2014 GLOBAL R&d FUNDING FORECAST U s. R&d investment up one percent to $465 billion Historic U s. commitment to research intensity expected to remain firm Economic growth continues to propel Asian R&d spending
which is a public service for use by policy makers, corporate research leaders, researchers, educators, and economists.
This perspective is based on assumptions about the economy, and on indications that our leaders in Washington may be able to find common ground on the value of R&d investment.
We are impressed by R&d commitments in Europe and Asia, where increasing research intensity amplifies the investment momentum that strong economic growth provides.
In a world where scientific discovery and technology commercialization are truly global, these trends have implications beyond national borders.
and researchers alike because of the multiplier effect R&d investment can have, both in economic and cultural terms.
There is an important relationship between economic growth and research and development, between industry creation and political stability, and between the nurturing of research
. which has resumed modest growth that is expected to be relatively stable through 2020. •At the current rates of growth and investment,
the combined investments by the U s.,China and Japan will account for more than half of the total. •Together, the U s.,China,
•For 2014, we project declines in defense and aerospace R&d, increases in energy-related research, increases in life science research and development, strong growth in information technology research investment and growth in R&d budgets
Key research investment trends around the globe: •Given the current, weak economic environment in Europe, large increases in R&d investments are expected not for the next several years. •Emphasis by Southeast Asian countries on economic growth through increased
R&d investments is likely to continue through the end of the decade. •Significant R&d investments by western countries in long-range technology platforms like robotics, high-performance computing, social media, software,
cost-effective energy sources and nanobiotechnology could stimulate rapid industry-scale economic growth. The research standouts in the â€oerest of the Worldâ€:
•The â€oerest of the World†countries are expected to undergo moderate growth in R&d investment in 2014, with leadership from countries like South korea,
Russia and Taiwan. •Most Middle east countries will experience strong GDP growth in 2014, but are constrained by weak R&d infra-structure†with exceptions such as Israel
Total investments in R&d (as a percentage of GDP) will stay relatively steady throughout the world in 2014.
The 2013 slowdown was due primarily to unsettled European and U s. economies that, in turn, affected global performance.
R&d investments often are linked closely to GDP and economic outlook. Global R&d investments, according to our analysis, are forecast to increase in 2014 and 2015†albeit at a decreasing rate in 2015.
Other highlights include: •Economic and R&d growth in Asian countries have slowed, but R&d investments in this region still outpace the rest of the world. •U s. R&d investment is back on track with modest growth that is expected to continue through 2020. •China continues its unmatched economic growth
and double-digit R&d increases. •R&d rankings have not changed significantly in the past five years, but differences have narrowed in funding levels between countries.
While 2013 R&d investment growth was minimal in the U s. and Europe, growth in most Asian countries†especially China†continued.
Asian R&d investment growth rates are expected to return to their pre-2013 levels in 2014 and 2015.
In 2014, China will continue its two-decade trajectory in R&d investment, consistent with the current Five-Year Plan (FYP 2011 to 2015.
This rate of growth is expected to continue through the end of the decade as China strives to transition from a manufacturing economy to being â€oeinnovation-driven†by 2020.
At current rates of R&d investment and economic growth, China could surpass the U s. in total R&d spending by about 2022.
the combined investments by the U s.,China and Japan is more than half of the total.
In the same five years, Asia†s share of R&d investments has risen from 33%to nearly 40%,with China rising from 10%to nearly 18%.
and its total R&d investments are now more than 60%those of the U s. The economic and political context in each of these regions suggest these trends are not likely to change in the near term
The growth rate for R&d investments in ROW countries is also low†less than 4%expected in 2014.
The low rate of investment in these countries implies priorities other than innovation-based growth, and may also relate to underdeveloped domestic R&d infrastructure and educational capacity.
Differences among regions in R&d economics as well as major science and technology priorities, are narrowing. Noteworthy exceptions include China and India,
•U s. R&d investment will increase by 1. 0%(after inflation) to $465 billion. •National research intensity will remain stable at 2. 8%of GDP. â€
Small Increase in 2014 In the current economy, R&d jobs are multiplied 3. 2x Projected U s. R&d spending of $465 billion will directly employ over 2. 7 million U s. residents
an additional 6 million U s. jobs will be supported. 2 R&d spending is amplified 2. 9x As R&d spending ripples through the U s. economy,
Long-term economic growth is linked to research intensity The most important example of long-term R&d impact is U s. economic growth in the second half of the 20th century.
