Chapter 4 | Research and Development: U.S. Trends and International Comparisons

Cross-National Comparisons of R&D Performance

The global total of R&D expenditures continues to rise at a substantial pace. NCSES’s latest estimate puts the worldwide total at $1.918 trillion (current PPP dollars) in 2015 (Figure 4-5).^​ The corresponding estimate for 5 years earlier in 2010 was $1.415 trillion. In 2000, it was $722 billion. By these figures, the annual increase in total global R&D averaged 6.3% over the 2010–15 period and 7.0% over 2000–10. (As a point of comparison, U.S. GDP totaled $18.121 trillion in 2015.)

Global R&D performance continues to remain concentrated in three geographic regions: North America, Europe, and the regions of East/Southeast and South Asia (Figure 4-5). North America (United States, Canada, Mexico) accounted for 28% ($535 billion) of worldwide R&D performance in 2015; Europe, including the European Union (EU) (see this chapter’s Glossary for a list of the 28 EU member countries), accounted for 22% ($415 billion); the combination of the regions of East/Southeast and South Asia (including China, Japan, South Korea, India, and Taiwan) accounted for 40% ($773.5 billion). The remaining 10% of global R&D comes (in order) from the regions of the Middle East, South America, Central Asia, Australia and Oceania, Africa, and Central America and the Caribbean.

The geographic concentration of R&D is more sharply apparent when the profiles of specific countries or economies are considered (Table 4-5). The United States remains the largest R&D performer ($497 billion in 2015), accounting for 26% of the global total. China was the second largest performer ($409 billion) in 2015, accounting for about 21% of the global total. Japan is third at 9% ($170 billion); Germany is fourth at 6% ($115 billion). South Korea ($74 billion), France ($61 billion), India ($50 billion), and the United Kingdom ($46 billion) make up a third tier of performers—each accounting for 2%–4% of the global R&D total. Brazil, Russia, Taiwan, and Italy make up a fourth tier, with annual R&D expenditures ranging from $30 billion to $38 billion, each accounting for 2% of the global total. Canada, Australia, and Spain are a next rung down, with annual R&D expenditures in the $20 billion–$27 billion range and each being about 1% of the global total. The United States and China together accounted for about 47% of the global R&D total in 2015, the top 8 countries accounted for 74%, and all 15 of the countries mentioned accounted for 85% of the global total.

The R&D total for the EU as a whole in 2015 was $386 billion—now noticeably behind China’s $409 billion for the year. Among the EU countries, Germany, with $115 billion in 2015, is by far the largest R&D performer. France ($61 billion), the United Kingdom ($46 billion), and Italy ($30 billion) are next in order.

The generally vigorous pace at which total global R&D has increased, more than two and a half times over the 2000–15 period and continuing to grow, remains among the most prominent developments—a continued reflection of the escalating knowledge intensiveness of the economic competition among the world’s nations (see Chapter 6 for a further discussion). Another major trend is the sustained, large increases in the levels of R&D performance in the regions of East/Southeast and South Asia compared with the other major R&D performing areas. R&D performed in the North American region accounted for 40% of the global total in 2000 but declined to 31% in 2010 and further down to 28% in 2015. Europe accounted for 27% in 2000, 23% in 2010, and then down to 22% in 2015. The regions of East/Southeast and South Asia comprised 25% of the global total in 2000 but rose to 35% in 2010 and even higher to 40% in 2015. Present regional growth trends in R&D performance suggest the ascendant primacy of these areas of Asia is unlikely to end soon.

Total global R&D increased by some $1.196 trillion (current dollars) from 2000 to 2015—as noted earlier, the 2000 total was $723 billion, rising to $1.918 trillion in 2015. China alone accounted for 31% ($376 billion) of the global increase over this 15-year period. The United States accounted for 19% ($228 billion) of the global increase, and the EU accounted for 17% ($203 billion). The increases of several other major Asian R&D performers were also noticeable: Japan accounted for 6% of the increase ($71 billion), and South Korea accounted for 5% ($56 billion).

China continues to exhibit the world’s most dramatic R&D growth pattern (Figure 4-6; Appendix Table 4-12). The pace of its increase in R&D performance has been exceptionally high over numerous years, averaging 20.5% annually over 2000–10 and 13.9% for 2010–15 (or 18.0% and 12.0%, respectively, when adjusted for inflation). The rate of growth in South Korea’s R&D has also been quite high, averaging 10.9% annually over 2000–10 and 7.3% for 2010–15. Japan’s corresponding rates of R&D growth have been slower, at 3.6% and 3.9%.

Although the United States remains well atop the list of the world’s R&D-performing nations, its pace of growth in R&D performance has averaged 4.3% over 2000–10 and 4.0% for 2010–15, and its share of global R&D has declined from 37% in 2000 to 26% in 2015. Total R&D by EU nations has been growing at an annual average rate of 5.4% in 2000–10 and 4.6% in 2010–15—with Germany at 5.0% and 5.7%, France at 4.4% and 3.6%, and the United Kingdom at 4.1% and 4.2%. The EU countries accounted for 25% of total global R&D in 2000 but dropped to 20% in 2015.

As discussed earlier in this chapter, the U.S. R&D-to-GDP ratio was 2.61% in 2000, peaked at 2.80% in 2009, dropped modestly over the next several years, but then moved upward again to 2.74% in 2015 (Figure 4-7).

