R&D Expenditures
Total R&D Expenditures
Many governments consider R&D to be a key to economic growth and social welfare. Gross expenditures on R&D are an indicator of overall potential for technological innovation.
- The level of R&D activity in Asia[8] had surpassed that of the EU in 2002 and by 2003 was nearly 10% greater than the EU level. In 2003, the Asian R&D level was about 79% that of the United States (table 7; figure 15).
- From 1991 to 1995, R&D in Asia grew at a much faster annual rate (7.9%) than in the EU (3.4%) and in the United States (3.3%). After 1995, growth accelerated in Asia to an annual average of 8.7%, exceeding that of the EU (5.4%) and the 6.0% U.S. average (figure 16).
- China's annual rate of R&D growth from 1995 to 2003 (20%) exceeded that of all these other R&D performers, followed by Singapore's at 15%. Growth in Taiwan averaged 10% and in South Korea 7% (figure 17).
- Only Japan's R&D growth from 1995 to 2003 was below that of the United States and the EU. At present growth rates, China's R&D expenditures appear to be rapidly approaching those of Japan, the world's second largest R&D-performing country.
- Obtaining internationally comparable estimates of R&D spending for a developing country like China is difficult,[9] and the estimated absolute level of R&D investment in China cannot be considered exact. However, there is no reason to doubt the rapidly accelerating investment trend indicated by the Chinese data.
Table 7 Source Data: Excel file
Figure 15 Source Data: Excel file
Figure 16 Source Data: Excel file
Figure 17 Source Data: Excel file
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R&D-to-GDP Ratio
This indicator shows the level of economic resources devoted to R&D activities compared with other economic activities, as measured by GDP. R&D-to-GDP ratios are broadly indicative of the capacity for innovative activity and technological change in overall economic activity.
- The ratio of R&D to GDP in Asia[10] has recently exceeded that in the EU, reaching 1.92 in 2003, when the EU ratio was 1.81. The ratio in the United States stood at 2.68 in 2003 (figure 18).
- Substantial differences in R&D-to-GDP ratios exist among the five Asian economies. In 2003, Japan and South Korea had the highest values: 3.15 and 2.63, respectively. The ratios were lower in Taiwan (2.45) and Singapore (2.13) (figure 19).
- Although China's R&D-to-GDP ratio was the lowest among the five Asian economies in 2003 (1.13), its ratio had the steepest increase since 1995 among these economies, closely followed by Singapore's, and showed further growth in 2004, to 1.23. When set against China's rapidly growing economy, the rise in the R&D-to-GDP ratio is remarkable.
- The ratios in Asia increased faster between 1995 and 2003 (in both absolute and relative terms) than the ratios in the United States and the EU.
Figure 18 Source Data: Excel file
Figure 19 Source Data: Excel file
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R&D Expenditures by Performing Sector
This indicator measures the relative prominence of different sectors, business, academic, government, and private nonprofit, in conducting R&D activities.
- The business sector performed the majority of R&D in Asia,[11] the EU, and the United States. In 2003, the business sector's share in Asia (70%) was similar to that in the United States, but the sector's share in the EU (64%) was lower (figure 20).
- From 1995 to 2003, the business sector share increased 7 percentage points in Asia, offset largely by a decline in the academic sector's share. In the EU, small increases in business and academic sector R&D shares were offset by a decline in the government share. The U.S pattern remained largely stable.
- Business sector growth was especially robust in China, where it reflected, in part, the restructuring of formerly state-owned enterprises and thus was accompanied by a sharp decline in the share of government-performed R&D (figure 21).
- Japan's business sector share of R&D also rose strongly, coupled with a decline in the academic share. In South Korea, business and academic R&D sector shares increased while that of government R&D declined. Singapore and Taiwan registered small declines in the business share of R&D.
Figure 20 Source Data: Excel file
Figure 21 Source Data: Excel file
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U.S. Multinational Corporations' R&D in Asia and the EU
Foreign direct investment (FDI) is an indicator of globalization. It refers to the ownership by multinational corporations (MNCs) or their foreign affiliates of productive assets outside their home country. FDI can result from cross-border mergers and acquisitions, establishment of new facilities, and activities in existing facilities.[12]
- U.S.-based MNCs have nearly doubled the value of their overseas R&D activities through their foreign affiliates since the mid-1990s, from $11.9 billion in 1994 to $21.2 billion in 2002 (preliminary estimate). Although the bulk of this overseas R&D is performed in Europe, Asia[13] is becoming a key location (table 8).
- Asia absorbed $3.6 billion in R&D FDI in 2002, down slightly from $3.9 billion in 2001 but more than double its $1.5 billion in 1994. In contrast, the EU accounted for an estimated $12.1 billion, up from $8.3 billion in 1994.[14] However, the EU share of the total declined from about 70% in 1994 to 57% in 2002 (figure 22; table 8).
- Following consecutive annual declines in 1997 and 1998 that coincided with the Asian financial crisis, U.S. companies' R&D expenditures in Asia more than doubled from 1998 to 1999, from $1.3 billion to $2.9 billion, and reached $3.9 billion in 2001. However, investments in individual economies outside of Japan remained relatively modest through 2002 (figure 23; table 8).
- From 1998 to 2002, foreign affiliates of U.S. MNCs increased their R&D expenditures in Asia at an average annual rate of 28.6%, compared with 9.6% overall and 4.8% in the EU. Japan's share of Asia's total dropped from 74% to 40% over the period.
- Mainland China's R&D FDI growth for U.S.-based MNCs was particularly rapid, from $7 million in 1994 to $52 million in 1998 and $646 million in 2002. R&D FDI in India remained more modest in comparison, rising from $5 million in 1994 to $80 million in 2002.
Table 8 Source Data: Excel file
Figure 22 Source Data: Excel file
Figure 23 Source Data: Excel file
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Footnotes
[8] Data for Asia are limited to Japan, China, Singapore, South Korea, and Taiwan. However, because R&D data are not available for Singapore and Taiwan until 1994/1995, the early 1990s growth rate for Asia represents only China, Japan, and South Korea. The 1990–95 data for Japan are adjusted to more accurately reflect full-time-equivalent researcher labor costs.
[9] See "Comparing International R&D Expenditures" in National Science Board, 2006, Science and Engineering Indicators 2006 (National Science Foundation, pp. 4-39).
[10] Data for Asia are limited to Japan, China, Singapore, South Korea, and Taiwan. The 1990–95 data for Japan are adjusted to more accurately reflect full-time-equivalent researcher labor costs.
[11] Data for Asia are limited to Japan, China, Singapore, South Korea, and Taiwan. The 1990–95 data for Japan are adjusted to more accurately reflect full-time-equivalent researcher labor costs.
[12] Data in this section include the R&D activities of overseas affiliates of U.S. companies in which the parent company has a 50% or higher ownership share. Data are from the U.S. Bureau of Economic Analysis (BEA) Survey of U.S. Direct Investment Abroad. http://www.bea.gov/bea/di/di1usdop.htm
[13] Asian data include Hong Kong.
[14] EU data include 12 countries in 1994 and 15 thereafter.
