Although the US remains the single largest funder of R&D, the global science funding landscape is increasingly diffuse. Nations continue to prioritize R&D investments and scientific workforce development to address economic and societal challenges. As a result of the internationalization of R&D, emerging economies will play a greater role in the discovery and marketing of new products and services. Meanwhile, growing awareness of global challenges like climate change, food security, and conflict mitigation is giving rise to new R&D efforts for sustainable development. The United Nations identifies science and technology as a key component of the Sustainable Development Goals approved last summer as part of the UN’s 2030 Agenda guiding global action over the next 15 years. There is also more attention being paid to the role of the private sector, with governments looking at how public policies can stimulate business R&D and knowledge spillovers both domestically and internationally. A recent IMF report examined ways to boost research through mechanisms such as technology transfer and R&D tax incentives.
The OECD regularly publishes data exploring key R&D funding trends around the world. What follows are selected datasets drawn from OECD’s two main R&D-related information sources – S&T Indicators and the STI Scoreboard – to help readers understand the changing global landscape for R&D.
Overall R&D Spending
In the OECD area, which comprises 34 member states (see list), total R&D spending increased by 2.1 percent in real terms from 2013 to reach $1.1 trillion in 2014. As a percentage of global GDP, OECD R&D rose from 2.0 percent in 1995 to 2.1 percent in 2004, and then grew at a faster pace to reach 2.4 percent in 2014 (see chart). Since the 2008-09 global financial crisis, however, R&D funded or performed by governments in the advanced OECD economies has declined or flattened as the effects of the downturn continue. Meanwhile, R&D investments continue to shift east, on account of the rapid growth and industrialization of East Asian nations. For instance, Korea doubled its R&D spending as a share of GDP over the past 20 years to reach 4.29 percent in 2014, driven by Korea’s five-year S&T basic plans launched in 1997. Likewise, China has taken massive leaps in research spending, more than tripling R&D intensity from 0.64 percent in 1997 to 2.05 percent in 2014. China’s latest five-year plan would boost R&D investment to 2.5 percent of GDP by 2020; this is doubly impressive as both the numerator (R&D) and the denominator (GDP) have increased in China. In its most recent STI Outlook, OECD predicted that China would overtake the United States in total R&D spending from all sources by about 2019.
While total R&D figures provide a starting point for international comparisons, what also matters is the research “mix” comparing basic (long-term) research versus applied (short-term) research and development. In the OECD area, applied research and experimental development – defined as the application of knowledge for new products and processes – have more than doubled in real terms since 1985 (see chart). Even more notable is that basic research has nearly quadrupled over the period, owing largely to funding growth within the higher education sector, according to the OECD. Manufacturing-driven economies tend to invest relatively less in basic research than more advanced innovation-driven economies. For instance, basic research accounted for only 4.7 percent of Chinese R&D in 2013, compared to the OECD average of 17.3 percent that year. The chart above suggests that OECD nations increasingly devote a greater share of their R&D mix to basic research rather than development, reflecting many governments’ emphasis on fundamental science, whereas R&D spending in nations like China still remains somewhat more geared towards shorter-term technological advances and research of an applied nature.
Overall, the global volume of scientific production as measured by the number of scientific publications increased by 7.9 percent annually from 2003-2012. In the United States, total publications rose by 51.3 percent over this period, while China’s output quadrupled (see chart below). Although China remains the second largest producer of publications and continues to catch up with the United States in terms of volume, a different story emerges when considering OECD’s “excellence” indicator, defined as publications which feature within the global top 10 percent most-cited. The chart below shows the considerable gap between Western nations and China in terms of “excellence.” Even still, China remained on course to overtake Japan’s excellence rate of 9.5 percent as of 2012. Meanwhile, the United States, United Kingdom, and Germany have all seen their proportions of publications among the top 10 percent stagnate or decline in recent years, though certainly nations like the UK still punch above their weight.
R&D by Socio-Economic Objective
The STI Outlook provides an overview of government funding for R&D in areas relevant to a number of societal challenges. Health-related R&D plays a primary role in the US government’s civil budget portfolio, as seen in the chart at right (which excludes defense spending), reflecting the prominence of NIH in the portfolio. While 2014 data shows US funding for health R&D as the OECD’s highest in both absolute and relative terms, health outcomes in the United States remain on par, or even poorer, than other advanced nations. The latest OECD health statistics report that in 2013 the United States spent on average $8,713 per person – two and a half times as much as the OECD average – yet the average American dies 1.7 years earlier than the average OECD citizen.
Although the United States remains the OECD’s second largest funder of R&D for energy and the environment, spending $2.95 billion in 2014, this amounts to a mere 2.2 percent of the total US government R&D budget (see chart). Over the past decade, spending on energy and environment-related programs in the OECD area increased by only 0.95 percent as a fraction of total government budgets for R&D. Some nations have seen substantial declines; Japan has reduced its share of the government’s budget for energy and environment by 4.15 percent since 2004, though this area remains a top priority for Japan.
The United States also stands out when comparing defense spending around the world. Currently, US government R&D expenditures are split roughly evenly between civil and defense functions (see chart). As a whole, the OECD devoted 23.4 percent of government R&D budgets to defense in 2014, an 8.0 percent drop since 2005. For its part, the European Union set aside only 4.4 percent of its R&D budget to defense purposes in 2014; EU member states including the UK, Germany, and France have all shifted government funds from defense to civil R&D in the last decade. The Asia-Pacific nations of Japan, Australia, and Korea have otherwise sustained their proportions of funding for defense R&D in recent years.
R&D Tax Incentives
Besides directly funding research, governments spur business R&D through tax relief measures. A comparison of public support provided in 2006 and 2013 shows an increase in reliance on R&D tax incentives as a mechanism for supporting business R&D in a number of nations, particularly France, Ireland, and the UK (see chart). Currently, the United States significantly trails other leading nations in providing incentives for companies to conduct research and development, when viewed as a share of total government funding for R&D. This past year, however, the United States made its R&D tax credit permanent as a stable way to encourage investment within the nation.