Against the Office of Management and Budget†s estimate of 2. 2%inflation for 2013-2014, the forecast level of R&d would be an increase of 1. 0%in real terms.
•General acknowledgement that R&d investment has both short -and long-term return to the economy. •Concern about maintaining U s. innovation-based competitiveness at a time
when other nations are catching up in R&d spending, capability and output. •Apparent bipartisan support for publicly funded R&d.
and some industries increased their investment, industry investment in R&d as a whole was flat in 2013 due to the slow global economy, continued rationalization of R&d activi-ties in selected industries and the private-sector impact of federal
budgets and sequestration. The sequester-associated reductions in 2013 U s. R&d had pronounced a effect on university research activity, among other areas.
that industrial R&d spending is correlated with the current economy and the stability of its outlook.
Increased industry investment equates to more R&d activity, which is projected to increase by 3. 8%to more than $330 billion,
and is correlated with the business cycle and economy rather than government actions. As a group, the nation†s research universities are the second largest performer of U s. R&d, accounting for 13%of the U s. total,
the recent dynamics of federal R&d funding, from increases via the American Recovery and Reinvestment Act (ARRA) investments in 2009-2011 to budget reductions in 2012
B attelle and R & D M agazine Industry Continues to Lead U s. R&d Investment Source:
Highlights of the academic research enterprise include: •Academia performs about 60%of all U s. basic research. •Federal funding for academia will increase 2. 5%in 2014. •U s. universities continue to lead world rankings. â€
the ARRA added about $18 billion of federal investments to baseline funding for academic research.
federal investments in academic R&d declined from 2012 to 2013, resulting in flat funding levels
Times Higher education rankings Despite this positive track record, the U s. academic research enterprise faces challenges, many of which were expressed as concerns by researchers responding to the survey on
If universities are expected to perform as for-profit companies, driven by short-term returns on investment, then the foundations upon
which major high-risk scientific discoveries are made will eventually erode. As these research centers are lost slowly, so too will be lost the supply of highly trained researchers who drive innovation and competition.
-Academic Researcher/U s. 12 R&dmagazine December 2013 www. rdmag. com 2014 GLOBAL R&d FUNDING FORECAST International Overview Summary For the past six years
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.
Battelle, R&d Magazine Highlights of the international research funding environment include: •Asian share of global R&d continues to increase,
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
while government research now turns to areas like grid accommodation of fueling demand for EVS.
and the prospects seem good for realization of the original policy goals in energy security and environmental protection that stimulated early public investment.
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,
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 economists have warned that sustained large investments in innovation must be paired with investments in social and environmental-protection infrastructures.
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 IN CHINA Summary China has increased its R&d investments by 12%to 20%annually for each of the past 20 years;
As a result, China†s investment is now about 61%that of the U s, . and continuing to close.
•China†s middle class will expand from 35%to 75%over the next 10 years†a demographic statistic that reflects economic growth and, to some extent,
academic and government R&d are viewed also more favorably than Chinese counterparts. •China†s goal of an innovation-driven economy by 2020 requires solving resources and environmental challenges.
But efficient manufacturing alone is not adequate to maintain economic growth. Recognizing this, China intends to evolve from a manufacturing-centric model in 2013 to an innovation-based economy by 2020.
Mirroring the approach taken by the U s.,Europe and Japan since WORLD WAR II, China is making steady progress at building a research infrastructure 2014 GLOBAL R&d FUNDING FORECAST
China†s R&d investment is linked to national goals for industrial growth stable domestic evolution to an advanced economy, power projection and international prestige.
These goals are manifested in large R&d-enabled projects like a Chinese space station and energy generation infrastructure spanning from renewable to nuclear power.
This creates opportunities at a time when new unconventional fossil reserves have decreased emphasis on large-scale deployment of renewable energy technology in the U s. Moreover,
Comparison of annual change in national R&d investment www. rdmag. com December 2013 R&dmagazine 15 must be overcome to reach the 2020 innovation-economy target.
China†s continued strong economic growth†more than three times that of the U s. †provides the resources to support its strong R&d investments and expansion of basic infrastructure as well.
The ambitious program and globally enabled economic growth means that China has become an exporter of jobs into Asia to meet its own needs.
Ten years ago, most foreign direct investment was being made in China. Today, China has grown to a point that it is now a foreign direct investor throughout Asia,
the global R&d enterprise was dominated by Europe, the U s. and Japan. In 2011 China surpassed Japan†s overall spending.
