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Stability returns to R&D funding: growth in R&D spending has resumed following recession-induced cuts in advanced economies, while growth in emerging nations continues unabated.

The global R&D outlook for 2011 is increasingly stable and positive, according to analysis performed by Battelle Memorial Institute and R&D Magazine. Having endured one of the worst recessionary periods in recent memory, R&D managers are adapting to expectations of moderate sustainable growth while competing on a global scale for market share and resources. Reflecting recent trends, prospects for R&D funding vary by region, with the United States (U.S.) expecting R&D growth to track GDP growth, Europe contemplating fiscal austerity that may restrict investment for several years, and most Asian countries maintaining strong financial commitments to R&D.

Total global spending on R&D is anticipated to increase 3.6%, to almost $1.2 trillion. With Asia's stake continuing to increase, the geographic distribution of this investment will continue a shift begun more than five years ago. The U.S., however, still dominates absolute spending at a level well above its share of global GDP.

During the recession, the Asian R&D communities generally, and China specifically, increased their R&D investment and stature. As a Reuters headline noted, "While the world slashed R&D in a crisis, China innovated". China entered the recession with a decade of strong economic growth. During that time, it increased R&D spending roughly 10% each year--a pace the country maintained during the 2008-2009 recession. This sustained commitment set China apart from many other nations.

In the U.S., a recession-related drop in industrial R&D spending in 2009 is expected to be recovered by increases in 2010 and 2011 at levels exceeding the rate of inflation. For federally-sponsored R&D, 2010's election results and increased attention on government spending could signal future pressure on funding. The high level of defense R&D spending (more than two-thirds of the federal total) may be among the first areas reviewed. Cuts in DOD mission-specific R&D however, should not seriously affect the broad science and technology foundation supported by NSF, NIH, NIST, and the DOE's Office of Science. Some observers note that R&D funded by these agencies more directly affects U.S. competitiveness and economic growth than does defense-related R&D.

Among the global research communities, the state of R&D in the European Union (EU) is the most concerning. Challenged by weak economies in Greece, Spain, and Ireland, Europe is struggling to recover from the recession and to cut deficits, which in turn affects government support of R&D. As the Washington Post observed, "The pressure on European science ... is yet another legacy of the financial crisis." The EU's ambitious goal to increase its R&D funding to at least the level of the U.S. (2.7% of GDP) has gone unmet, and that may continue to be the case for some time.

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Conversely, the positive direction of R&D in Asia is driven by multiple synergistic factors, beginning with policy. Leading Asian nations recognize that their economic expansion can be sustained by continued commitment to R&D investment across a wide range of science and technologies. The scale and significance of research and development in Asia continues to grow, with implications for the rest of the world. Experienced researchers are becoming harder to find in the U.S. and Europe, as Asian emigrant scientists return to attractive opportunities at home. At the same time, industrial, academic and even Western government R&D organizations are increasingly establishing. They are supporting substantial R&D facilities throughout Asia to take advantage of lower labor costs and larger pools of skilled scientists and engineers; and in some cases to support marketing efforts to an increasingly affluent and large local consumer population. Most U.S. and European Fortune 1000 companies already have multiple R&D centers and manufacturing sites throughout Asia, and they direct increasing shares of R&D budgets accordingly.

Finally, funding and geographic dynamics in the R&D landscape are likely amplified by macroeconomic factors, such as the rate of innovation and balances of trade, with corresponding shifts in liquidity, affluence and advanced manufacturing. These factors could make it more difficult for the U.S. to maintain its historic lead in the development and economic leverage of innovation, even as it invests as much on R&D as its next four global competitors combined.
Share of Total
Global R&D Spending

                2009    2010    2011

Americas        39.1%   38.8%   38.4%
U.S.            34.7%   34.4%   34.0%
Asia            33.6%   34.8%   35.3%
Japan           12.6%   12.3%   12.1%
China           11.2%   12.3%   12.9%
India            2.5%    2.9%    3.0%
Europe          24.1%   23.3%   23.2%
Rest of World    3.1%    3.0%    3.0%

Source: Battelle, R&D Magazine

Global R&D Spending Forecast

                                 2009      2009 R&D     2010
                               GERD PPP    as % of    GERD PPP
                               Billions,     GDP      Billions,
                                 U.S.$                  U.S.$

Americas                         433.2       2.2%       446.7
U.S.                             383.6       2.7%       395.8
Asia                             372.5       1.9%       400.4
Japan                            139.6       3.4%       142.0
China                            123.7       1.4%       141.4
India                             28.1       0.8%        33.3
Europe                           267.0       1.7%       268.6
Rest of World                     34.2       1.2%        34.8
Total                           1,107.0      1.9%      1,150.6

                               2010 R&D     2011      2011 R&D
                               as % of    GERD PPP    as % of
                                 GDP      Billions,     GDP
                                            U.S.$

Americas                         2.2%       458.0       2.2%
U.S.                             2.7%       405.3       2.7%
Asia                             1.9%       421.1       1.8%
Japan                            3.3%       144.1       3.3%
China                            1.4%       153.7       1.4%
India                            0.9%        36.1       0.9%
Europe                           1.6%       276.6       1.7%
Rest of World                    1.2%        36.3       1.2%
Total                            1.9%      1,192.0      1.9%

PPP, Purchasing Power Parity

Source: Battelle, R&D Magazine

Forecast Gross Domestic Expenditures on R&D (GERD)

Billions of U.S. Dollars

Global   Country             2009      2009 R&D     2010      2010 R&D
Rank                       GERD PPP    as % of    GERD PPP    as % of
                           Billions,     GDP      Billions,     GDP
                              US$                    US$

