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Chapter 4. Research and Development: National Trends and International Comparisons

International Comparisons of R&D Performance

Data on R&D expenditures by country and region provide a broad picture of the changing distribution of R&D capabilities and activities around the world. R&D data available from the Organisation for Economic Co-operation and Development (OECD) cover the organization’s 34 member countries and 7 nonmembers (OECD 2013). The United Nations Educational, Scientific and Cultural Organization’s (UNESCO’s) Institute for Statistics provides data on additional countries (UNESCO 2013). The discussion in this section draws on both of these data sets.

Cross-national comparisons of R&D expenditures and funding necessarily involve currency conversions. The analysis in this section uses the international convention of converting foreign currencies into U.S. dollars via purchasing power parity (PPP) exchange rates (for a discussion of this methodology, see the sidebar, “Comparing International R&D Expenditures”).

Global Pattern of R&D Expenditures

Worldwide R&D expenditures totaled an estimated $1,435 billion (current PPP dollars) in 2011.[8] The corresponding estimate for 5 years earlier in 2006 is $1,051 billion. Ten years earlier, in 2001, it was $753 billion. By these figures, growth in total global R&D has been rapid, averaging 6.4% annually over the 5-year period and 6.7% annually over the 10-year period.

Overall, global R&D performance remains highly concentrated in three geographic regions: North America, Asia, and Europe (figure 4-8). North America (United States, Canada, Mexico) accounted for 32% ($462 billion) of worldwide R&D performance in 2011; the combination of East/Southeast and South Asia (including China, Taiwan, Japan, India, South Korea) accounted for 34% ($492 billion); and Europe, including (but not limited to) European Union (EU; see “Glossary” for member countries) countries accounted for 24% ($345 billion). The remainder, around 10%, reflects the R&D of countries in the regions of Central and South America, Central Asia, the Middle East, Australia/Oceania, and Africa.

The geographic concentration of R&D is more apparent when looking at specific countries (table 4-4). Three countries account for more than half of global R&D. The United States is by far the largest R&D performer ($429 billion in 2011), accounting for just under 30% of the global total, but down from 37% in 2001. China was the second-largest performer ($208 billion) in 2011, accounting for about 15% of the global total. Japan is third at 10% ($147 billion). The largest EU performers spend comparatively less: Germany ($93 billion, 7%), France ($52 billion, 4%), and the United Kingdom ($40 billion, 3%). R&D spending by South Korea has also been rising in recent years and accounted for 4% ($60 billion) of the global total in 2011. Taken together, these top seven countries account for about 72% of total global R&D. The Russian Federation, Taiwan, Brazil, Italy, Canada, India, Australia, and Spain make up the next tier of performers, with total R&D expenditures ranging from $20 billion to $35 billion. The top seven countries, along with the second group of eight economies, together account for 84% of current global R&D.

The generally vigorous pace at which total global R&D continues to grow is certainly one of the prominent developments, a reflection of the growing knowledge-intensiveness of the economic competition among the world’s nations. The other major trend is the particularly rapid expansion of R&D performance in the regions of East/Southeast and South Asia, including economies such as China, India, Japan, Malaysia, Singapore, South Korea, Taiwan, and Thailand. The R&D performed in these two Asian regions represented only 25% of total global R&D in 2001 but increased to 34% in 2011, including China (15%) and Japan (10%).

China continues to exhibit the world’s most dramatic R&D growth pattern (figure 4-9; appendix table 4-13). 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 growth over the past 10 years (2001–11) in China’s overall R&D remains exceptionally high at 20.7% annually (still very high, at 18.1% per year, when adjusted for inflation).

The rate of growth in South Korea’s R&D has also been quite high, averaging 10.9% annually over the same 10-year period. The growth in Japan’s R&D has been much slower, at an annual average rate of 3.5%.

By comparison, while the United States remains atop the list of the world’s R&D-performing nations, its pace of growth in R&D performance has averaged 4.4% over the same 2001–11 period, and its share of global R&D has declined from 37% to 30%. Total R&D by EU nations has been growing over the same 10 years at an annual average rate of 5.0%. The pace of growth during the same period for Germany (5.5%), France (3.8%), and the United Kingdom (3.1%) has been somewhat slower. The EU countries accounted for 22% of total global R&D in 2011, down from 26% in 2001.[9]

Comparison of Country R&D Intensities

R&D intensity provides another basis for international comparisons of R&D performance. This metric does not require conversion of a country’s currency to a standard international benchmark (dollars), but it does provide a means to adjust for differences in the sizes of national economies.

The U.S. R&D/GDP ratio was somewhat over 2.8% in 2011 (table 4-4). At this level, the United States is 10th among the economies tracked by the OECD and UNESCO. Israel continues to have the highest ratio at 4.4%. South Korea is now second at 4.0%, and Finland is third at 3.8%. Japan and Sweden are both around 3.4%. Denmark is at 3.1%, and Taiwan is at 3.0%. Germany and Switzerland, both at 2.9%, are slightly ahead of the United States. By way of comparison, the United States was eighth in R&D intensity in the data for 2007; it has been gradually slipping in the world rank for this indicator in recent years.

