International R&D Comparisons

Data on R&D expenditures are often used to make international comparisons, in part because of the relative ease of comparing monetary data across countries. But although it is possible to compare the cost of R&D in two countries, differences in their national systems of innovation may make one country more effective than the other in translating investments in S&T into economic growth or other social benefits. Although it can be difficult to assess the qualitative differences in the R&D and innovation systems in different countries, it is important to keep these differences in mind when analyzing data presented in this section on international R&D spending patterns.

Most of the R&D data presented in this section are from the OECD, the most reliable source for such international comparisons. However, an increasing number of non-OECD countries and organizations now collect and publish R&D statistics (with variable levels of international comparability), which are cited at various points in this section. No R&D-specific currency exchange rates exist, but for comparison purposes, international R&D data have been converted to U.S. dollars with purchasing power parity (PPP) exchange rates (see sidebar, "Comparing International R&D Expenditures").

Global R&D Expenditures

Worldwide R&D performance is concentrated in a few developed nations. In 2002, global R&D expenditures totaled at least $813 billion; one-third of this world total was accounted for by the United States, the largest country in terms of domestic R&D expenditures, and 45% of this total was accounted for by the two largest countries in terms of R&D performance, the United States and Japan.

As figure 4-14figure. illustrates, more than 95% of global R&D is performed in North America, Asia, and Europe. Within each of these regions, a small number of countries dominate in terms of expenditures on R&D: the United States in North America; Japan and China in Asia; and Germany, France, and the United Kingdom in Europe.[26]

Wealthy, well-developed nations, generally represented by OECD countries, perform most of the world's R&D, but R&D expenditures have grown rapidly in several lesser-developed nations. In 2004, Brazil performed an estimated $14 billion of R&D (RICYT 2007), although the compilations of its R&D statistics do not yet fully conform to OECD guidelines. India performed an estimated $21 billion in 2000, making it the seventh largest country in terms of R&D in that year, ahead of South Korea (UNESCO/Institute for Statistics 2007). China had the fourth largest expenditures on R&D in 2000 ($45 billion), behind Germany's $52 billion (OECD 2006b). In 2005, it is estimated that $115 billion of R&D was performed in China, making it the third largest country in terms of R&D expenditures. Given the lack of R&D-specific exchange rates (see sidebar, "Comparing International R&D Expenditures"), it is difficult to draw conclusions from these absolute R&D figures, but China's nearly decade-long ramp-up of R&D expenditures appears unprecedented in recent years.

OECD and G-7 R&D Expenditures

The 30 OECD countries represented 81% of global R&D, or $657 billion, in 2002. Although global R&D estimates are not available for later years, the R&D performance of OECD countries grew to $726 billion in 2004. The G-7 countries performed two-thirds of the world's R&D in 2002 and 83% of OECD's R&D in 2004. Outside of the G-7 countries, South Korea is the only country that accounted for a substantial share of the OECD total (4% in 2004).

More money was spent on R&D activities in the United States in 2004 than in the rest of the G-7 countries combined (figure 4-15figure.). In terms of relative shares, the U.S. share of the G-7's R&D expenditures has fluctuated between 48% and 52% during the past 25 years. As a proportion of the G-7 total, U.S. R&D expenditures reached a low of 48% in 1990. After the early 1990s, the U.S. percentage of total G-7 R&D expenditures grew as a result of a worldwide slowing in R&D performance that was more pronounced in other countries. R&D spending rebounded in the late 1990s in several G-7 countries, but the recovery was most robust in the United States, and the U.S. share of total G-7 R&D has exceeded 50% since 1997, peaking at 52% in 2000, before dropping slightly to 51% of total in 2004.

Indicators of R&D Intensity

International comparisons of absolute R&D expenditures are complicated by the fact that countries vary widely in terms of the size of their population and economy. For example, although Germany and China had similar R&D expenditures in 2000, China's population was more than 15 times larger, and its economy more than twice as large, as Germany's in that year. Policy analysts commonly use various measures of R&D intensity to account for these size differences when making international comparisons.

