Emerging Economies Drive Global R&D Growth

Posted In: Editors Picks | R&D Magazine | Global R&D Funding Forecast | Government Policy | Battelle

By Martin Grueber, Research Leader, Battelle, Cleveland, Ohio and Tim Studt, Editor in Chief, Advantage Business Media

Tuesday, December 22, 2009

The global recession is over for most of the world, but the recovery reveals relatively meager R&D increases for most advanced economies—and strong gains for emerging economies.

Most of the financial trauma from the worst economic recession in 50 years is now over, and positive economic growth for both the general economy and the R&D community appears likely for the foreseeable future. While there is always the threat of a double- or even triple-dip economic recession, that would not be expected to have an effect on R&D spending.

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That said, both general economic and R&D growth for advanced economies, including the U.S. and the European Community (EC), are forecast to be mediocre over the next several years. Economic growth and R&D growth for emerging economies such as China and India, however are already strong and are expected to increase over the next several years, following a relatively minor slowdown during the global recession. China and India had a combined 7.6% GDP (gross domestic product) growth from 2008 to 2009, compared with a -3.6% GDP average decline for the other 38 R&D spending countries documented in this report.

Global R&D Spending (Source: Battelle, R&D Magazine)
	2008 GDP PPP, Billions, U.S.$	2008 R&D as % of GDP	2008 GERD PPP, Billions U.S.$	2009 GERD PPP, Billions U.S.$	2010 GERD PPP, Billions U.S.$	2010 R&D as % of GDP
Americas	19,663	2.28%	448.1	438.8	452.8	2.32%
U.S.	14,260	2.79%	397.6	389.2	401.9	2.85%
Asia	18,800	1.91%	359.0	372.4	400.4	1.95%
Japan	4,329	3.41%	147.8	139.6	142.0	3.41%
China	7,973	1.28%	102.3	123.7	141.4	1.50%
India	3,297	0.80%	26.7	28.1	33.3	0.90%
Europe	16,487	1.69%	278.8	267.1	268.5	1.69%
Rest of World	2,958	1.21%	35.9	34.2	34.8	1.23%
Total	57,908	1.94%	1121.8	1112.5	1156.5	1.97%

Given these factors, the 2010 Global R&D Forecast, created by Battelle analysts and the editors of R&D Magazine, predicts overall global R&D will increase 4.0% in 2010 to $1,156.5 billion from $1,112.5 billion spent in 2009. This increase will mostly be driven by continued spending by China and India, who will drive a 7.5% increase in Asian R&D.

American R&D spending is expected to increase 3.2% to $452.8 billion, while EC spending will only increase 0.5% to $268.5 billion in 2010.

The 2010 forecast underscores a trend noted in the first Battelle-R&D Global Report in September 2005, wherein both the Americas (U.S., Canada, Mexico, Brazil, and Argentina) and the EC were falling behind the spending levels seen in Asian countries. Even Japan, the second largest R&D spender in the world, is now trailing the level of spending by China and India.

If anything, the 2008-09 global recession has accelerated this trend, as American and EC economies are not expected to even return to their 2008 level of R&D spending for several years, let alone begin to challenge the current level of spending by China and India. The increasing amount of debt the U.S. and Europe are accruing will also limit their general economic and R&D growth capabilities.

Additionally, a difficult-to-document amount of spending by EC and American industrial firms can directly be attributed to the creation and support of new R&D facilities in China and India (through foreign direct investment, or FDI). Those investments are significantly more than those countries are investing in either America or the EC. The National Science Foundation (NSF) will begin to document these investments by U.S. firms in Asia starting in 2010, but specific results will not be available until 2011.

Share of Total Global R&D Spending (Source: Battelle, R&D Magazine)
	2008	2009	2010
Americas	39.9%	39.4%	39.2%
U.S.	35.4%	35.0%	34.8%
Asia	32.0%	33.5%	34.6%
Japan	13.2%	12.5%	12.3%
China	9.1%	11.1%	12.2%
India	2.4%	2.5%	2.9%
Europe	24.9%	24.0%	23.2%
Rest of World	3.2%	3.1%	3.0%

The relative strength and depth of the science and technology infrastructures in the advanced economies is likely to ensure their continued persistence in the short term future, as this report documents. However, the increasing growth and intellectual property gains being made in China and India are not likely to diminish anytime soon.

Some lessening may occur as the emerging economies become more equitable in terms of per capita income, and their costs come to equal those in the advanced economies. But those changes appear to be far into the future, with many other issues to be addressed in the interim.

Economic stimulus
Beginning in 2009, the world’s governments spent $1.92 trillion in economic stimulus investments to offset the effects of the global recession. About 38% of these stimulus packages was spent by Asian countries to offset their declines in economic growth. The majority of these monies will be spent in 2009 and 2010. The stimulus funding bills mostly appear to be successful, with a very noticeable effect on local R&D efforts. The unfortunate factor in these programs, however is that they dramatically increased the debt loads of those countries implementing them. And servicing the interest on these programs could detract from comparable R&D investments that might be made in the future.

Marginal economic growth has inspired additional stimulus incentives. Japan, for example, recently announced an additional $81 billion stimulus to support small- and medium-enterprises that have been hurt by the strong yen. There is discussion in the U.S. of a possible second stimulus package.

