R&D leadership shifting from west to east

For the past six years, the top ten countries funding R&D have remained mostly the same. There has been dramatic change, however, in the extent of globalization involved in research, as well as shifts in the way funds are spent. Driven in part by China’s aggressive programs, Southeast Asia has become the world’s largest region for research investments—a trend that is expected to continue through at least the end of the decade. Collaborations with technology firms and research organizations in the U.S. and Europe are also increasing as Asia seeks to leverage global scientific knowledge and capabilities. And major infrastructure investments continue to be made, often with the goal of creating an innovation ecosystem with mechanisms for technology commercialization and industry engagement, leading to amplified economic returns from research investment. Leading examples include Skolkovo in Russia, Biopolis in Singapore and the Qatar Foundation.

Highlights of the international research funding environment include:

  • Asian share of global R&D continues to increase, driven by China, Japan and Korea, while U.S. and European shares decrease.
  • U.S. and Europe remain global leaders in high-quality research output, but the balance is shifting.
  • African, Middle East and South American R&D remains relatively small, albeit with some noteworthy national initiatives.
Global R&D Spending Forecast
  2012 GERD PPP
Billion U.S. $
2012 R&D as %
of GDP
2013 GERD
PPP Billions
U.S. $
2013 R&D
as % of
Billions U.S. $
2014 R&D
as % of
Americas (21) 485 2.5% 489 2.4% 504 2.5%
U.S. 447 2.8% 450 2.8% 465 2.8%
Asia (20) 561 1.8% 596 1.9% 633 1.9%
China 232 1.8% 258 1.9% 284 2.0%
Japan 160 3.4% 163 3.4% 165 3.4%
India 41 0.9% 42 0.9% 44 0.9%
Europe (34) 350 1.9% 349 1.9% 351 1.8%
Germany 92 2.8% 92 2.8% 92 2.9%
Rest of World (36) 81 0.9% 83 0.9% 87 0.9%
Global Total 1,517 1.8% 1,559 1.8% 1,618 1.8%
GERD, Gross Expenditures on R&D, PPP, Purchasing Power Parity
Source: Battelle, R&D Magazine

Globalization Unleashed
Globalization of R&D has accelerated in the past decade through a combination of R&D funding growth in emerging economies, off-shoring and outsourcing of a portion of western R&D, improved communications and the need for larger-scale, interdisciplinary collaboration on major scientific challenges. In the commercial sector, innovation capabilities tend to follow the wealth created by manufacturing, catalyzed by accelerating product development cycles and sometimes by regulation. China’s Huawei, for example, now competes for telecommunication contracts in Europe and the U.S. Its related attempts to acquire U.S. telecom companies have been largely rebuffed by federal regulators, providing incentive to develop indigenous product development capabilities. Moreover, China is designing and building state-of-the-art next-generation nuclear power plants, a space station, high-speed rail systems, military and commercial aircraft and other major projects—many of which draw on global science and technology assets.

Long-Term Outlook for R&D Expenditures



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Source: Battelle and R&D Magazine
Even if the historic stability of the U.S. and European commitment to research intensity (i.e., spending as a percent of GDP) continues, growth in China’s economy is likely to propel it to the top position in absolute R&D spending by the early 2020s.


R&D capabilities also follow markets for technology-enabled products. Automobiles are a good example, since the major manufacturers have R&D operations around the world. Japan’s Toyota is holding its position as the world’s largest car maker, with leading market shares for advanced hybrid and electric vehicles (EV). Toyota’s research effort in this field, along with that of Ford and others, builds on earlier publicly funded basic research in batteries and power electronics, while government research now turns to areas like grid accommodation of fueling demand for EVs. EVs are a good illustration of a globally distributed, multi-decade R&D effort with domains of coordinated collaboration, complemented by independent efforts that leverage loosely coupled global connectivity through publications, licensing, recruitment of experienced scientists and engineers and other forms of knowledge transfer. Momentum in EVs is shifting from research to development, and the prospects seem good for realization of the original policy goals in energy security and environmental protection that stimulated early public investment.


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Different Priorities Among Research Leaders

China places more emphasis on development, less on basic research

Source: Battelle/R&D Magazine

Linkage Between R&D and National Priorities
Tepid economic recovery in Europe and the U.S. suggests significant increases in R&D investments are unlikely in the next several years. Emphasis on public deficit and debt reduction will continue, with unpredictable short-term effects on discretionary research investments. While the historic stability of research intensity in the U.S. and Europe suggests dramatic declines in national R&D investments are not likely, these headwinds mean that the west will continue to lag the accelerated level of R&D spending in Asia.

Governments around the world, and particularly in Asia, recognize the importance of investing in the building blocks of innovation-based economies. All countries seek economic growth, often amplified by the need for job creation to match rising populations: energy, food and water demands. Strategies vary. In the U.S., the government tends to seed innovation with investment in basic research and some tax and policy incentives, but the free market decides which technology is deployed at large scale. China, on the other hand, has fixed a macroeconomic goal of spending 2.2% of GDP on research by 2015, toward becoming an innovation-based economy by 2020. Such a command approach can sometimes accelerate the translation from research to development. This is illustrated by the large proportion of development investment in China versus funding for basic and applied research, and is manifested (for example) in the large-scale deployment of clean energy and advanced grid technologies in China. But this approach can also lead to expensive failures, and economists have warned that sustained large investments in innovation must be paired with investments in social and environmental protection infrastructures.