One of the first (Steelman 1947) and now one of the more widely used indicators of a country's R&D intensity is the ratio of R&D spending to GDP, the main measure of a nation's total economic activity. Policymakers often use this ratio for international benchmarking and goal setting.

Normalized indicators, such as R&D/GDP ratios, are useful for international comparisons because they not only account for size differences between countries, but they also obviate the need for exchange rates. However, even normalized indicators are not always comparable from one country to another. This occurs most often when the variable being used to normalize the indicator differs across countries. For example, the structure of national economies, and hence GDP, varies greatly. As figure 4-16figure. shows, the agricultural and industrial sectors account for less than one-third of GDP in the United States and the other G-7 countries. These sectors represent similarly small shares of the labor force in the G-7 countries. This contrasts with less-developed nations such as China, where the agricultural and industrial sectors account for more than half of GDP and an even larger share of the labor force (estimated to be 69%) (CIA 2007). In recent years, the service sector has grown substantially in India in terms of its contribution to GDP (61% in 2005), but more than half of India's labor force works in the agricultural sector. Differences such as these in the structure of economies can result in significant country-to-country differences in terms of various R&D indicators.

Total R&D/GDP Ratios

The ratio of R&D expenditures to GDP can indicate the intensity of R&D activity in relation to other economic activity and can be used to gauge a nation's commitment to R&D at different points in time. For example, since 1953, R&D expenditures as a percentage of GDP in the United States have ranged from a minimum of 1.4% (in 1953) to a maximum of 2.9% (in 1964). Most of the growth over time in the R&D/GDP ratio can be attributed to increases in nonfederal R&D spending, the majority of which is company financed. Nonfederally financed R&D increased from 0.6% of GDP in 1953 to a projected 1.9% of GDP in 2006 (down from a high of 2.0% of GDP in 2000). The increase in nonfederally financed R&D as a percentage of GDP illustrated in figure 4-17figure. is indicative of the growing role of S&T in the U.S. economy.

Historically, most of the peaks and valleys in the U.S. R&D/GDP ratio can be attributed to changing priorities in federal R&D spending. The initial drop in the R&D/GDP ratio from its peak in 1964 largely reflects federal cutbacks in defense and space R&D programs. Gains in energy R&D activities between 1975 and 1979 resulted in a relative stabilization of the ratio. Beginning in the late 1980s, cuts in defense-related R&D kept federal R&D spending from keeping pace with GDP growth, while growth in nonfederal sources of R&D spending generally kept pace with or exceeded GDP growth. Since 2000, defense-related R&D spending has surged, and federal R&D spending growth has outpaced GDP growth. (See the discussion of defense-related R&D earlier in this chapter.)

For many of the G-8 countries (i.e., the G-7 countries plus Russia), the latest R&D/GDP ratio is no higher now than it was at the start of the 1990s, which ushered in a period of slow growth or decline in their overall R&D efforts (figure 4-18figure.). The two exceptions, Japan and Canada, both exhibited substantial increases on this indicator between 1990 and 2004. In Japan this indicator declined in the early 1990s as a result of reduced or level R&D spending by industry and government, a pattern similar to that exhibited by the United States. Japan's R&D/GDP ratio subsequently rose to 3.2% in 2004, the result of both a resurgence of industrial R&D in the mid-1990s coupled with slow GDP growth. By contrast, over the same period, GDP grew more robustly in Canada; therefore the rise in its R&D/GDP ratio is more indicative of R&D growth.

