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European business to increase R&D spending despite crisis

Top EU businesses expect their investments in research and development to grow by an average of 4 percent annually over the period 2012 to 2014

Máire Geoghegan-Quinn, Commissioner for Research, Innovation and Science. Image: EC
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A European Commission survey of some of Europe's top corporate investors in R&D has found they intend to carry on investing despite the ongoing economic crisis.

The survey illustrates the importance that these companies place on R&D as a key factor for their future growth and prosperity, according to the Commission. The front runner is the software and computer services sector, which expects R&D investment to grow by 11 per cent per year on average. In-house R&D is seen as the most relevant driver of innovation by the surveyed companies, followed by market research and related activities for new product introduction.

"This positive trend for corporate R&D investment is essential for European competitiveness," said Máire Geoghegan-Quinn, Commissioner for Research, Innovation and Science. "These companies are the main drivers in making the European economy more knowledge-based and smarter. Our future research and innovation programme, Horizon 2020, will give a further boost to innovative enterprises."

IP rights a problem

When asked how government policies and external factors affect their innovation activities, surveyed companies highlighted the strong positive effects of fiscal incentives, national grants, EU financial support and public-private partnerships both at national and EU level.

In contrast, the time needed to obtain intellectual property right protection and the costs of that protection were seen by many companies as key factors impacting negatively on their innovation activities. This confirms the importance of an efficient IPR regime for fostering companies’ innovation activities.

The surveyed companies were also asked about the importance of various ways to share knowledge. Collaboration agreements with other companies stand out as the most important. For companies active in high R&D intensity sectors, this is followed by licensing in/out with other companies, and then agreements with higher education institutions and other public research organisations.

The importance of sharing

For companies in medium and low R&D intensity sectors, collaboration agreements with higher education institutions and other public research organisations are seen as more important than licensing.

In general, the results show the strong importance given to these various ways of sharing knowledge by many companies, which could be a sign of the increasing role of open innovation.

The report contains the main findings of the seventh survey on R&D investment business trends based on 187 responses of mainly large companies from the 1000 EU-based companies in the 2011 EU Industrial R&D Investment Scoreboard. These 187 companies are responsible for R&D investment worth almost €56 billion, constituting around 40% of the total R&D investment of the 1000 EU Scoreboard companies.

The main findings are as follows:

  • Companies expect to maintain robust R&D investment increases over the next three years. These expectations indicate a positive and stable trend for R&D investment growth as observed before the 2008 economic and financial crises.
  • The responding companies report significant shares of sales coming from innovative products and services introduced in the past three years: from 33% to 10% in high and low R&D intensity sectors respectively. The average share of sales coming from new innovative products and services was 18%.
  • Almost half of the respondents named themselves as the innovation leader in the sector.

    R&D within the company is the most important component of innovation, followed by market research related activities for new product introduction.
  • Collaboration agreements were a more important way of knowledge sharing than licencing.

    For the impact of factors and policies on the company’s innovation activities, national public support had the most positive effect.
  • Labour costs and conditions of Intellectual Property Rights (enforcement, time and costs) continue to be perceived as negative factors for company innovations. This underlines the importance of an efficient IPR regime for the support of company innovations.
  • The majority of R&D collaboration agreements with other companies are with customers or suppliers (vertical agreements), while less than 10% are made with competitors.
  • More than one fifth of the respondents preferred Germany as the most attractive location for outsourcing R&D, mostly because of a very high share of statements from the home country, followed closely by the US.
  • The US is the most attractive source of Intellectual Property Rights, followed by Germany.

    Among the types of Intellectual Property Rights (IPRs) licencing, licencing-in ranges before licencing-out.
  • Favourable tax treatment of licencing revenue would encourage more licencing activity.

    High R&D intensive companies report the highest licencing-in expenditure and licencing-out revenues.

The EU Survey on R&D Investment Business Trends was carried out by the European Commission's Joint Research Centre (JRC) at the Institute for Prospective Technological Studies (IPTS) and the Directorate General for Research and Innovation. The survey results are based on 187 responses of mainly larger companies from the 1,000 EU-based companies in the 2011 EU Industrial R&D Investment Scoreboard. These responses were collected between 16 January and 28 April 2012.

Taken together, these 187 companies are responsible for R&D investment worth almost €45 billion, constituting around 40% of the total R&D investment by the 1,000 EU Scoreboard companies, which is a significant share of European business investment in R&D. The 4% average growth level is slightly down on the 5% growth expected in the previous survey, reflecting the worsening of the economic context.

The survey is available at:

http://iri.jrc.es/reports.htm
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Related subjects: Competitiveness, Patent