Data on Government R&D Priorities expenditures can provide a broad picture of the changing distribution of R&D activities around the world. R&D data available from the OECD cover the organization's 30 member countries and 9 nonmembers. Data from the United Nations Educational, Scientific, and Cultural Organization's (UNESCO's) Institute for Statistics are used here to supplement OECD statistics in order to cover a larger set of countries. Increasingly, these data are collected following OECD standards, but the reader should treat them as broad indicators of trends and patterns rather than as precise measures.
International comparisons involve currency conversions. The discussion here follows the international convention to convert foreign currencies into U.S. dollars via purchasing power parity (PPP) exchange rates. (See sidebar "Comparing International R&D Expenditures.")
Worldwide R&D expenditures in 2007 totaled an estimated $1,107 billion. Although many countries conduct R&D, much of global R&D performance continues to be concentrated in a few high-income countries and regions.
Three regions predominate (figure
The concentration is more apparent when reviewing the
data of specific countries (table
The top two countries thus account for 47% of the global R&D total, whereas the top five countries represent about 66%. Adding the next 5 countries—South Korea, the United Kingdom, the Russian Federation, Canada, and Italy—increases the total to just below 80%, meaning that four-fifths of the world's R&D is concentrated in just 10 countries.
With respect to major geopolitical groupings, the R&D performance of the 27 nations of the European Union (EU-27) currently accounts for about 24% of the global total. The Group of Seven (G-7) industrialized countries, of which the United States is a member (along with Canada, France, Germany, Italy, Japan, and the United Kingdom), account for about 65%. The 30 countries constituting the OECD account for about 80% of worldwide R&D. (Among the current major R&D-performing nations, only China is not an OECD member.)
U.S. dominance of global R&D performance is notable as well with respect to these country groupings. U.S. R&D expenditures are currently 40% greater than the total for all of the EU-27 countries together. Within the G-7, the United States currently accounts for more than half (52%) of the R&D total. (The U.S. share was 48% in 1990. It has exceeded 50% since 1997.) Within the OECD, U.S. R&D is about 42% of the total.
According to OECD statistics (figure
China continues to show the most dramatic growth pattern. The World Bank revised China's PPP exchange rate in late 2007, significantly lowering the dollar value of its R&D expenditures. Nonetheless, the pace of real annual growth over the past 10 years in China remains exceptionally high at just above 19%.
Finally, both India and Brazil are among the world's larger R&D performers, although neither has yet become part of OECD's statistical system. According to the UNESCO statistics, India performed $15 billion of R&D in 2004 (current U.S. dollars, PPP) and Brazil performed $13 billion in 2005. Both figures are about double the levels of R&D performance that each country reported in the mid-1990s. These levels of R&D expenditures would put both India and Brazil in the world's top 15 R&D performers.
R&D intensity—typically measured as the ratio of a country's national R&D expenditures to GDP for a given year—provides another basis for international comparisons of R&D performance. This approach does not require conversion of a country's currency to a standard international benchmark yet still provides a way to adjust for differences in the sizes of national economies.
The structure of a national economy—that is, the relative prominence of agriculture, manufacturing, services, and so on—influences the interpretation of R&D intensity statistics. Businesses and organizations differ widely in their relative need for investment in the latest science and technology, and countries whose overall GDP depends considerably on industries in the high-technology sector will exhibit higher R&D/GDP ratios than other countries.
Total R&D/GDP Ratios
The U.S. R&D/GDP ratio was about 2.7% in 2007 (table
The R&D/GDP ratio in the United States has ranged from
1.4% in 1953 to a high of 2.9% in 1964 and has fluctuated
in the range of 2.6% to 2.7% in recent years (figure
Historically, the many peaks and valleys in the U.S. R&D/GDP ratio reflect changing federal R&D priorities. The ratio's drop from its peak in 1964 largely resulted from federal cutbacks in defense and space R&D programs; from 1975 to 1979, gains in energy R&D activities kept the ratio stable. Beginning in the late 1980s, cuts in defense-related R&D kept growth in federal R&D spending below GDP growth, while nonfederal growth kept pace with or exceeded that of GDP. Since 2000, defense-related R&D spending has helped federal R&D spending growth outpace the growth of GDP.