Because of the business sector's dominant role in global R&D funding and performance, R&D/GDP ratios are most useful when comparing countries with national S&T systems of comparable maturity and development. Geopolitical events also affect R&D intensity indicators, as evidenced by Germany and Russia. [West] Germany's R&D/GDP ratio fell from 2.8% at the end of the 1980s, before reunification, to 2.2% in 1994 for all of Germany. Its R&D/GDP has since risen to 2.5% in 2005. The end of the Cold War and collapse of the Soviet Union had a drastic effect on Russia's R&D intensity. R&D performance in Russia was estimated at 2.0% of GDP in 1990; that figure dropped to 1.4% in 1991 and then dropped further to 0.7% in 1992. The severity of this decline is compounded by the fact that Russian GDP contracted in each of these years. Both Russia's R&D and GDP exhibited strong growth after 1998. Between 1998 and 2003, Russia's R&D doubled, and its R&D/GDP ratio rose from 1.0% to 1.3%. This growth was not maintained in the subsequent 2 years, and Russia's R&D/GDP ratio dropped to 1.1% in 2005.

Overall, the United States ranked seventh among OECD countries in terms of reported R&D/GDP ratios (table 4-12table.), but several of its states have R&D intensities of more than 4%. Massachusetts, a state with an economy larger than Sweden's and approximately twice the size of Israel's, has reported an R&D intensity at or above 5% since 2001 (see the section entitled "Location of R&D Performance"). Israel (not an OECD country), devoting 4.7% of its GDP to R&D, currently leads all countries, followed by Sweden (3.9%), Finland (3.5%), Japan (3.2%), and South Korea (3.0%). In general, nations in Southern and Eastern Europe tend to have R&D/GDP ratios of 1.5% or lower, whereas Nordic nations and those in Western Europe report R&D spending shares greater than 1.5%. This pattern broadly reflects the wealth and level of economic development for these regions. A strong link exists between countries with high incomes that emphasize the production of high-technology goods and services and those that invest heavily in R&D activities (OECD 1999). The private sector in low-income countries often has a low concentration of high-technology industries, resulting in low overall R&D spending and therefore low R&D/GDP ratios.

Outside the European region, R&D spending has intensified considerably since the early 1990s. Several Asian countries, most notably South Korea and China, have been particularly aggressive in expanding their support for R&D and S&T-based development. In Latin America and the Pacific region, other non-OECD countries also have attempted to increase R&D substantially during the past several years. Even with recent gains, however, most non-European (non-OECD) countries invest a smaller share of their economic output in R&D than do OECD members (with the exception of Israel). All Latin American countries for which such data are available report R&D/GDP ratios at or below 1% (RICYT 2007). This distribution is consistent with broader indicators of economic growth and wealth.

Nondefense R&D Expenditures and R&D/GDP Ratios

Another indicator of R&D intensity, the ratio of nondefense R&D to GDP, is useful when comparing nations with different financial investments in national defense. Although defense-related R&D does result in spillovers that produce commercial and social benefits, nondefense R&D is more directly oriented toward national scientific progress, economic competitiveness, and standard-of-living improvements. Using this indicator, the relative position of the United States falls below that of Germany and just above Canada among the G-7 nations (figure 4-18figure.). This is because the United States devotes more of its R&D, primarily for development rather than research, to defense-related activities than do most other countries. In 2006, approximately 16% of U.S. R&D was defense related, whereas for historical reasons, less than 1% of the R&D performed in Germany and Japan is defense related. Approximately 10% of the United Kingdom's total R&D was defense related in 2004.

Basic Research/GDP Ratios

R&D involves a wide range of activities, ranging from basic research to the development of marketable goods and services. Because it is motivated primarily by curiosity, basic research generally has low short-term returns, but it builds intellectual capital and lays the groundwork for future advances in S&T. (See sidebar, "Definitions of R&D.") The relative investment in basic research as a share of GDP indicates differences in national priorities, traditions, and incentive structures with respect to S&T. Estimates of basic research often involve a greater element of subjective assessment than other R&D indicators; thus, approximately 40% of the OECD countries do not report these data at the national level. Nonetheless, where these data exist, they help differentiate national innovation systems in terms of how their R&D resources contribute to advancing scientific knowledge and developing new technologies.