1        United States       389.2       2.7%      401.9        2.8%
2        China               123.7       1.4%      141.4        1.4%
3        Japan               139.6       3.4%      142.0        3.3%
4        Germany              68.0       2.4%       68.2        2.4%
5        South Korea          41.4       3.0%       42.9        3.0%
6        France               41.1       2.0%       41.5        1.9%
7        United Kingdom       37.2       1.7%       37.6        1.7%
8        India                28.1       0.8%       33.3        0.9%
9        Canada               23.2       1.8%       23.7        1.8%
10       Russia               21.8       1.0%       22.1        1.0%
11       Brazil               18.0       0.9%       18.6        0.9%
12       Italy                18.7       1.1%       18.7        1.1%
13       Taiwan               17.6       2.4%       18.2        2.3%
14       Spain                17.3       1.3%       17.2        1.3%
15       Australia            15.0       1.8%       15.3        1.8%
16       Sweden               11.5       3.4%       11.6        3.3%
17       Netherlands          10.5       1.6%       10.6        1.6%
18       Israel                8.8       4.3%        9.1        4.2%
19       Austria               8.2       2.5%        8.2        2.5%
20       Switzerland           7.3       2.3%        7.4        2.3%
21       Belgium               6.8       1.7%        6.8        1.7%
22       Turkey                6.4       0.7%        6.7        0.7%
23       Poland                3.5       0.5%        3.6        0.9%
24       Mexico                5.8       0.4%        6.0        0.4%
25       Finland               6.1       3.2%        6.1        3.1%
26       Singapore             5.7       2.4%        6.0        2.2%
27       Denmark               4.9       2.4%        4.9        2.4%
28       Norway                4.1       1.6%        4.1        1.6%
29       Czech Republic        3.7       1.4%        3.7        1.4%
30       South Africa          3.6       0.7%        3.6        0.7%
31       Portugal              2.8       1.2%        2.8        1.2%
32       Argentina             2.6       0.4%        2.6        0.4%
33       Ireland               2.6       1.4%        2.6        1.4%
34       Greece                1.8       0.5%        1.8        0.6%
35       Hungary               1.7       0.9%        1.7        0.9%
36       New Zealand           1.3       1.2%        1.4        1.2%
37       Romania               1.3       0.5%        1.3        0.5%
38       Slovenia              0.8       1.3%        0.8        1.4%
39       Slovak Republic       0.5       0.4%        0.5        0.4%
40       Iceland               0.3       2.3%        0.3        2.3%

Global   Country           2010-11     2011        2011      2011 R&D
Rank                         GDP      GDP PPP    GERD PPP    as % of
                           Growth    Billions,   Billions,     GDP
                                        US$         US$

1        United States      2.3%      14,963      405.3        2.7%
2        China              9.0%      10,747      153.7        1.4%
3        Japan              1.5%       4,339      144.1        3.3%
4        Germany            2.0%       2,957       69.5        2.3%
5        South Korea        4.5%       1,512       44.8        3.0%
6        France             1.6%       2,176       42.2        1.9%
7        United Kingdom     2.0%       2,218       38.4        1.7%
8        India              8.4%       4,193       36.1        0.9%
9        Canada             2.7%       1,357       24.3        1.8%
10       Russia             4.3%       2,288       23.1        1.0%
11       Brazil             4.1%       2,253       19.4        0.9%
12       Italy              1.0%       1,775       19.0        1.1%
13       Taiwan             4.4%         839       19.0        2.3%
14       Spain              0.7%       1,366       17.2        1.3%
15       Australia          3.5%         907       15.9        1.7%
16       Sweden             2.6%         366       11.9        3.3%
17       Netherlands        1.7%         681       10.8        1.6%
18       Israel             3.8%         223        4.4        4.2%
19       Austria            1.6%         339        8.3        2.5%
20       Switzerland        1.7%         327        7.5        2.3%
21       Belgium            1.7%         402        6.9        1.7%
22       Turkey             3.6%         983        6.9        0.7%
23       Poland             3.7%         738        6.9        0.9%
24       Mexico             3.9%       1,599        6.4        0.4%
25       Finland            2.0%         200        6.3        3.1%
26       Singapore          4.5%         287        6.3        2.2%
27       Denmark            2.3%         213        5.1        2.4%
28       Norway             1.8%         263        4.2        1.6%
29       Czech Republic     2.2%         273        3.8        1.4%
30       South Africa       3.5%         526        3.7        0.7%
31       Portugal           0.0%         239        2.8        1.2%
32       Argentina          4.0%         641        2.7        0.4%
33       Ireland            2.3%         191        2.6        1.4%
34       Greece             -2.6%        318        1.7        0.6%
35       Hungary            2.0%         201        1.7        0.9%
36       New Zealand        3.2%         123        1.4        1.2%
37       Romania            1.5%         269        1.3        0.5%
38       Slovenia           2.4%          60        0.8        1.4%
39       Slovak Republic    4.3%         129        0.5        0.4%
40       Iceland            3.0%          13        0.3        2.3%

Source: International Monetary Fund, R&D Magazine, Battelle
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Title Annotation:2011 GLOBAL R&D FUNDING FORECAST; research and development
Comment:Stability returns to R&D funding: growth in R&D spending has resumed following recession-induced cuts in advanced economies, while growth in emerging nations continues unabated.(2011 GLOBAL R&D FUNDING FORECAST)(research and development)
Publication:R & D
Article Type:Statistical table
Geographic Code:4EXRU
Date:Dec 1, 2010
Words:1832
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