The R&D/GDP ratio in the United States has ranged from 1.4% in 1953 to well above 2.8% in 1963–67 to a historical high of 2.9% in 2009. Over the 10-year period from 2001 to 2011, the ratio fluctuated between a low of 2.6% in 2004 to a high of 2.9% in 2009 (figure 4-10; appendix table 4-13). The ratio has generally been rising since 2004, but the drop in 2010 to 2.8% is a noticeable departure.

Most of the growth over time in the U.S. R&D/GDP ratio can be attributed to increases in nonfederal R&D spending, primarily that financed by business. Nonfederally financed R&D increased from about 0.6% of GDP in 1953 to 2.0% of GDP in 2011. This increase in the nonfederal R&D/GDP ratio reflects the growing role of business R&D in the national R&D system and, more broadly, the growing prominence of R&D-derived products and services in the national and global economies.

Among the other top seven R&D-performing countries, most had increasing R&D/GDP ratios over the 2000–11 period (figure 4-10). However, for some, the rise was modest at best, and for others, it was quite large. France exhibited only a bare increase over this period: from 2.2% in 2001 to somewhat over 2.2% in 2011. The United Kingdom’s ratio was also rather flat over the same period, around 1.8%. For Germany, the ratio increased from 2.5% in 2001 to 2.9% in 2011. Japan was also in the modest increase category: from 3.1% in 2001 to 3.4% in 2011. (Japan’s rising ratio reflects in part the confluence of declining GDP and largely flat R&D spending.) The high-risers were China and South Korea. China’s ratio doubled over the period: from just under 1.0% in 2001 to somewhat above 1.8% in 2011. South Korea’s ratio increased from 2.5% in 2001 to 4.0% in 2011.

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.

Comparative Composition of Country R&D Performance

The business sector is the predominant R&D performer for the top seven R&D-performing nations (table 4-5; appendix table 4-14). For the United States, the business sector accounted for 69% of gross expenditures on R&D in 2011. Japan’s business sector was the highest, accounting for 77% of the country’s overall R&D performance. China (76%) and South Korea (77%) were also well above the U.S. level. Germany, at 67%, was close to the level of the United States. France and the United Kingdom were somewhat lower, at, respectively, 63% and 62%.

The R&D performed by the government ranges over 8%–16% of total national R&D for the leading seven countries. Japan (8%) and the United Kingdom (9%) are on the lower end of this range. China (16%), Germany (15%), and France (14%) are at the high end. The United States and South Korea lie in between.

Academic R&D ranges from 8% to 27% of total national R&D performance for these countries. China has the lowest ratio, at 8%. The United Kingdom has the highest, at 27%. The United States (15%), Japan (13%), and South Korea (10%) have lower shares; Germany (18%) and France (21%) have higher shares.

With regard to the funding of R&D, the business sector is again the predominant source for the top seven R&D-performing nations (table 4-5). In 2011, funding for about 77% of Japan’s total national R&D came from the business sector. The corresponding figures for South Korea, China, and Germany are also high, in the 66%–74% range. R&D funding from business is lower, but still predominant, in the United States (59%) and France (54%). The corresponding figure for the United Kingdom (45%) is notably lower.

Government is the second major source of R&D funding for these seven countries. France is the highest, at 37%. The lowest is Japan, at 16%. The United States (31%), the United Kingdom (32%), and Germany (30%) are on the higher side. South Korea (25%) and China (22%) are in between.

Funding from abroad refers to funding from businesses, universities, governments, and other organizations located outside of the country. Among the top seven R&D-performing countries, the United Kingdom is the most notable in this category, with 17% of R&D funding coming from abroad. France is also comparatively high, at nearly 8%. Germany and the United States are both around 4%, and the rest are much lower. (For the United States, the funding from abroad reflects foreign funding for domestic R&D performance by the business and higher education sectors.)

Another dimension in which to compare countries is the extent of total national R&D performance directed to basic research. None of the other top seven R&D-performing countries come close to the United States in its $74 billion of support for basic research in 2011 (table 4-6). The next closest is Japan, at $18 billion, and then France, at $13 billion. The U.S. basic research share (17%) is also high among this group, although it is exceeded by France (25%). China has the lowest share of basic research (5%) in this group of countries.

[8] The figures cited here for total global R&D in 2001, 2006, and 2011 are NSF estimates. R&D expenditures for all countries are denominated in U.S. dollars, based on purchasing power parities. These estimates are based on data from the OECD, Main Science and Technology Indicators (Volume 2013/1) and from R&D statistics for additional countries assembled by UNESCO, Institute for Statistics (as of early August 2013). At present, there is no database on R&D spending that is comprehensive and consistent for all nations performing R&D. The OECD and UNESCO databases together provide R&D performance statistics for 214 countries, although the data are not current or complete for all. NSF’s estimate of total global R&D reflects 91 countries, with reported annual R&D expenditures of $50 million or more, which accounts for most all of current global R&D.
[9] The figures cited for the EU in 2001 are adjusted to include all of the current 28 member countries.