Annual worldwide corporate R&D spending broke through US$700 billion in annual investment, according to an annual analysis of R&D spending across 1000 global public companies by PwC’s Strategy&. It shows corporate R&D spending increased a steady 3% in the past year, bouncing back from less than 1% increase previously.
However, in a global survey with 562 executive participants, R&D leaders expressed concerns about the growing heat of rhetoric about economic nationalism – and its potential impact on where companies invest in R&D how they conduct innovation.
Overall, 52% of respondents say that a general move toward economic nationalism will have a moderate or significant impact on their companies’ R&D efforts.
Major companies have been conducting some R&D outside their headquarters countries for decades. In 2015 it was determined that 94% of major corporations conduct their R&D in multiple countries. But increasing attention on regulations and policies for visas, labor movement, and the regulations governing the sharing of knowledge and technology are causing some companies to question how sustainable their integrated global innovation networks are.
Nearly 33% of R&D executives surveyed, report that they have already felt the effects of economic nationalism on their R&D talent acquisition or retention because of visa or work restrictions — either losing employees, seeing less talent available, or in hiring more local talent.
Although nearly 66% of all participants surveyed say they have not experienced pressure to change their approach to innovation in their headquarters country to date, 23% say they have already experienced such pressure in another country.
Almost 50% of the companies in North America plan to make changes to their R&D programs over the next two years in response to the changing political environment.
Survey participants believed US, UK, and China could be most at risk from potential changes in policy that could impact R&D investment. Both the US and UK’s talent flow could be at risk of potential disruption while China’s decline in corporate R&D spending and reliance on R&D investment from abroad could be at risk.
Canada, Germany, and France are likely to gain if protectionist policies broadly become a reality.
“It’s been a year of highs and lows for R&D. Record levels of investment, next to unprecedented drops in alignment between innovation and business strategies. There’s no doubt that uncertainty is causing concern for medium and long term plans, irrespective of whether policy realities actually follow political rhetoric.” comments Barry Jaruzelski, Principal, PwC US, Strategy&.
“Although the goals and levels of investment in corporate innovation will likely not change if economic nationalism continues to develop, the global innovation model would need to evolve. At many companies, what is now a nimble, interdependent network may become a group of more autonomous hubs, hiring specialist technical talent in local regional markets and opening future R&D centers in regional markets. It could mean companies losing efficiency and taking on higher costs if it is not managed effectively,” commented Jaruzelski.
Global Innovation 1000
The Strategy& Global Innovation 1000 study analyses spending at the world’s 1000 largest publicly listed corporate R&D spenders and is now in its 13th year.
Amazon is the largest spender on R&D in the Global Innovation 1000 study, the first time the top spender is a high tech firm. All top four spenders are high tech companies.
Overall, Software & Internet industry companies continue to increase their year-on-year R&D spending, and the analysis shows that by 2018, Healthcare companies will surpass Computing & Electronics to become the largest industry in terms of R&D spending - the first time in 12 years of analysis.
Overall, Computing & Electronics, Healthcare, and Automotive are the top three industry sectors and represented 61.3% of global R&D spending in 2017.
Alphabet, Amazon, GE, IBM and Microsoft all increased their ranking in the 10 Most Innovative Companies list, according to a global survey of R&D executives.
R&D spending by companies based in China declined for the first time in the study, it increased in Japan for first time in 4 years, and continued to grow moderately in North America.