EU companies lead global R&D investment growth
The EU Industrial R&D Investment Scoreboard monitors and benchmarks the performance of the EU’s leading industrial R&D investors against their global peers. Since 2004, the Scoreboard has been a reliable source of key insights and data for companies, researchers, and policy-makers.
In 2023, the world’s top 2 000 R&D investors, headquartered across 40 countries and representing over 900,000 subsidiaries, collectively invested EUR 1 257 billion in R&D. This accounted for over 85% of global business-funded R&D. The top 50 companies alone contributed 40% of the total, indicating that a small number of companies control a significant portion of global business sector R&D investment.
The top 2 000 includes 322 EU-based companies (18.7% of the total R&D investment), alongside 681 US firms (42.3%), 524 Chinese firms (17.1%), 185 Japanese firms (8.3%), and 288 companies from the rest of the world (13.5%), including the UK (63), Taiwan (55), South Korea (40), and Switzerland (39).
Global R&D investment grew by 7.8% nominally (4.5% adjusted for inflation) in 2023, marking a slowdown compared to 2022 and 2021. EU firms led this growth, increasing R&D investments by 9.8% nominally, outpacing US companies (5.9%) for the second consecutive year and narrowing the R&D gap with the US. Moreover, for the first time in the Scoreboard’s history, the EU’s nominal R&D growth also surpassed that of China (9.6%). However, when adjusted for inflation, Chinese companies still lead real R&D investment growth (10.2%). Despite this increase, 2023 marked the 6th consecutive year of declining real R&D investment growth rates in China.
Sectors
Four sectors (ICT hardware, ICT software, health, and automotive) continued to account for more than three quarters of Scoreboard R&D. The EU led in automotive R&D, the US in ICT services, ICT producers, and health. China was in second place in ICT and health sectors with an increasing number of newcomers entering the ranking.
The sectoral development in 2023 was mixed. Automotive R&D was a standout, adding EUR 25.1 billion globally (13.2% nominal rate), with EU, Chinese, and ROW companies increasing particularly strongly. In contrast, growth in ICT software slowed to 5.6%, its lowest since 2016. The health sector recorded its weakest growth since 2013, at 4.9%, while ICT hardware saw an 8% rise, above its long-term average.
Of the top 800 R&D investing companies in the EU, most large R&D investors continue to be located in Germany, France and the Netherlands. In terms of sectoral composition, the majority of the EU 800 were outside the four top R&D sectors, indicating a broader sectoral base compared to the US. Some of the EU firms that strongly increased their R&D investment during the last decade have done so in technological areas such as biotech and semiconductors. Moreover, there are 99 SMEs in the EU sample, of which 75% are active in the pharmaceutical and biotech sector.
R&D Productivity
Beyond the monitoring part, this year’s Scoreboard includes an analysis of the productivity of R&D investments and merger and acquisition (M&A) activity over the past 2 decades. The analysis shows that although R&D investments of Scoreboard firms still contributed positively to labour productivity and patenting, there is a global trend of diminishing returns on R&D investments for top R&D investors, suggesting that increasingly more R&D investments are required today than in the past in order to generate marketable products or new ideas.
While the decrease in R&D productivity is a global phenomenon, EU-based Scoreboard firms show lower R&D productivity levels (in terms of generating sales and new ideas), and no signs of catching up with firms from regions (e.g. China and US) that exhibit higher R&D productivity. This suggests that merely pushing for more R&D investments by the EU private sector is insufficient as a sole policy measure. Improving R&D routines/processes, attracting and retaining top R&D talent, and crafting more effective policy instruments to steer R&D incentives towards impactful innovations are also needed.
The M&A analysis shows that while both R&D investment and M&A activity separately can drive short-term gains in sales, employment, and profits, pursuing both simultaneously may lead to a substitutive effect, likely due to resource allocation issues. Additionally, no direct link was found between M&A activity and labour productivity. EU firms, in particular, are more likely to engage in M&A activities compared to their global peers, yet these efforts do not appear to translate into measurable productivity gains.
Read more: https://iri.jrc.ec.europa.eu/scoreboard/2024-eu-industrial-rd-investment-scoreboard
