Spending on Research Still Lags

Private sector spending on research and development fell by 4.5% in 2008 as a result of the global financial crisis, according to a new report from the Organization for Economic Cooperation and Development (OECD), and spending levels have yet to recover fully from the shock. When government spending is added in, total R&D spending still doesn’t reach pre-crisis levels.

The major exceptions to the downturn in spend came from the emerging market countries of China, India, and Indonesia, with Korea in the mix as well, making Asia the primary locus of R&D spending increases. In 2010, China’s spending on R&D rose 29.5% year-over-year, and spending in India and Korea rose by 20.5% that year. The OECD notes:

More than ever, restoring growth and competitiveness is the main objective of innovation policies. OECD countries need more growth, not least to address the persistent sovereign debt crisis and to tackle unemployment. In knowledge-based economies innovation is a major driver of growth. Because emerging countries increasingly challenge developed countries on knowledge-intensive segments of markets, developed countries need to climb the value added ladder. This calls for innovation.

And innovation costs money. The OECD would focus spending on addressing global environmental challenges, the impact of aging populations, and innovation in low-tech as well as high-tech businesses. The report identifies several policy instruments that would support innovation: tax incentives; demand-side policies; entrepreneurship; clustering of businesses, schools, and research institutes to develop complementary actions; patent and intellectual property policies; and information and communication infrastructure.

More information on the report is available here.

Paul Ausick