High basic research/GDP ratios generally reflect the presence of robust academic research centers in the country and/or a concentration of high-technology industries (such as biotechnology) with patterns of strong investment in basic research (see the section entitled "International R&D by Performer and Source of Funds"). Of the OECD countries for which data are available, Switzerland has the highest basic research/GDP ratio at 0.8% (figure 4-19figure.). This is significantly higher than either the U.S. ratio of 0.5% or the Japanese ratio of 0.4%. Switzerland, a small, high-income country boasting the highest number of Nobel prizes, patents, and science citations per capita worldwide, devoted almost 30% of its R&D to basic research in 2004 despite having an industrial R&D share comparable with the United States and Japan. The differences among the Swiss, U.S., and Japanese character-of-work shares reflect both the high concentration of chemical and pharmaceutical R&D in Swiss industrial R&D, as well as the "niche strategy" of focusing on specialty products adopted by many Swiss high-technology industries.

China, despite its growing investment in R&D, reports among the lowest basic research/GDP ratios (0.07%), below Romania (0.08%) and Mexico (0.11%). With its emphasis on applied research and development aimed at short-term economic development, China follows the pattern set by Taiwan, South Korea, and Japan. In each of these economies, basic research accounts for 15% or less of total R&D (figure 4-20figure.). Singapore also followed this pattern, but since 2000, its expenditures on basic research have grown faster than its total R&D. In 2000, 12% of Singapore's R&D was basic research, but in 2004 this share was 19%, on par with the United States.

International R&D by Performer and Source of Funds

R&D performance patterns by sector are broadly similar across countries, but national sources of support differ considerably. In each of the G-8 countries, the industrial sector is the largest performer of R&D (table 4-13table.). Industry's share of R&D performance ranged from 48% in Italy to more than 75% in Japan and South Korea; it was 71% in the United States. In China, much of the recent growth in R&D expenditures has occurred in the business sector, which performed 68% of China's R&D in 2005, up from 60% in 2000. In most countries, industrial R&D is financed primarily by the business sector. A notable exception is the Russian Federation, where government was the largest source of industrial R&D funding in 2005 (appendix table 4-37Excel.).

In all of the G-8 countries except Russia, the academic sector was the second largest performer of R&D (representing from 13% to 38% of R&D performance in each country). In Russia, government is the second largest R&D performer, accounting for 26% of its R&D performance in 2005. Government-performed R&D accounted for 22% of China's R&D in 2005, down from 32% in 2000.

Government and industry together account for more than three-quarters of the R&D funding in each of the G-8 countries, although their respective contributions vary (table 4-14table.). The industrial sector provided as much as 75% of R&D funding in Japan to as little as 30% in Russia. Government provided the largest share of Russia's R&D (62%), and although recent data for Italy are not available, its government funded 50% of Italy's R&D in 1999. In the remaining six G-8 nations, government was the second largest source of R&D funding, ranging from 18% of total R&D funding in Japan to 38% in France.

In nearly all OECD countries, the government's share of total R&D funding declined during the 1980s and 1990s as the role of the private sector in R&D grew considerably (figure 4-21figure.). In 2000, 28% of all OECD R&D was funded from government sources, down from 44% in 1981. The relative decline of government R&D funding was the result of budgetary constraints, economic pressures, and changing priorities in government funding (especially the relative reduction in defense R&D in several of the major R&D-performing countries, notably France, the United Kingdom, and, until rather recently, the United States). This trend also reflected the growth in business R&D spending during this period, irrespective of government R&D spending patterns. However, since 2000, government funding of R&D has grown in the OECD relative to funding from the business sector. In 2004, governments funded 30% of all OECD R&D.

Not all countries track the amount of domestic R&D that is funded by foreign sources, but of those that do, the United Kingdom reports a relatively large amount of R&D funding from abroad (17% in 2004) (table 4-14table.). Businesses in the United States also receive foreign R&D funding; however, these data are not separately reported in U.S. R&D statistics and are included in the figures reported for industry. Therefore, the industry share of R&D funding for the United States is overstated compared with the industry shares for countries where foreign sources of R&D funding are reported separately from domestic sources.

