European R&D Growth Outstrips the U.S.

A new study finds that EU firms grew their R&D spending faster than those in the U.S. last year, but there are worrisome shortfalls and disparities

By Andrew Willis

For the second year running, EU firms outpaced their US counterparts in growth in research and development spending, according to a new scoreboard published by the European Commission on Monday (16 November).

But the scoreboard also highlights the diverging nature of R&D spending on both sides of the Atlantic, with the US clearly leading the way in higher-intensity R&D sectors such as biotechnology, while the EU is more dominant in medium-intensity sectors such as automobiles.

The study, which looks at the top 1000 EU and 1000 non-EU firms, also threw up considerable disparities between firms in different EU member states, and highlighted the rapid growth in R&D spending seen in Asian countries such as China.

Overall, worldwide corporate investment in R&D increased by 6.9 percent in 2008 despite the financial crisis, with EU companies (up 8.1 percent) outstripping those in the US (5.7 percent) and Japan (4.4 percent).

"Even in bad times, keeping up investment in R&D is very important because when we come out of the crisis the firms will be fitter and more competitive," said the EU's science and research commissioner Janez Potocnik while launching the new scoreboard.

Criticisms

But despite the new growth figures, absolute R&D levels remained largely unchanged in 2008, with EU firms re-investing 2.7 percent of sales into R&D, compared with 4.5 percent in the US and 3.4 percent in Japan.

And the study's definition of EU firms as those headquartered in the 27-member bloc means overseas R&D spending by those firms is included in the EU investment figures.

Eurochambres, the umbrella group that represents EU chambers of commerce, also criticised the study for its narrow approach that failed to take account of small and medium-sized enterprises.

"The fact that the results refer to the top 1000 companies mean they are not at all representative of the economy," Ben Butters, Eurochambres director of EU affairs, told this website.

"These figures don't prove that the higher levels of investment are actually bringing a return on the investments. If they were, there would be a trickledown effect to smaller suppliers which does not appear to be taking place," he said.

Mr Butters' sentiment reflects previous criticisms levelled at the EU executive and its economic blueprint – the Lisbon Strategy – that call for a greater emphasis to be placed on business outputs rather than spending levels in R&D.

Growing divide?

What the study does highlight, at least for larger firms, is the growing divide between EU and US investment areas.

In the US, investment growth was driven largely by high-intensity R&D sectors such as pharmaceuticals, biotechnology and computer services sectors, consolidating an already existing trend.

In the EU, the largest contribution to R&D growth came from medium-intensity sectors such as automobiles, electrical equipment, machinery and household goods.

Mr Potocnik said in Europe a more equal distribution between the different intensity brackets appeared to be "the name of the game", adding that evidence of EU firms investing heavily in renewable energies was a positive sign.

Japanese automaker Toyota (TM) topped the list, with the highest growth in R&D investment in 2008, with only two European firms, Volkswagen (VOWG.DE) and Nokia (NOK), making it within the top ten.

The study also highlighted the differences in R&D investment growth between EU member states, with companies in Italy (20.4 percent), Sweden (17.0 percent) vastly outstripping their counterparts in France (0.7 percent) and Belgium (-0.8 percent).

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