And by sometime around 2022, it will exceed likely also the R&d investments of the U s. in absolute terms.
In addition to recognizing the strong linkage between R&d and economic growth, it is likely that the professional perspec-tives of China†s leadership are influential in science and innovation policy:
China is expanding its science and technology infrastructure through investments in its academic research institutions, the Chinese Academy of Sciences and its industrial research firms.
In Their Own Words Comment from the Battelle/R&d Magazine Global Researcher Survey The investment that China is making in scientific research
Highlights of the European research enterprise and its economic context include: •The amount of R&d performed in Europe is essentially flat for 2012,2013 and 2014. •The R&d-focused Eighth Framework Programme is projected to increase nearly 60%to $110 billion over FP7. •Performance of U s
ending the longest economic contraction on record for the EU The rebound was driven by the EU€ s largest economy, Germany,
Most European countries are forecast to experience economic growth of about 1%through 2014, although Eastern European countries could see GDP (and related R&d) growth rates in the 1%to 2%range.
including increased access to capital and support for small-to-medium enterprises. A dedicated budget of $34 billion will focus on top-level research supported by the European Research Council, the EU€ s equivalent to the U s. †s National Research Council.
While representing less than 5%of the EU€ s total forecast R&d investment in 2014 of $351 billion
It also emphasizes the translation from scientific research to commercialization to economic impact by helping innovative enterprises develop technological assets into viable products with large commercial potential.
More U s Europe Like the United states, Europe deploys a portion of R&d investment to Asia. 75%87%25%13%Spent in Asia Europe Spent domestically & non-Asia U s. 18 R&dmagazine
. those in Europe and China†are expected to see moderate growth in their R&d investments in 2014,
Most Asian countries are projected to experience significant economic growth in 2014. When GDP momentum is paired with national commitments to increase research intensity,
•Russia†s economy is expected to grow 3, %with R&d growth exceeding that rate. Russia†s strong infrastruc-ture for scientific research positions it better than other CIS affiliates,
Among this group are driven innovation economies like South korea (where $63 billion will be invested in R&d in 2014), to significant nations with relatively low emphasis on R&d (e g.
Research Intensity Trends in BRIC and Other Key Nations www. rdmag. com December 2013 R&dmagazine 19 ing a border with the U s. and an economy that is expected to experience reasonable growth in 2014,
while having economies about one tenth the size. In ROW, Means & Policy Disproportionately Affect R&d The sustained high rates of R&d growth in China are unusual.
but social and political priorities draw investment away from R&d. India†s projected rate of R&d funding growth in 2014 is only one-fifth that of its anticipated economic growth.
Although difficult to quantify a lack of willingness or capacity to invest in R&d could restrain such economies from reaching larger potential in the long term.
And it may become more difficult. According to Mckinsey Global Institute analysis, as global economic growth slows in the future (as it is projected to do),
the supply of capital will fall short of demand by 2030. This is especially important for those among the 74 ROW economies with limited R&d infrastruc-tures:
They could become even more restricted in building a foundation for R&d in the future than they are now.
In Their Own Words Comment from the Battelle/R&d Magazine Global Researcher Survey The globalization of research, finance, production, etc. will balance world economies in ways not seen ever before to the advancement of some and the stalling or loss
of income of others. Water and climate extremes will likely be key sources of world tension that will need addressing through all means possible including research and technology.
and South Ko-rea†s rate of R&d investment shows in publication volume and quality.
T hom son R euters 20 R&dmagazine December 2013 www. rdmag. com 2014 GLOBAL R&d FUNDING FORECAST Maximizing the Economic value of R&d:
The Role of Ecosystems R&d funding is only one ingredient for innovation-based economic success Research and development is a long-term investment in the future,
While there is a significant immediate economic impact from R&d activities (estimated to reach a total impact of 8. 7 million jobs from the full effects of R&d spending across the U s. economy in 2014),
the big payoff from investments in R&d are sustained longer-term economic gains through strengthened global competitiveness and even creation of entire new industries.
R&d investments are the foundation for generating new knowledge through basic research and ultimately for generating products and services through applied research and commercialization.
For this payoff to happen and innovation-driven growth to flourish requires a successful R&d ecosystem.
What it Takes to Build a Successful R&d Ecosystem In successful economies, innovations are fostered and prepared for market within robust,
and catalyze enterprise formation. Well-known examples include the dedicated Research Triangle in North carolina and the more loosely evolved Silicon valley.