Industrial Sector

The structure of industrial R&D varies substantially among countries in terms of both sector concentration and sources of funding. Because industrial firms account for the largest share of total R&D performance in each of the G-8 countries and most OECD countries, differences in industrial structure can help explain international differences in more aggregated statistics such as R&D/GDP. For example, countries with higher concentrations of R&D-intensive industries (such as communications equipment manufacturing) are likely to also have higher R&D/GDP ratios than countries whose industrial structures are weighted more heavily toward less R&D-intensive industries.

Sector Focus

Using internationally comparable data, no one industry accounted for more than 16% of total business R&D in the United States in 2004 (figure 4-22figure.; appendix table 4-42Excel.) (OECD 2006d). This is largely a result of the size of business R&D expenditures in the United States, which makes it difficult for any one sector to dominate. However, the diversity of R&D investment by industry in the United States is also an indicator of how the nation's accumulated stock of knowledge and well-developed S&T infrastructure have made it a popular location for R&D performance in a broad range of industries.[27]

Compared with the United States, many of the other countries shown in figure 4-22figure. display much higher industry and sector concentrations. In countries with less business R&D, high sector concentrations can result from the activities of one or two large companies. This pattern is notable in Finland, where the radio, television, and communications equipment industry accounted for almost half of business R&D in 2004. This high concentration most likely reflects the activities of one company, Nokia, the world's largest manufacturer of cellular phones (see also table 4-6table. in sidebar, "R&D Expenses of Public Corporations"). By contrast, South Korea's high concentration (47% of business R&D in 2004) of R&D in this industry is not the result of any one or two companies, but reflects the structure of its export-oriented economy. South Korea is one of the world's top producers of electronic goods, and among its top export commodities are semiconductors, cellular phones, and computers (see sidebar, "R&D in the ICT Sector").

Other industries also exhibit relatively high concentrations of R&D by country. Automotive manufacturers rank among the largest R&D-performing companies in the world (see sidebar, "R&D Expenses of Public Corporations"). Because of this, the countries that are home to the world's major automakers also boast the highest concentration of R&D in the motor vehicles industry. This industry accounts for 32% of Germany's business R&D, 26% of the Czech Republic's, and 19% of Sweden's, reflecting the operations of automakers such as DaimlerChrysler and Volkswagen in Germany, Skoda in the Czech Republic, and Volvo and Saab in Sweden. Japan, France, South Korea, and Italy are also home to large R&D-performing firms in this industry.

The pharmaceuticals industry is less geographically concentrated than the automotive industry but is still prominent in several countries. The pharmaceuticals industry accounts for 20% or more of business R&D in Denmark, the United Kingdom, Belgium, and Sweden. Denmark, the largest performer of pharmaceutical R&D in Europe, is home to Novo Nordisk, a world leader in the manufacture and marketing of diabetes-related drugs and industrial enzymes, and H. Lundbeck, a research-based company specializing in psychiatric and neurological pharmaceuticals. The United Kingdom is the second largest performer of pharmaceutical R&D in Europe and is home to GlaxoSmithKline, the second largest pharmaceutical company in the world in terms of R&D expenditures in 2003 and 2004 (table 4-6table.).

The office, accounting, and computing machinery industry represents only a small share of business R&D in most countries. Among OECD countries (appendix table 4-42Excel.), only the Netherlands and Japan report double-digit concentration of business R&D in this industry, 24% (2004) and 13% (2003), respectively. The Netherlands is the home of Royal Philips Electronics, the largest electronics company in Europe.

