A consulting firm compiles a yearly ranking of the world's leading companies according to the amount of money each spent...
GMAT Critical Reasoning : (CR) Questions
A consulting firm compiles a yearly ranking of the world's leading companies according to the amount of money each spent on research. It has shown in the past that spending more on research has no correlation with better financial performance. But this year's study found that multinational companies that took a global approach to research financially outperformed those that concentrated their spending on research in their home market.
Which of the following statements is most strongly supported by the information provided?
Passage Visualization
| Passage Statement | Visualization and Linkage |
|---|---|
| A consulting firm compiles a yearly ranking of the world's leading companies according to the amount of money each spent on research. |
Context Establishment: Sets up the data source
|
| It has shown in the past that spending more on research has no correlation with better financial performance. |
Historical Finding - Amount Irrelevance:
|
| But this year's study found that multinational companies that took a global approach to research financially outperformed those that concentrated their spending on research in their home market. |
New Discovery - Strategy Matters:
Example comparison:
Same spending amount, different allocation strategy, different results |
| Overall Implication | PARADOX REVEALED: While the amount of R&D spending doesn't correlate with performance, the geographic distribution strategy of that spending does correlate with performance. This suggests that how money is allocated matters more than how much money is spent. |
Valid Inferences
Inference: For multinational companies, the geographic distribution strategy of research spending is a better predictor of financial performance than the total amount spent on research.
Supporting Logic: Since past studies showed no correlation between research spending amounts and financial performance, but this year's study found that global research approaches outperformed home-concentrated approaches among multinationals, it demonstrates that allocation strategy (where money is spent) has predictive power while total spending (how much money is spent) does not.
Clarification Note: This inference applies specifically to multinational companies and their geographic research allocation decisions, not to research spending strategies in general or to companies that operate primarily in domestic markets.
Taking a global approach to research has become necessary in order to achieve business financial success.
This goes too far beyond what we can conclude. The passage only tells us that among multinational companies, those with global research approaches outperformed those with home-concentrated approaches. We can't conclude that a global approach is necessary for ALL business financial success - this is too absolute and broad.
Companies seeking to improve their financial performance can usually do so by increasing their global research spending.
This misses the key point entirely. The passage specifically states that spending MORE on research has no correlation with better performance. The benefit comes from WHERE the research spending is allocated (globally vs. home), not from increasing the amount spent.
Only the largest countries are able to provide sufficient research innovation to ensure a leading company's profitability.
This introduces concepts not mentioned in the passage. We have no information about country size, research innovation capabilities, or what ensures profitability. This choice brings in completely new ideas not supported by the given information.
A company with a low ranking in research spending may have better financial performance than a company with a high ranking.
This is directly supported by the passage. Since the argument establishes that spending more on research has no correlation with better financial performance, it means high research spenders don't necessarily perform better than low spenders. Therefore, a low-ranking company in research spending could indeed outperform a high-ranking one financially.
The company currently spending the most on research and development is not likely to be among the best in financial performance.
This makes a specific prediction about the top spender that goes beyond what we can conclude. While we know there's no correlation between spending and performance, we can't specifically say the highest spender is unlikely to perform well - they could perform well, poorly, or average.