Among other top 10 R&D-performing countries, total
R&D/GDP ratios over the past 10 years show mixed trends
In addition to the United States, countries in Nordic and Western Europe and the most advanced areas of Asia have R&D/GDP ratios above 1.5%. This pattern broadly reflects the global distribution of wealth and level of economic development. Countries with high incomes tend to emphasize the production of high-technology goods and services and are also those that invest heavily in R&D activities. Private sectors in low-income countries often have a low concentration of high-technology industries, resulting in low overall R&D spending and, therefore, low R&D/GDP ratios.
Nondefense R&D and Basic Research
Further perspective is provided by the ratio of nondefense R&D expenditures to GDP. This ratio more directly measures civilian R&D intensity and is useful when comparing nations with substantially different financial commitments to national defense. Figure
Another perspective comes from the extent to which spending on basic research accounts for a country's total R&D/GDP ratio. Estimates of the relative volume of basic research spending can provide a glimpse of the extent to which R&D resources are directed toward advancing the scientific knowledge base.
Based on the most recent data available, the U.S. basic
research/R&D ratio is about 0.5% and accounts for less than a
fifth of the total R&D/GDP ratio (table
The following countries have basic research-to-GDP ratios at or above the U.S. level: Switzerland (0.83%), Israel (0.78%), Singapore (0.48%), Australia (0.45%), and Denmark (0.44%).
In all top 10 countries ranked by R&D expenditures, the
business sector is currently the largest performer, ranging
from 77% for South Korea and Japan to 49% for Italy (table
China's business R&D sector has spurred much recent growth in national R&D expenditures, which rose from 60% of the total in 2000 to 72% in 2007. This increase reflects activities by private domestic companies and by multinational companies as well as the conversion of government-owned enterprises to the private sector.
With respect to R&D funding, the business sector supplies
66% of total R&D funds in the United States (table
More precise analysis is impeded by the lack of comparable
data for foreign-funded R&D in the United States
Businesses in the United States also receive R&D funding from abroad. However, this funding is not separately reported in U.S. R&D statistics; instead, it is included in the figures reported for the business sector.
The structure of business R&D varies substantially among countries in terms of both sector concentration and sources of funding. Because businesses account for the largest share of total R&D performance in the United States and most OECD countries, differences in business 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 pharmaceuticals or automotive manufacturing) are likely to also have higher R&D/GDP ratios than countries whose business structures are weighted more heavily toward less R&D-intensive industries.
Sector Focus for the United States and OECD
Using internationally comparable data, no one industry accounted for more than 18% of total business R&D in the United States in 2007 (figure
Compared with the United States, many of the other
countries shown in figure
Other industries also exhibit relatively high concentrations
of R&D by country. Automotive manufacturers ranked
among the largest R&D-performing companies in the world
in 2006. (See table
The pharmaceuticals industry is less geographically concentrated
than the automotive manufacturing industry but
is still prominent in several countries. The pharmaceuticals
industry accounts for more than 27% of business R&D in
Denmark and the United Kingdom, and more than 20% in Belgium and Ireland. 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 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,
which manufacturers medicines and vaccines for
the World Health Organization's three priority diseases—HIV/AIDS, tuberculosis, and malaria. GlaxoSmithKline
was the third-largest pharmaceuticals company in the world
in terms of R&D expenditures in 2005 and 2006 (table
The computers, office and accounting machines industry
represents only a small share of business R&D in most
countries. Among the OECD countries shown in figure
A significant trend in both U.S. and international business
R&D activity has been the growth of R&D in the service
sector. According to national statistics for recent years,
the service sector accounted for 30% or more of all business
R&D in 9 of the 19 OECD countries shown in figure
Internationally comparable data for seven non-OECD countries have recently been made available in OECD's Analytical Business Enterprise R&D (ANBERD) database (OECD 2009c). Percentage shares of total business R&D by industry for Chile, China, Israel, the Russian Federation, Singapore, South Africa, and Taiwan are detailed in appendix table
Among these countries, the new data show that the communication, television, and radio equipment industry accounts for more than 40% of all business R&D in Singapore and Taiwan and more than 15% in Israel and China. Motor vehicle and pharmaceutical R&D account for smaller percentages of business R&D than in most of the OECD countries. Motor vehicle R&D accounts for 5% or more of business R&D in South Africa and China, and the two countries with the highest percentages of pharmaceutical R&D are Singapore (8%) and China (4%). R&D in the computer, office and accounting machines industry accounts for 15% of the business R&D performed in Taiwan, the highest percentage among the seven nations.
