Expenditure on research and development (R&D) is a key indicator of countries' innovative efforts. Research and development comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge (including knowledge of man, culture and society) and the use of this knowledge to devise new applications.
Research and development covers three activities: basic research; applied research; and experimental development. Basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view. Applied research is also original investigation undertaken in order to acquire new knowledge; it is, however, directed primarily towards a specific practical aim or objective. Experimental development is systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed.
The main aggregate used for international comparisons is gross domestic expenditure on R&D (GERD). This consists of the total expenditure (current and capital) on R&D carried out by all resident companies, research institutes, university and government laboratories, etc. It includes R&D funded from abroad but excludes domestic funds for R&D performed outside the domestic economy. GERD is here expressed in constant 2005 dollars (adjusted for purchasing power parity) and as a share of GDP (R&D intensity).
The R&D data shown here have been compiled according to the guidelines of the OECD Frascati Manual. Estimates of the resources allocated to R&D are affected by national characteristics such as the periodicity and coverage of national R&D surveys across institutional sectors and industries (and the inclusion of firms and organisations of different sizes); and the use of different sampling and estimation methods.
Data for Israel exclude defence. Those for Korea, prior to 2007, exclude social sciences and the humanities. For the United States, R&D capital expenditures are excluded and depreciation charges of the business enterprises are included.
The latest update to the System of National Accounts (SNA), the 2008 SNA, recognised the role of R&D as an activity leading to the creation of an intellectual asset. One implication of this is that the level of GDP will be revised upwards and the R&D intensity ratio will be reduced, as the numerator stays constant and the denominator increases. Users should be careful when comparing the R&D intensity of countries that have and have not capitalised R&D in their national accounts. Likewise, they should avoid comparing previously published measures of R&D intensity and more recent ones.
Among OECD countries, the United States is the main performer with 42% of the total OECD GERD in 2012, followed by Japan (14%) and Germany (9%). Since 2000, real R&D expenditure has been growing the fastest in Estonia (15.8%), Turkey (10.0%), Korea (9.6%) and Slovenia (8.3%). Outside the OECD area, China's average annual real growth in R&D spending has been 17.6%, making it the world's second largest R&D performer and ahead of Japan since 2009.
In 2012, R&D amounted to 2.4% of GDP for the OECD as a whole. Finland, Israel, Japan, Korea and Sweden were the only OECD countries whose R&D-to-GDP ratio exceeded 3%.
Over the last decade, R&D intensity grew in the EU (from 1.76% to 1.97%), in Japan (from 3.12% to 3.34%) and in the United States (from 2.55% to 2.79%). Estonia, Korea, Portugal and Slovenia were the fastest growing OECD countries. In the same period, R&D intensity in China increased from 1.07% to 1.98% and surpassed the EU for the first time in 2012.