One of the more significant trends in both U.S. and international industrial R&D activity has been the growth of R&D in the service sector. In the European Union (EU), service-sector R&D has grown from representing 9% of business R&D in 1993 to 15% in 2003. In 2003, the EU's service-sector R&D nearly equaled that of its motor vehicles industry and more than doubled that of its aerospace industry. According to national statistics for recent years, the service sector accounted for less than 10% of total industrial R&D performance in only four of the countries shown in figure 4-22figure. (Japan, Germany, France, and South Korea). Among the countries listed in this figure, the service sector accounted for as little as 7% of business R&D in South Korea to as much as 41% in Australia, and it accounted for 29% of total business R&D in the United States. Information and communications technologies (ICT) services account for a substantial share of the service R&D totals (see sidebar, "R&D in the ICT Sector").

Sources of Industrial R&D Funding

Most of the funding for industrial R&D in each of the G-8 countries is provided by the business sector, and in most OECD countries, government financing accounted for a small and declining share of total industrial R&D performance during the 1980s and 1990s (figure 4-23figure.). In 1981, government provided 21% of the funds used by industry in conducting R&D within OECD countries. By 2000, government's funding share of industrial R&D had fallen to 7% but rose slightly to 8% in 2004. Among G-8 countries, government financing of industrial R&D performance shares ranged from as little as 1% in Japan in 2004 to 54% in Russia in 2005 (appendix table 4-37Excel.). In the United States in 2006, the federal government provided about 9% of the R&D funds used by industry, and the majority of that funding came from DOD contracts.

Foreign sources of funding for business R&D increased in many countries in the 1990s (figure 4-24figure.). The role of foreign funding varies by country, accounting for less than 1% of industrial R&D in Japan to as much as 23% in the United Kingdom in 2004. The countries that exhibited the largest growth in this indicator during the 1990s (United Kingdom, Russia, and Canada), also experienced sharp drops in more recent years as shown by figure 4-25figure.. Year-to-year variations in this measure can reflect changes in ownership of businesses conducting R&D in a country as well as changes in the level of foreign investment in the country.

This funding predominantly comes from foreign corporations and can be viewed as an indicator of the globalization of industrial R&D. However, some of this funding also comes from foreign governments and other foreign organizations. For European countries, growth in foreign sources of R&D funds may reflect the expansion of coordinated European Community (EC) efforts to foster cooperative shared-cost research through its European Framework Programmes.[28]

There are no data on foreign funding sources of U.S. R&D performance. However, data on investments by foreign MNCs provide some indication of this activity for the industrial sector (see the section entitled "R&D by Multinational Corporations" later in this chapter).

Academic Sector

In most OECD countries, the academic sector is a distant second to industry in terms of national R&D performance. Among G-8 countries, universities accounted for as little as 6% of total R&D in Russia to as much as 38% in Canada, and they accounted for 14% of U.S. total R&D (figure 4-26figure.). In Asia, the academic sector generally performs a small share of national R&D in financial terms, accounting for 13% or less of total R&D expenditures in Japan, China, South Korea, and Taiwan. Each of these countries also reports relatively low amounts of basic research as a share of total R&D (figure 4-20figure.).

Source of Funds

For most countries, the government is now, and historically has been, the largest source of academic research funding (see sidebar, "Government Funding Mechanisms for Academic Research"). However, in each of the G-7 countries for which historical data exist, the government's share declined and industry's share increased during the 1980s and 1990s. Business funding of academic R&D for all OECD countries combined peaked in 2000 at 7% but declined to 6% in 2004. In the United States, it slipped to 5% in 2003, where it has since remained. Among OECD countries, the business sector's role in funding academic R&D is most prominent in Germany where the industry-funded share of academic R&D is twice that of all OECD members combined (figure 4-27figure.). The business sector plays an even greater role in other countries, however. In 2004, the business sector funded 37% of China's academic R&D and 33% of Russia's. With the launching in early 2007 of the European Research Council, a pan-European funding agency established as part of the EU's Seventh Research Framework Programme, the EU hopes to provide additional support to academic research. The European Research Council, with a 7-year budget of 7.5 billion (approximately $10 billion), will employ a competitive peer-review process similar to that employed by various government agencies in the United States to select grant recipients.