Among the OECD countries shown in figure
The academic sector's share of R&D is largest in Canada,
where it accounted for 36% of national R&D performance in
Source of Funds
For most countries, the government is (and has long been) the largest source of academic research funding. (See sidebar "Government Funding Mechanisms for Academic Research.") Business support for academic R&D has increased over the past 25 years among the OECD countries as a whole. It was around 3% in the early 1980s, nearly 6% in 1990, and almost 7% in 2000 but then fell back to around 6% in 2006.
In the United States, business support for academic R&D was about 4% in the early 1980s and rose to about 7% later in that decade and through the 1990s but has dropped under 6% since 2000. Some commentators note with concern this recent trend of decline, in light of the significant role that academic basic research plays in providing a foundation for technological innovation important to the national economy.
The proportion of academic R&D financed by business
is more varied among the other top R&D-performing countries
Many countries that support a substantial level of academic R&D devote proportionately more of their R&D spending to engineering and social science than does the United States (table
Public R&D budget directed toward specific socioeconomic
objectives gives insight into government priorities.
Statistics compiled by the OECD on annual government budget appropriations or outlays for R&D (GBAORD) for
its members and selected other countries provide a basis for
such a comparison (table
Defense is an objective for government funding of R&D for all the top R&D-performing countries, but the share varies widely. Defense accounted for 58% of U.S. federal R&D support in 2007 but was markedly lower elsewhere: a smaller but still significant 29% in France and 28% in the United Kingdom, 17% in South Korea, and below 10% in both Germany and Japan.
Defense has remained the focus of more than 50% of the federal R&D budget in the United States for much of the past 25 years. It was 63% in 1990 as the long Cold War period drew to a close. It dropped to 52% in 2000 but has risen again in the wake of events stemming from September 11, 2001. The defense share of government R&D funding for the other countries over the past 25 years has generally declined or remained at a stable, low level.
The health and environment objective now accounts for 55% of nondefense federal R&D budget support in the United States and 26% in the United Kingdom. For both countries, the share has expanded dramatically over the prevailing levels several decades ago. The health and environment share is currently 17% in South Korea, 13% in France, and 10% or less in Germany and Japan. The funding under this objective goes primarily into the health arena in the United States and the United Kingdom. In the other countries, it is more balanced between health and the environment.
The economic development objective encompasses agriculture, fisheries and forestry, industry, infrastructure, and energy. The share of nondefense government R&D support allocated to economic development has generally declined over the past 25 years across the OECD countries. In the United States, it was 36% of all nondefense federal support for R&D in 1981, dropping to 10% in 2007. In the United Kingdom, it was 39% in 1981, declining to 7% in 2006. Despite a decline, support for this objective remains substantial in some countries: 22% in Germany and France (both with particular attention to industrial production and technology) and 31% in Japan (notably in energy and industrial production and technology). South Korea currently has by far the largest share for this objective, 52%, with a particularly strong emphasis in recent years on industrial production and technology.
The civil space objective accounts for 18% of nondefense federal R&D funding in the United States. The share has been around 20% in the United States for much of the past 25 years. The share in France is currently about 13%—and has been around that level for almost 20 years. The share has been below 10% for the rest of the OECD countries.
The other purposes objective includes the general advance
of knowledge (university research and nonoriented
government research), education, and other activities directed
toward cultural and socioeconomic system purposes.
This objective accounts for 17% of nondefense federal
R&D funding in the United States (table