R&D investments by 2,000 of the world’s largest companies grew 6.9% in aggregate in fiscal 2008, compared to 9.0% growth in fiscal 2008, according to the European Commission’s “2009 EU Industrial R&D Scoreboard.” The Scoreboard tracks R&D spending by 1,000 EU and 1,000 non-EU firms. The economic downturn’s effect on these industrial sectors is not reflected in the figures because the effects of the recession were most fully evident only in the last quarter of the calendar year.

To be included in the Scoreboard, non-EU firms must have had fiscal 2008 R&D expenditures of at least €31.51 million ($46.3 million = €0.68 = $1), while EU companies must have spent at least €4.34 million ($6.4 million) on R&D. Based on the non-EU R&D spending level, there were 350 comparable non-EU companies, which represented 94% of the 1,000 EU companies’ total R&D investment in fiscal 2008.

The 1,350 comparable companies consisted of 531 US companies, 350 EU companies, 256 Japanese firms and 213 companies from other countries. Companies from these respective countries represented 38%, 29%, 22% and 11% of their total €422.8 billion ($621.8 billion) in R&D spending in fiscal 2008. Among other countries, the 38 companies in Switzerland, 22 companies in South Korea and 41 Taiwanese firms were among the largest spenders on R&D, with fiscal 2008 R&D spending of €17.5 billion ($25.7 million), €8.6 billion ($12.6 million) and €5.1 billion ($7.5 million), respectively. Taiwanese companies’ R&D spending grew 25.1%, Swiss firms’ R&D spending increased 10.4% and R&D expenditures by South Korean firms increased 8.0%.

According to IBO’s analysis of Scoreboard data for eight industrial sectors (see table below), the greatest percentage increase in R&D spending by Scoreboard companies in fiscal 2008 was among oil and gas producers, in line with the three-year compound annual growth rate (CAGR) for both EU and non-EU oil and gas companies. Revenues for the 25 oil and gas producers in the Scoreboard increased 24.8% to €2,429 billion ($3,572 billion) last fiscal year.

As with the high price of oil, the high price of metals drove double-digit increases in R&D spending last year and over the three-year period for industrial metals companies. Fiscal 2008 sales for these 29 companies increased 9.1% to €416.7 billion ($612.8 billion).

Double-digit increases in R&D spending also reflected double-digit growth in annual sales for biotech companies and food producers. The 129 biotech firms in the table posted a 14.9% increase in sales last fiscal year to €41.2 billion ($60.6 billion). Revenues for the 52 food producers in the table increased 11.2% to €390.5 billion ($574.3 billion).

The two industries in the table with declining sales in fiscal 2008 were automobiles and parts and semiconductors, for which revenues fell 1.4% and 5.5%, respectively. Yet, despite decreasing sales, R&D spending continued to grow for these industries last fiscal year.

The sector showing the most notable decrease in R&D spending growth last year compared to its three-year CAGR was the pharmaceutical industry. This change was most likely due to slower sales growth for pharmaceutical firms. In fiscal 2008, total sales for the 126 pharmaceutical companies in the table rose only 5.1% to €448.7 billion ($659.9 billion). Sales for pharmaceutical companies in 2008’s Scoreboard increased 8.9% (see IBO 10/31/08). The consistent ratio of R&D to sales in fiscal 2007 and fiscal 2008 suggests that lower sales, rather than a drop in total R&D spending, reduced the percentage of R&D growth.

Seven of the eight industrial sectors in the table showed a decrease in R&D expenditures per employee in fiscal 2008. This is a new trend, as last year’s analysis showed a decrease for only biotech and chemical companies. The decline likely reflects improved efficiencies, the greater use of less highly skilled employees and greater outsourcing.

According to the European Commission’s analysis, pharmaceutical and biotech companies accounted for 18.5% of R&D spending, the largest share among the 1,350 comparable companies in the Scoreboard. US, EU and Japanese pharmaceutical and biotech companies represented 25%, 17% and 8% of the annual R&D spending by all 2,000 Scoreboard companies, respectively. Pharmaceutical and biotech is the highest intensity sector among the 22 industry sectors in the Scoreboard, with 16.5% of sales going to R&D.

Despite the economic downturn, automobiles and parts companies’ R&D spending was the third-largest among comparable companies last fiscal year, at 17.1%. The percentages of spending by Japanese, US and EU automobile and parts firms was almost evenly divided at 27%, 25% and 24%. The automobile and parts sector has an R&D intensity of 4.4%. Oil and gas producers, which has R&D intensity of 0.3%, showed the fastest increase in R&D spending last year.

Spending by EU companies increased 8.1%, compared to a 5.7% increase for US firms and a 4.4% increase for Japanese companies. Within the EU, the countries whose companies’ spending grew the fastest were Italy at 20.4%, Sweden at 17.0% and Denmark at 16.4%. The country whose companies spent the most on R&D was Germany.

Graph: R&D Spending Increases 2007–08 Among Scoreboard Companies by Industry

Semiconductors 2.3%

Automobiles 4.3%

Pharmaceuticals 6.3%

Chemicals 7.5%

Food Producers 10.8%

Biotech 16.3%

Industrial Metals 16.9%

Oil & Gas Producers 17.0%