Science and Engineering Indicators 2012

Global Expansion of Research and Development Expenditures

Global R&D expenditures over the past decade have grown faster than global GDP,^[2] an indication of widespread efforts to make economies more knowledge and technology intensive. The global total rose from an estimated $522 billion in 1996 to approximately $1.3 trillion in 2009, with the rate of growth slowing in the 2008–09 recession years (figure O-1). Although the specific data points in figure O-1 are imprecise estimates, the steady and strong upward trend illustrates the rapidly growing global focus on innovation through R&D.^[3]

R&D investments of Western countries slowed markedly in the face of adverse economic conditions. After 2008, R&D growth stopped and decreased for both the United States and the EU, after accounting for inflation. Growth for the Asian region (China, Japan, and the Asia-8) and the rest of the world slowed somewhat in 2008 and 2009, but from very high rates in earlier years.

The United States remained by far the single largest R&D-performing country, with an R&D expenditure of $400 billion in 2009. For the first time, the Asian region's total of $399 billion^[4] matched the U.S. total in 2009 (figure O-2).

China's 2008–09 R&D growth increased by a record 28%—well above its 1997–2007 trendline growth of 22%—and propelled it past Japan into second place. 2010 data released by China's National Bureau of Statistics show a further 22% increase.

R&D expenditures can be viewed as long-term investments in innovation. The R&D/GDP ratio is a convenient indicator of how much of a nation's economic activity is devoted to innovation through R&D. A U.S. goal in the 1950s was to achieve an R&D investment of 1% of GDP by 1957. More recently, many governments have set their sights at 3% of GDP in pursuit of developing knowledge-based economies, a figure the EU has formally made its long-term planning target.^[5]

However, decisions affecting the bulk of R&D expenditures are generally made by industry, thus removing achievement of such a target from direct government control. In the United States, industry funds about 62% of all R&D. The EU average is 54%, but with considerable range (e.g., nearly 70% for Germany, but 45% for the United Kingdom). In China, Singapore, and Taiwan, industry funding ranges from 60% upward. Nevertheless, government planners monitor the R&D/GDP ratio as an indicator of innovative capacity, even as few countries reach the 3% mark.

Over the past decade, many developing economies in Asia have exhibited increased R&D/GDP ratios; conversely, the United States and the EU ratios have broadly held steady. Japan's comparatively high R&D/GDP ratio reflects the confluence of contracting GDP and flat R&D.

China's R&D/GDP ratio almost tripled, from 0.6% in 1996 to 1.7% in 2009, a period during which China's GDP grew at 12% annually—an enormous, sustained increase. The gap in China's R&D/GDP ratio relative to those of developed economies suggests that there is room for China's R&D volume to continue to grow rapidly (figure O-3).

The decade-long (1996–2007) R&D growth rates of mature S&T economies were lower than those of developing ones. Growth of R&D expenditures in the United States, the EU, and Japan were in the 5.4%–5.8% range while growth ranged from about 9.5%–10.5% for Singapore and Taiwan, to 12% for South Korea.

The effect of the global economic slowdown on R&D expenditures is dramatic—a sharp drop in growth in most locations in 2008–09 that is in stark contrast to a 28% rise in China's R&D spending, its highest growth rate since 2000 (figure O-4).

The relatively greater R&D growth rates of Asian economies (excluding Japan) resulted in changes in the global distribution of estimated R&D expenditures. Compared to 1996, the North America region's (United States, Canada, and Mexico) share of estimated world R&D activity decreased from 40% to 36% by 2009; the EU's share declined from 31% to 24%. The Asia/Pacific region's share increased from 24% to 35%, Japan's low growth notwithstanding (figure O-5).

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