S&E Fields

Most countries supporting a substantial level of academic R&D devote a larger proportion of their R&D to engineering and social sciences than does the United States (table 4-15table.). Conversely, the U.S. academic R&D effort emphasizes the natural sciences and medical sciences more than do many other OECD countries. This is consistent with the emphases in health and biomedical sciences for which the United States is known. Japan, the country with the second largest amount of academic R&D ($16 billion in 2004, approximately one-third of the U.S. amount) places a roughly equal emphasis on engineering and medical sciences. Together, these two fields account for half of Japan's academic R&D expenditures.

Government R&D Priorities

Analyzing public expenditures for R&D by major socioeconomic objectives shows how government priorities differ between countries and change over time. Within the OECD, the defense share of governments' R&D financing declined from 43% in 1986 to 28% in 2001 (table 4-16table.). Much of this decline was driven by the United States, where the defense share of the government's R&D budget dropped from 69% in 1986 to 50% in 2001. The defense share of the U.S. government's R&D budget is projected to have grown to 58% in 2006 (appendix table 4-41Excel.).

Notable shifts also occurred in the composition of OECD countries' governmental nondefense R&D support over the past two decades. In terms of broad socioeconomic objectives, government R&D shares increased most for health and the environment. Growth in health-related R&D financing was particularly strong in the United States, whereas many of the other OECD countries reported relatively higher growth in environmental research programs. In the United States, health-related R&D has accounted for more than half of the government's nondefense R&D budget since 2000. Throughout the OECD, the relative share of government R&D support for economic development programs declined from 25% in 1981 to 15% in 2005. Economic development programs include the promotion of agriculture, fisheries and forestry, industry, infrastructure, and energy.

Differing R&D activities are emphasized in each country's governmental R&D support statistics (figure 4-28figure.). As noted above, defense accounts for a relatively smaller government R&D share in most countries outside the United States. In recent years, the defense share was relatively high in the United Kingdom and France at 31% and 22%, respectively, but was 6% or less in Germany, Italy, Canada, and Japan. In 2005, South Korea allocated 13% of its government R&D budget for defense-related activities.

Japan committed 17% of its governmental R&D support to energy-related activities, reflecting the country's historical concern over its high dependence on foreign sources of energy. Industrial production and technology is the leading socioeconomic objective for R&D in South Korea, accounting for 27% of its government's R&D budget. This funding is primarily oriented toward the development of science-intensive industries and is aimed at increasing economic efficiency and technological development. Industrial technology programs accounted for less than 1% of the U.S. total. This figure, which includes mostly R&D funding by NIST, is understated relative to most other countries as a result of data compilation differences. In part, the low U.S. industrial development share reflects the expectation that firms will finance industrial R&D activities with their own funds; in part, government R&D that may be indirectly useful to industry is often funded with other purposes in mind such as defense and space (and is therefore classified under other socioeconomic objectives).

Compared with other countries, France and South Korea invested relatively heavily in nonoriented research at 18% and 21% of government R&D appropriations, respectively. The U.S. government invested 6% of its R&D budget in nonoriented research, largely through the activities of NSF and DOE. However, differences in countries' classification practices affect the size of this apparent gap.


[26] For other S&T indicators on Asian countries relative to the United States and the EU, see NSF/SRS (2007a).

[27] For discussions of R&D diversity measurement, see Archibugi and Pianta (1992). Also see Archibugi and Pianta (1996).

[28] Since the mid-1980s, EC funding of R&D has become increasingly concentrated in its multinational Framework Programmes for Research and Technological Development (RTD), which were intended to strengthen the scientific and technological bases of community industry and to encourage it to become internationally competitive. EC funds distributed to member countries' firms and universities have grown considerably. The EC budget for RTD activities has grown steadily from 3.7 billion European Currency Units (ECU) in the first Framework Programme (1984–87) to 17.5 billion ECU for the Sixth Framework Programme (2003–06). The institutional recipients of these funds tend to report the source as "foreign" or "funds from abroad." Eurostat (2001).

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