing Impossibility of application It allows you to use only factual the determinants of to the business entity which information about costs in order to find costs is not carrying out R&D, and reserves for their more efficient use and is at a planning stage. management. Source: author's development based on Limanli (2015), Bhattacharia, Kumar, Kara (2011), Henriksen and Traynor (1999) Table 2 Advantages and disadvantages of using tools to manage the costs of enterprises in the research and development in terms of entering new international markets Method / Tool Advantages Disadvantages Decision making on Allows to form an optimum set of Complicates the choice of the project portfolio projects of innovative developments; tools to find the optimal Takes into account the availability of point between the level of resources and the need for them in each costs and the effectiveness project; of scientific development. Maximizes the efficiency of resource use and the results of complex projects The method of scoring Search for reserves to reduce Is to reduce the cost of models of cost inefficient costs; research and development analysis for the Maintaining a constant level of in crisis situations, which evaluation of research spending on research and development; reduces the efficiency of projects Improving the competitiveness of the innovation. enterprise. Method of influencing Analysis of current R&D expenditures; Provides evaluation, the determinants of Search for reserves for effective research analysis and impact on R&D costs and development cost management; costs based on actual past Mobilization of new resources from costs. the identified reserves of reduced costs; Occurs if the method is used Reducing the share of unproductive costs in a large enterprise. (input resources that do not provide returns in the form of innovation processes or increasing competitiveness) Source: author's development based on Limanli (2015), Bhattacharia, Kumar, Kara (2011), Henriksen and Traynor (1999) Table 3 presents the dynamics of R&D expenditures during 2010-2019. Table 3 Dynamics of R&D expenditures for the period 2010-2019 in Ukraine Years Expenditures for Including execution of: Share of research and research and basic applied scientific and technical development - development research, research, (experimental) total, UAH million expenditures in UAH million mln UAH developments, UAH GDP,% million 2010 8107,1 2175,0 1589,4 4342,7 0,75 2011 8513,4 2200,8 1813,9 4498,7 0,65 2012 9419,9 2615,3 2023,2 4781,4 0,67 2013 10248,5 2698,2 2061,4 5488,9 0,70 2014 9487,5 2452,0 1882,7 5152,8 0,60 2015 11003,6 2460,2 1960,6 6582,8 0,55 2016 11530,7 2225,7 2561,2 6743,8 0,48 2017 13379,3 2924,5 3163,2 7291,6 0,45 2018 16773,7 3756,5 3568,3 9448,9 0,47 2019 17254,6 3740,4 3635,7 9878,5 0,43 Source: based on the State Statistics Service (2020a) The dynamics of costs for research and development for the period from 2010 to 2019 is described by the linear equation y = 1001.9x + 6061.5. From the graph we can conclude that the volume of R&D expenditures increased throughout the study period and according to the trend, the positive growth dynamics is projected to continue. The coefficient of determination is R^2=0.8714, which indicates the presence of a close relationship and the continuation of the upward trend in future periods. With the help of the trend line the forecast for the next 3 periods is made. With the help of the trend line the forecast for the next 3 periods is made. The graph shows that, given the current trend, the total cost of research and development will increase in each of these three forecast periods. 25000 20000 y = 1001,9x + 6061,5 R² = 0,8714 UAH million 15000 16773,717254,6 13379,3 10000 11003,611530,7 10248,5 9419,9 9487,5 8107,1 8513,4 5000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Years Expenditures for research and development - total, UAH million Линейная (Expenditures for research and development - total, UAH million) Figure 1: Dynamics of expenditures for research and development during 2010-2019 Source: based on the State Statistics Service (2020a) The next step in analyzing the costs of Ukrainian enterprises in R & D is to study the dynamics of the share of components of the costs of enterprises in R&D. For this purpose, the share of components of R&D expenditures of Ukrainian enterprises for the period 2010-2019 is calculated. The results are given in table 4. Table 4 Dynamics of the share of components of R&D expenditures for the period 2010-2019 in Ukraine Years Expenditures for The share of implementation costs for: research and basic research,% applied scientific and technical development - research,% (experimental) total, UAH million developments,% 2010 8107,1 26.82834 19.60504 53.56663 2011 8513,4 25.85101 21.30641 52.84258 2012 9419,9 27.76356 21.47794 50.7585 2013 10248,5 26.32776 20.11416 53.55808 2014 9487,5 25.84453 19.84401 54.31146 2015 11003,6 22.35814 17.81781 59.82406 2016 11530,7 19.30238 22.21201 58.48561 2017 13379,3 21.85839 23.64249 54.49911 2018 16773,7 22.39518 21.27318 56.33164 2019 17254,6 21.6777 21.0709 57.2514 Source: based on the State Statistics Service (2020a) To better reflect the dynamics of relative indicators, it is advisable to give the dynamics of the share of R&D expenditure by their components graphically (Fig.2). 70 60 y = 0,5854x + 51,923 R² = 0,4064 59,82405758 58,48560799 50 57,25139963 56,33163822 53,56662678 52,84257758 54,31146245 53,55808167 54,4991143 50,75850062 40 % 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Years basic research applied research scientific and technical (experimental) developments Линейная (scientific and technical (experimental) developments) Figure 2: Dynamics of the share of component costs of Ukrainian enterprises in the R&D for the period 2010-2019 Source: author's development based on (State Statistics Service, 2020a). Based on the graph data, we can conclude that the connection between the constructed trend line and the actual data on the dynamics of scientific and technical experimental developments, which were and remain the main and most significant element of R&D costs of Ukrainian enterprises. The value of the coefficient of determination R² = 0.4064 indicates that there is a low probability that