One fundamental aspect of these ecosystems is that they are â€oesticky†environments in which talent and capital are retained
and recycled into successive phases of innovation and commercial development. Key features of any successful ecosystem regardless of location include:
•LARGE INVESTMENTS IN HUMAN CAPITAL: Close attention is paid to encouraging and advancing a talent pipeline in science, technology,
engineering and math (STEM) skills, along with broader base of product design, management, sales, finance and entrepreneurs to ensure commercial success. •SCIENCE IS PARTNERED WITH COMMERCIAL VISION AND ENTREPRENEURIAL EFFORTS:
and close collaborations with entrepreneurs are in place to advance their commercialization. •CAPITAL AVAILABLE FOR ALL STAGES OF R&d:
from small-scale grants for early stage proof-of-concept research to large-scale commercially focused equity investment. •GOVERNMENT SUPPORT IS ESTABLISHED & RESPONSIVE:
Industry is offered opportunities to give input on the changing needs of ecosystems. Absence of one or more of the key components substantially hinders an ecosystem†s ability to provide returns on investment
and to successfully commercialize innovations. These components are determining factors in the ongoing stability and growth of established ecosystems during recessionary periods and market contractions.
They also are essential measures for the viability and growth of ecosystems in emerging economies.
the demands to keep pace are unrelenting. In a more positive direction, the 2014 survey reflected a sense of improving productivity,
The results from industry executives who track return on investment is one of a generally improving bottom-line impact of research and development activities,
A new factor complicating the R&d environment for the life science industry is the set of changes in the U s. healthcare landscape mandated by the Affordable Care Act.
Smaller biotech companies find opportunity in these circum-stances and innovation through acquisition continues to be an important strategy by larger firms.
The future operating environment for this industry is complex. As noted, the Affordable Care Act creates uncertainties in areas like the introduction of new medical products.
we asked U s. industry representatives to provide context on key factors in their R&d investment plans.
Their answers were mixed regarding future R&d investment: 45%were more pessimistic about the sufficiency of their R&d budgets,
Origins & Priorities for Innovation The survey also explored the link between R&d investment and technology development.
Battelle/R&d Magazine, Schonfeld & Associates, European commission-JRC/EIRI Corporate leaders in life science R&d investment 24 R&dmagazine December 2013 www. rdmag. com
INDUSTRY BREAKOUT †INFORMATION & COMMUNICATION TECHNOLOGIES Summary The information and communications technologies (ICT) industry, and the significant level of R&d that supports it, is driven by constant change in consumer preferences,
market demand and technological evolution. The ICT industry is the largest private-sector R&d investor in the U s,
software and services that make up the modern information age, spanning semiconductors, telecommunications, productivity or security software, computers, tablets and gaming.
To keep pace with the demand for increased device performance, chip makers continue to invest in technology
Factors Driving R&d Investment While it might be said that Moore†s Law is driving the relentless investment in semiconductor R&d
it is consumer demand for functionality driving R&d investments in other sectors of the ICT industry.
Increased competition, at 39%,was the second most cited factor in industry technology change. The constant evolution of ICT technologies is recognized as both a market driver and as a driver for R&d
as the ICT industry†s R&d operations are built to support these demand requirements. Nearly three in four industry respondents felt technology change was a decisive factor, with 31%reporting significant technological changes just in the past year.
ICT industry respondents, reflecting steady growth even in weaker economies, are optimistic regarding their 2014 R&d budget.
, with both Intel and Microsoft exceeding US$10 billion in 2012 R&d investment, and Google†s and Intel†s R&d investments growing by 40%and 27%,respectively, in each of the last two years.
The innovation-and R&d-intensive nature of the global ICT industry is evident with all of the U s
%Corporate leaders in ICT R&d investment Nokia Ericsson Canon Huawei Alcatel Lucent Microsoft Intel Cisco IBM Google-10%0%10%20
while capacity, economics and efficiency are drivers for civil aviation requirements. Recent declines in U s. R&d have been the result of reductions in defense R&d
Internal R&d and technological integration in materials, electronics and communication and surveillance technologies within both civilian and defense aerospace, is partially offsetting reduced government funding by creating more efficient, cost-effective capabilities.
instrumentation and communication suppliers, and other firms engaged in defense and homeland security-related activities. Firms in this industry typically maintain close R&d ties with the U s. DOD, through collaboration and contract research.
