EU companies must boost R&D investment to stay globally competitive
Investment in research and development (R&D) by companies based in the EU grew by 2.6% in 2013, despite the unfavourable economic environment. However, this growth has slowed in comparison to the previous year’s 6.8%. It is also below the 2013 world average (4.9%), and lags behind companies based in the US (5%) and Japan (5.5%).
These results have been published in the European Commission’s 2014 EU Industrial R&D Investment Scoreboard, which analyses the top 2500 companies worldwide, representing about 90% of the total business R&D expenditure. Data show that EU-based companies (633) invested €162.4 billion in 2013, whereas US-based companies (804) invested €193.7 billion and the 387 Japanese ones €85.6 billion.
“Despite the harsh economic climate, EU companies continue to invest in R&D. That is good news, but more is needed to keep up with our competitors. With public resources limited, attracting private R&D investment is even more essential”, said Carlos Moedas, Commissioner for Research, Science and Innovation.
The EU-based carmaker Volkswagen leads the global ranking for the second consecutive year with a total R&D investment of €11.7billion (a 23.4 % increase). The second and third place in the ranking are occupied by Samsung (South Korea) and Microsoft (US).
There are two new entries in the top ten in this Scoreboard 2014 edition: Google (9th) from the USA and Daimler (10th) from the EU. Two Swiss pharmaceutical companies, Novartis (5th) and Roche (6th), and Toyota (7th) from Japan and Johnson & Johnson (8th) from the USA complete the top ten.
The automobile sector, where investments continued to increase by 6.2%, accounts for one quarter of the total R&D invested by the EU Scoreboard companies. On the other hand, high-tech sectors such as pharmaceuticals or technology hardware and equipment have experienced weaker growth and lowered the overall average of R&D investment in Europe.
Germany, France and the UK: the top EU countries
The Scoreboard companies employed 48 million staff worldwide in 2013. For EU based companies, 97% of the total R&D investment is by companies based in 10 countries. The overall performance is largely driven by companies based in three countries: Germany, France and the UK, which account for more than two thirds of the total. In Germany and the UK, companies’ investment continued to grow (5.9% and 5.2% respectively) above the average while French companies saw a decrease in R&D investment (-3.4%).
Declining investment in a few major EU companies particularly affected the R&D investment rate of their county. This was the case with Nokia (-17.1%) or STMicroelectronics (-19.2%) which had significant impact on the overall investment in Finland (-11.6%) and the Netherlands (-0.1%), two of the top ten countries in Europe.
Meanwhile, Scoreboard companies based in some EU countries saw their R&D investment increase above the world average: Ireland (13.6%) and Italy (6.4%), and above the EU average: Spain (4.4%).
How do EU companies perform compared to US companies?
An analysis of the trends since the start of the financial crisis in 2009 shows a recovery of R&D investments in the period 2010- 2012. However R&D investment by EU based companies slowed considerably in 2013 and was accompanied by a fall in sales. Meanwhile US companies appear more resilient.
“To keep up with global competitors we need to boost investments – and these should benefit a range of research disciplines and sectors. Building a knowledge economy requires strong foundations and we count on our industry partners to help us in these effort”, highlighted Tibor Navracsics, Commissioner for Education, Culture, Youth and Sport.
US Scoreboard companies operating in high R&D intensity sectors (with the exception of the Aerospace & Defence sector) invest more than their EU counterparts. The most striking differences, both in terms of the number of companies and overall R&D investment values, correspond to the ICT sectors like Software, Semiconductors, Computer Hardware, Internet and Computer Services and to the health-related Biotechnology sector. In 2013, the overall amount of R&D investment in high-tech sectors of the EU Scoreboard companies was €61.9 billion, well below the total amount invested by their US counterparts, €142.6 billion.
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