07 Dec 2017   |   News

EU firms spending more on research and innovation

Investment in R&D in Europe rose above world average in 2016, but there is persistent weakness in digital innovation and companies are increasingly outsourcing research to academic partners, potentially displacing basic university research

EU firms have significantly increased their investment in research and development, rising above the world's average growth rate, according to the industrial R&D investment scoreboard published this week by the European Commission.

The report looks at R&D spend disclosed by the world's top 2,500 research-based companies, which together increased their investments by 5.8 per cent in 2016. Spread across 43 countries, these companies are responsible for 90 per cent of private sector R&D.

EU headquartered firms invested a total of over €192 billion in research and development last year, each spending around 7 per cent more than the average of R&D intensive companies based elsewhere.

For the fourth consecutive year, the top R&D investor in the world is German car manufacturer Volkswagen, which spent almost €14 billion in 2016. US companies Alphabet and Microsoft take second and third positions.

The other companies in the top 10 are Samsung from South Korea, Intel, Apple and Johnson & Johnson from the US, Novartis and Roche from Switzerland and Huawei from China.

Industry investment, which dipped during the global financial crisis beginning in 2008, benefited in 2016 from extraordinarily low interest rates and a relatively low and stable oil price, the report says.

But for a variety of technical reasons, the report is not a straightforward assessment of the world’s greatest innovators. For example, the long term performance of companies is understated because of the database’s limited duration and strict criteria.

Persistent weaknesses in digital and biotech

Europe remains behind the world’s most corporate research-intensive economy, the US, for total R&D spend.

In three high tech sectors, biotechnology, software and IT-hardware, EU companies show “persistent weaknesses” compared to their counterparts in the US, China and Japan, the report says. The gap in these three sectors has widened over the past 10 years.

Only one in every four patents filed by EU companies is in the field of digital technologies. In China, which continues its enormous strides in science and technology, over three in every four filings are ICT-related.

The report also reveals that nearly 70 per cent of R&D investment by companies in Europe takes place in just three economies: Germany, France and the UK.

The bulk of research investment in Europe continues to sit on a few large shoulders. For example, Ericsson and Volvo account for 57 per cent of total R&D spend by Swedish companies, Nokia for 77 per cent of the companies based in Finland, and Telecom Italia and Leonardo for 52 per cent of the companies based in Italy.

More research outsourced  

If EU companies are now spending more on research, they are also increasingly outsourcing responsibility for carrying it out.

New data this week from Nature Index show that there has been a surge in collaboration with academic and government research bodies, which has more than doubled in the past five years.

The Index, published on Tuesday, investigates firms’ changing role in science, and the costs and benefits of these shifting arrangements to high quality research.

The findings “demonstrate a fundamental shift towards greater collaboration in high quality research between industry and academia,” said David Swinbanks of the Nature Index.

But, while closer collaboration between industry and academia is desirable, “the longer-term concern is that it could shift the balance between basic and applied research in research institutions,” Swinbanks said.

For example, the share of corporate investment in basic and applied research in the US, as a proportion of total research and development funding, is on the decline.

This shift towards corporate–academic collaboration could help broaden the reach of scientific research, as well as improve academic productivity, the authors say. An analysis of the high quality papers tracked by the index showed that academic publications were more likely to attract attention if they included a corporate co-author.

IBM leads pack for high quality science

Data from the Nature Index over the five years between 2012 and 2016 also show which countries are the leading sources of corporate high quality research, as well as the countries where businesses are contributing the most in terms of overall national output.

US corporations represent almost half of all global corporate research. Japan is second, with a 10.65 per cent share, followed by the UK, China and Germany.

IBM is ranked first globally for high quality science, followed by Swiss pharmaceutical companies Roche and Novartis. South Korea’s Samsung Group is fourth, followed by Pfizer, Merck and Nippon Telegraph and Telephone Corporation, the highest entry from Japan.

Two UK pharmaceutical companies, GlaxoSmithKline and AstraZeneca, complete the top ten.

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