However, ADS firms†internal R&d investments are often 2014 GLOBAL R&d FUNDING FORECAST strongly aligned with the direction and substance of these contract R&d efforts.
and into the future. 69%of our ADS industry respondents believe their 2014 R&d budget is likely to be affected by reduced U s. federal R&d investments.
with more funds and a larger share of investment during major jet liner development. With the combination of reductions in defense spending,
Factors Driving R&d Investment Unlike other industries examined in this forecast, concern over federal budgets and spending is a significant factor in U s. ADS company R&d investment.
Reflecting these concerns 56%of ADS respondents are more pessimistic about their 2014 budgets. Cost cutting and budget reductions in recent years appear to be taking a toll on R&d investment and functions in the industry.
Approximately 40%of the respondents believe their R&d staff budgets are not large enough to accomplish their goals.
growth in commercial aviation and nontraditional defense and homeland security technologies, such as UAVS, will continue to provide momentum in ADS R&d investment.
R&d related to improving the fuel efficiency, operating costs and production of commercial aircraft will continue to benefit from the growing demand for global air travel.
Growth in the deployment of UAVS, primarily (but not exclusively) from increasing military demands, is driving R&d related to structures, materials, electronics and communication and surveillance technologies.
and materials development and advanced materials integration are increasingly important in shaping the industry†s R&d investment.
and hence viable economics. Solar is another area where ongoing materials developments for photovoltaic applications (e g.,
. com December 2013 R&dmagazine 29 Factors Driving R&d Investment R&d activities into new production technologies have led to the ability to access previously unobtainable oil
governments can play a significant role in modulating market demand, and therefore, whether energy-related R&d and technologies have a chance to be successful at large scale.
but private early-stage investment has waned. Elsewhere, governments are more active in deployment of alternative energy technology (e g.,
the R&d intensity for most energy leaders is less than 1%.The substantial growth in Petrochina†s R&d investment has elevated this firm into the leadership position reaching US$ 2. 3 billion in 2012 with all of
The forecast for R&d growth in the chemical and advanced materials industry reflects the improving global economy
The forecast for R&d activities within the chemical and advanced materials industry reflects improvements in the U s. and global economy,
and the role this industry plays in support of other demand-driven industries. We forecast U s. chemical and advanced materials R&d to increase by 3. 6%in 2014, reaching $12. 2 billion.
Factors Driving R&d Investment Like most industries resources to fund R&d activities are connected strongly to industry bottom lines.
com December 2013 R&dmagazine 31 ed post-recession, investments in industry R&d also have increased. These investments are tied directly to developing new, market-leading chemicals and materials for
which higher margins can be achieved. The factors driving R&d are distinctly different across different types of firms.
and by key customer demand. Lower-cost raw materials have dampened but definitely not eliminated, continued R&d into the use of biomass feedstocks and the production of bioplastics.
as both material sub-stitution and global competition, in what are often commodity products, requires firms to drive production costs to the lowest level possible.
and there is some evidence that support for public R&d investment crosses political boundaries. Even so, the survey results may indicate eroding confidence in the longer-term future.
issues 38%Sustainable development 32%Demand for renewable/sustainable energy 31%Climate change/global warming 30%Healthcare for the
%20%Competition 14%Translating Research into Products 10%15%Finding New Collaborators 17%Skilled worker Shortages 16%Rankings of Research Impact Metrics Broad Factors
#2#3 Military Aerospace Energy Technology Information & Communications#4 Commercial Aerospace & Non-Automotive Transport Motor vehicles Composite/Nano/Advanced Materials Instruments
Commercial Aerospace & Non-Automotive Transport Military Aerospace Composite/Nano/Advanced Materials Healthcare & Life science Information & Communications Instruments & Electronics#1#2 Energy
Technology Environment & Sustainability#3 Motor vehicles United states Motor vehicles Energy Generation & Eï¿ciency Environ. & Sustainability#1#2 Composite/Nano/Advanced Materials#3 Commercial Aerospace
& Non-Automotive Transport Healthcare & Life science Instruments & Electronics Germany#4 Information & Communications Motor vehicles Information & Communications Instruments & Electronics#2#3 Composite/Nano
. & Sustainability Instruments & Electronics United kingdom www. rdmag. com December 2013 R&dmagazine 35 The following Web sites are good sources of information related to the global R&d enterprise.
or output impacts in the economy, the values associated with scientific R&d are smaller than many â€oehigh-tech†industries.
see â€oesources of U s. Economic growth in a World of Ideas†(Jones 2002). ITIF and AAAS have done also important work on this topic.
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