Gross Domestic Expenditure on R&D (GERD) Billions of U.S. Dollars (Source: R&D Magazine, Battelle, OECD, IMF, CIA)
	2008 GDP PPP Billions, US$	2009 GDP PPP Billions, US$	2009 Stimulus Billions, US$	2010 GDP PPP Billions, US$	2010 R&D as % GDP	2008 GERD PPP Billions, US$	2009 GERD PPP Billions, US$	2010 GERD PPP Billions, US$
United States	14,260	13,875	787	14,083	2.85%	397.629	389.203	401.919
Japan	4,329	4,095	110	4,165	3.41%	147.800	139.640	142.026
China	7,973	8,651	586	9,429	1.50%	102.331	123.709	141.435
Germany	2,918	2,763	103	2,772	2.46%	71.861	67.970	68.191
South Korea	1,335	1,322	11	1,369	3.13%	41.742	41.379	42.850
France	2,128	2,077	33	2,096	1.98%	42.233	41.125	41.501
United Kingdom	2,226	2,128	36	2,147	1.75%	38.893	37.240	37.572
India	3,297	3,475	4	3,697	0.90%	26.706	28.148	33.273
Canada	1,300	1,268		1,294	1.83%	23.781	23.204	23.680
Russia	2,266	2,096	20	2,127	1.04%	23.482	21.798	22.121
Italy	1,823	1,730	6	1,733	1.08%	19.678	18.684	18.716
Brazil	1,993	1,979	4	2,048	0.91%	18.136	18.009	18.637
Taiwan	712	683		708	2.57%	18.325	17.553	18.196
Spain	1,403	1,350	113	1,340	1.28%	18.000	17.280	17.152
Australia	800	806	10	822	1.86%	14.914	14.992	15.289
Sweden	344	327		331	3.51%	12.076	11.478	11.618
Netherlands	672	644	8	648	1.63%	10.950	10.497	10.562
Israel	201	201		206	4.40%	8.846	8.844	9.064
Austria	330	317		318	2.58%	8.530	8.179	8.204
Switzerland	317	311	1	312	2.36%	7.474	7.340	7.363
Belgium	389	376	3	376	1.81%	7.028	6.806	6.806
Turkey	903	844		876	0.76%	6.830	6.414	6.658
Finland	194	182		183	3.36%	6.520	6.115	6.149
Singapore	237	229		239	2.51%	5.946	5.748	5.999
Mexico	1,563	1,449	54	1,497	0.40%	5.919	5.796	5.988
Denmark	204	199		202	2.45%	5.008	4.876	4.949
Norway	276	271	3	274	1.50%	4.133	4.065	4.110
Czech Republic	265	254		257	1.44%	3.814	3.658	3.701
South Africa	491	480	4	488	0.74%	3.654	3.552	3.611
Poland	668	675		690	0.52%	3.482	3.510	3.588
Portugal	236	229	3	3,697	1.21%	2.850	2.771	2.783
Argentina	574	560	13	568	0.46%	2.656	2.576	2.613
Ireland	188	174		170	1.52%	2.855	2.645	2.584
Greece	343	340		340	0.53%	1.828	1.802	1.802
Hungary	197	184	6	182	0.93%	1.823	1.711	1.693
New Zealand	117	114	5	117	1.18%	1.384	1.345	1.381
Romania	271	248		249	0.53%	1.434	1.314	1.320
Slovenia	59	56		57	1.38%	0.828	0.784	0.798
Slovak Republic	120	114		119	0.42%	0.498	0.479	0.500
Iceland	13	12		12	2.45%	0.318	0.294	0.294

Emerging Economies Drive Global R&D Growth
Recovery Renews R&D
Re-Emerging U.S. R&D
A Battelle Perspective On Investing In Innovation
Federal R&D: The Stimulus Hangover
A Battelle Perspective On Investing In National Security R&D
Technology Leadership: Do Perceptions Alter Reality?
Biopharm in Flux
A Battelle Perspective On Investing In Healthcare R&D
Global Perspective: Emerging Nations Gain R&D Ground
China: R&D Giant Ascendant (PDF)
Reinvigorating India's R&D (PDF)
Beyond Outsourcing and Off-Shoring—the Globalization of R&D
A Battelle Perspective On Investing In Energy R&D
A Battelle Perspective On Investing In International R&D
2010 Global R&D Funding Forecast: An Overview
Global R&D Funding Forecast Resources

Download the full report as a PDF (15 MB).

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3 Comments

naguib 7/13/2010 11:41:00 AM

top ten countries in R&D groth?
AI 12/30/2009 12:07:52 PM

I agree with this assessment, but would suggest a few additional issues:
US corporate leadership is using the same management style (gut feel) that they have used for the past century. While most of these leaders “talk” about R&D, it is mostly based on the perception that they are doing what US corporations were doing in the first three-fourths of the last century. During this period of time there was “true” interest in inventions and advanced technology. Also during this period, technology leadership was “the path to profits”. Now their focus has changed to be managing the bottom line: reducing base costs. Now you can restate the US corporate R&D process as one that is only focusing on incremental improvement (smaller, cheaper, faster).
In the few cases where executive management is attempting to refocus on growth and advanced solutions, the last 10 years of lean thinking has established momentum that will be difficult to overcome. Only when the slow moving companies are displaced by faster, more forward thinking companies, will the trend change. Unfortunately, these companies may not be in the US.
EKA 12/23/2009 12:19:50 PM

Of all of the trends that have been decried as reflecting the erosion of strength and leadership in the world, nothing is as significant nor as harmful as the reductions in our investment in our own future. Yes, mismanagement can cause companies and countries to perform poorly, but nothing is a assured to lead to a decline in performance than underinvesting in the future. Forget about where your sneakers, or memory chips, are manufactured, instead be concerned about R&D spending if you care about how bright the future will be.