SIEMENS

The importance of international research networks that link universities, research institutes, and companies has been increasing since the 1980s — and it makes no difference whether the scientists live in Beijing, Mumbai, Princeton, or Munich. Such networks were initially designed to adapt products to local requirements in emerging markets. But these days we’re also seeing technology transfer from emerging markets to the advanced industrialized nations. According to Deutsche Bank Research, for instance, exports of R&D services from India to the EU have increased by a factor of 2.5 since 2004, while the volume of such services from China has risen by a factor of three.

Strategy consulting firm Booz & Company reports that almost two thirds of the $503 billion spent on research and development by the world’s 1,000 biggest companies in 2009 was invested in the sectors for electronics/ computers (28 percent), health/pharmaceuticals (21 percent), and automobiles (16 percent). Global R&D investment fell by 1.9 percent in the crisis year of 2009 — and in many industrialized countries it declined by more than three percent, as reported in the Investment Scoreboard published by the European Commission last year. The report examined 1,400 companies around the world in terms of the total value of their worldwide R&D investments, regardless of location.

Developments in China and India have been completely different. They increased their research and development budgets by a combined 41.8 percent in the crisis year of 2009, according to Booz & Company. The huge extent to which the distribution of global R&D expenditure has changed is also demonstrated by the UNESCO Science Report 2010. Whereas in 1990 some 92 percent of total R&D activity worldwide was concentrated in just seven OECD countries, the industrial nations accounted for only 76 percent of this activity in 2007. The share for the U.S. was approximately one third, and the European Union accounted for just under 25 percent. The figure for Germany was 6.3 percent. Nevertheless, China and India are becoming increasingly important as research locations. DB Research reports that international companies invested almost $40 billion in R&D units in those countries in 2007.

Industrialized nations are using government funding to counter this trend. For example, the EU’s investment in R&D will total €50.5 billion for the period 2007–2013. These funds will be spent on projects for battling climate change, developing renewable energy sources, and improving health and food safety. In the U.S., Government funding of non-military research and development is set to increase by 5.9 percent in 2011 to $65.8 billion. Most of this investment will be earmarked for the health sector, fundamental research, aerospace, raw materials and environmental research, and energy and transport projects. The U.S. and Japan also provide tax breaks for R&D activities, such as deductions for personnel costs for researchers and depreciation of equipment and buildings.

According to the UNESCO Science Report, the U.S. accounted for around one third of all the money spent on research worldwide in 2010. Europe followed with 23 percent and China’s contribution was just under nine percent. Nevertheless, “the world in which technology and science was dominated by the triad of the U.S., the EU, and Japan is gradually giving way to a multipolar constellation,” says UNESCO General Director Irina Bokowa.

Along with China and India, countries such as Brazil, Mexico, and South Africa are investing more and more in research and development. According to the Battelle Memorial Institute in the U.S., China’s R&D expenditure will increase from $141.4 billion in 2010 to $153.7 billion in 2011 — which will put it ahead of Japan ($144.1 billion). Many nations also plan to invest more in higher education. India, for example, will be building 30 new universities, and the number of students in the country is set to increase to 21 million as early as 2012.

Scientific exchanges with China are also on the rise. DB Research reports that the number of scientists from abroad who visit China or work with Chinese researchers tripled to almost 100,000 between 2001 and 2008. China’s government plans to make the nation a leading scientific power by 2050. The government’s stated goal is to increase R&D expenditure from the current level of just under 1.6 percent of gross domestic product (GDP) to 2.5 percent by 2020 and to provide targeted funding to technology clusters that include the energy, IT, biotechnology, and space sectors.

R&D expenditure in the U.S. is currently around 2.8 percent of GDP, according to the OECD; the average for the 27 EU countries is 1.8 percent, while Japan spends 3.4 percent of its GDP on R&D. A total of 1.7 percent of gross world product was spent on research and development in 2007 — 45 percent more than in 2002. This illustrates the fact that countries have come to realize that investment in knowledge and innovation holds the key to their future competitiveness.