this indicator will show positive growth dynamics in the next 3 years for which the forecast is made, it also indicates the existence of external factors that cause deviations from the trend line. Based on the time series of the share of scientific and technical (experimental) costs as part of the total costs of enterprises in the research and development, a trend line is constructed, which is described by the linear equation y = 0.5854x + 51.923. It is obvious that the basis and prerequisite for the implementation and development of research and development in enterprises of all industries in Ukraine is the growth of all components of the cost of research. The basis for scientific and technical experimental development is basic and applied research, in addition, all elements of research and development of enterprises are interconnected and complementary. It is the indicators of expenditures of Ukrainian enterprises on applied and basic research that did not have a clear pattern during the study period. This in turn led to their reduction and insufficient funding to maintain the regulatory and target level for enterprises, which resulted in uncertainty about the cost of the main element of research and development of enterprises - the cost of experimental development and the inability to accurately predict their future situation. periods. Industrial enterprises are the largest centers of research and development among all business entities, and the most active users of the results of their own and external developments. Table 5 shows the dynamics of costs of industrial enterprises in the R&D for the period 2010-2019. Table 5 Dynamics of R&D expenditures for the period 2010-2019 in Ukraine Years Research and development Including: (R&D) internal external UAH million In% to the total UAH In% to the UAH In% to the cost of million total cost of million total cost of innovation innovation innovation 2010 996.4 12.4 818.5 10.2 177.9 2.2 2011 1079.9 7.5 833.3 5.8 246.6 1.7 2012 1196.3 10.4 965.2 8.4 231.1 2.0 2013 1638.5 17.1 1312.1 13.7 326.4 3.4 2014 1754.6 22.8 1221.5 15,9 533.1 6.9 2015 2039.5 14.8 1834.1 13.3 205.4 1.5 2016 2457.8 10.6 2063.8 8.9 394.0 1.7 2017 2169.8 23.8 1941.3 21.3 228.5 2.5 2018 3208.8 26.2 2706.2 22.2 502.6 4.1 2019 2918.9 20.5 2449.9 17.2 469.0 3.3 Source: based on the State Statistics Service (2020b) To clearly demonstrate the change in R&D costs during the study period, it is advisable to display this time series graphically (Fig. 3). According to the graph, we can conclude that the coefficient of determination R² = 0.9225, which indicates a close relationship between the time series of costs of industrial enterprises of Ukraine in the GDR with a trend line based on these data, which is described by the linear equation y = 241.3x + 618.88, and a forecast for 3 future periods. That is, the cost of industrial enterprises in the GDR will increase in the next 3 years (2020-2022). The correlation coefficient between the time series of internal costs of enterprises in the GDR and total costs is 0.99891, which indicates a direct relationship between these indicators, which leads to the conclusion that the total cost of industrial enterprises in the GDR by 99.891% depends on the cost of internal research and development. The graph shows that the volume of total and internal expenditures of enterprises on R&D tended to increase during the analyzed period. 4000 y = 241,3x + 618,88 3500 3208,8 R² = 0,9225 2918,9 3000 2457,8 2500 2169,8 UAH million 2039,5 2000 1754,6 1638,5 1500 1196,3 996,4 1079,9 1000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annually Total research and development (R&D) costs Internal costs of R&D External costs of research Линейная (Total research and development (R&D) costs) Figure 3: Dynamics of costs of industrial enterprises of Ukraine in the R&D for the period 2010-2019 Source: based on the State Statistics Service (2020b) The correlation coefficient between the time series of total and external R&D expenditures is calculated, the value of the coefficient is 0.66211, which indicates a slight impact on the total R&D expenditures. Throughout the study period, the share of internal expenditures in total R&D expenditures exceeded 75%. 4. Conclusions Thus, in the process of entering companies in new international markets there were problems with the use of cost management tools such as: 1) the problem of organizing the project with the lowest costs in a crisis situation and the urgent need for savings, reduction of all types of costs and accumulation of resources; 2) complex interdependencies between research projects and available resources, which complicates the choice of tools to find the optimal point between the level of costs and the effectiveness of scientific development; 3) reduction of scientific return and return from the implementation of the program of scientific developments (programmatic return); 4) the problem of inefficiency of cost management by the method of influencing the determinants of costs in the enterprise, which does not carry out actual research and development; A study of statistical data on R&D expenditures by Ukrainian enterprises showed that research and development in the last 10 years have been the most important element in ensuring innovative and economic development of enterprises, and in the next 3 years their steady growth is projected. The costs of enterprises for applied and fundamental research were a determining factor in the implementation of scientific and technical developments by enterprises. However, the insufficient level of funding for basic and applied research and development had a negative impact on experimental development. Thus, it is impossible to predict the dynamics of volumes and costs of experimental research in the next 3 years. In contrast, during 2010-2019 there was a tendency to increase the total cost of research of industrial enterprises, which indicates the key role of Ukrainian industry in its innovative development strategy. The increase in total R&D expenditures at industrial enterprises was due to the growth of internal R&D expenditures of these enterprises, the share of internal expenditures in total R&D expenditures exceeded 75%. 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