Expenditure on R&D

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.

Definition

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 expressed in constant 2010 dollars (adjusted for purchasing power parity) and as a share of GDP (R&D intensity).

Comparability

R&D data have been compiled according to the 2002 guidelines of the Frascati Manual which have now been superseded by the 2015 edition. The revised definitions are in the course of being implemented and are not expected to revise significantly the major indicators. 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 (except for the government sector) 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 has been revised upwards and the R&D intensity ratio has been reduced, as the numerator has stayed constant and the denominator increased. 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.

Overview

Among OECD countries, the United States has the highest level of gross domestic expenditure on R&D (GERD), with 40% of the total OECD GERD in 2013, followed by Japan (14%) and Germany (9%). Since 2000, real R&D expenditure has been growing fastest in Estonia (average annual growth rate of 12.5%), Turkey (9.7%), Korea (9.4%) and Slovenia (7%). Outside the OECD area, China’s average annual real growth in R&D spending has been 17.2%, making it the world’s second largest R&D performer and ahead of Japan since 2009.

In 2013, R&D amounted to 2.4% of GDP for the OECD as a whole. Denmark, 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 1.7% to 1.9%), in Japan (from 3.1% to 3.5%) and in the United States (from 2.6% to 2.7%). Estonia, Portugal, Slovenia and Turkey were the fastest growing OECD countries. In the same period, R&D intensity in China increased from 1.1% to 2.1% and surpassed the EU for the first time in 2012.

Sources

Further information

Methodological publications

Websites

Table. Gross domestic expenditure on R&D

 http://dx.doi.org/10.1787/888933336203

Gross domestic expenditure on R&D
As a percentage of GDP
picture

 http://dx.doi.org/10.1787/888933335027