At the 2015 level, the United States is 11th in R&D intensity among the economies tracked by OECD and UNESCO data. Israel and South Korea are essentially tied for the top spot, with ratios of 4.3% and 4.2%, respectively (although Israel’s data exclude expenditures for defense R&D, while South Korea’s data include them). Israel has long been at the top of the R&D-to-GDP ratio ranking (Table 4-5). But South Korea’s upward movement has been particularly rapid since the late 1990s (Figure 4-7); furthermore, South Korea is one of the world’s largest R&D performers, with annual R&D expenditures many times that of Israel. Switzerland is third, at 3.4%. Japan is fourth, at 3.3%. Several smaller countries or economies with comparatively high R&D-to-GDP ratios are Sweden (3.3%), Austria (3.1%), Taiwan (3.1%), Denmark (3.0%), Germany (2.9%), and Finland (also 2.9%). The other top 8 R&D performers include France at 2.2%, China at 2.1%, the United Kingdom at 1.7%, and India at 0.6%.

The U.S. rank in this indicator has been slowly falling in recent years as other countries have expanded the range and scope of their R&D activities: 11th in 2013 (as reported in Science and Engineering Indicators 2016), 10th in 2011 (as reported in Science and Engineering Indicators 2014), and 8th in 2009 (as reported in Science and Engineering Indicators 2012). The U.S. ranking has fallen despite the generally high U.S. R&D intensity levels (relative to historic levels) over these recent years.

The ratio has been rising gradually for the EU as a whole over the 2000–15 period, from about 1.7% in 2000 to nearly 2.0% in 2015 (Figure 4-7). For the largest R&D performers among the EU countries, the ratios for Germany, France, and the United Kingdom have gradually risen over 2000–15.

Among the large Asian R&D performers, Japan’s R&D-to-GDP ratio has moved mainly upward in recent years, from 2.9% in 2000 to 3.3% in 2015. The high risers—across all the 8 countries considered here—have been China and South Korea. China’s ratio doubled over the period, from just over 0.9% in 2000 to about 2.1% in 2015, suggesting that ample room remains for future increases (Appendix Table 4-12). South Korea’s ratio increased from 2.2% in 2000 to 4.2% in 2015.

The business sector is the predominant R&D performer for nearly all the current top R&D-performing nations (Table 4-6). For the United States, the business sector accounted for 72% of gross expenditures on R&D in 2015. The shares were even higher in the leading Asian R&D performers: China, where the business sector accounted for 77% of the country’s total R&D in 2015; Japan, where it accounted for 79%; and South Korea, where it accounted for 78%. The levels in Germany (69%), France (65%), and the United Kingdom (66%) were somewhat lower. The apparent exception is India, where the country’s business sector accounted for a much smaller share of the national R&D total—44% in 2015.

R&D performed by the government accounted for about 11% of the national total in the United States in 2015. This primarily includes activities by the federal government but also includes the small amount of R&D by nonfederal government (state) performers. The share ranged from 7% to 53% across the other countries. South Korea (12%) showed a similar share as the United States. The United Kingdom (7%) and Japan (8%) were both lower. The other countries arrayed around the United States include China (16%), Germany (14%), and France (13%). The government share in India was by far the highest, at 53%.

R&D performed by the higher education sector ranged from 4% to 26% of total national R&D across these countries. This sector’s performance share for the United States was about 13% in 2015. China was at 7% that year; similarly, South Korea (9%) was also below the U.S level. Japan (12%) and Germany (17%) were near the U.S. level. France (20%) and the United Kingdom (26%) were both noticeably higher. India had by far the lowest level, at 4%.

Business sectors were the predominant source of R&D funding (Table 4-6). (Although comparable data on R&D funding sources are not available for India.) For the United States, the business sector (domestic) accounted for about 62% of all U.S. R&D in 2015. China, Japan, and South Korea had substantially higher percentages, at 75%, 78%, and 75%, respectively. Germany’s share was higher than that of the United States, at 66%; the United Kingdom’s was lower, at 48%.

Government was the second major source of R&D funding for these countries. For the United States, government (federal and nonfederal) accounted for 26% of the nation’s R&D in 2015. Germany’s (28%) and the United Kingdom’s (28%) shares were somewhat higher than that of the United States. South Korea’s was just under, at 24%, and China’s was further below, at 21%. France’s was considerably higher, at 35%.

Funding from abroad refers to funding from businesses, universities, governments, nonprofits, and other organizations located outside of the country. Among the top R&D-performing countries, the United Kingdom is the most notable in this category, with 18% of R&D funding coming from abroad in 2015. France is also comparatively high, at nearly 8%. Germany was at 6%, and the United States was around 5%. The rest are much lower. (For the United States, the funding from abroad reflects foreign funding for domestic R&D performance mainly by the business and higher education sectors.)

Another dimension for comparing the top R&D-performing countries is the levels and shares of overall national annual R&D performance devoted to basic research, applied research, and experimental development. (Type-of-R&D data are not available for some countries, including Germany, in Table 4-7.)

The portion of annual R&D that countries allocate to basic research ranges between 5% and 24% (Table 4-7). For the United States, this share is on the high side of the range: 17% of its overall R&D in 2015, which amounted to $83.9 billion of basic research performance that year. France often has a higher share; in 2015, it was 24%, but this amounted to $14.8 billion of basic research performance, which was well below the U.S. level. Among the top R&D-performing countries, China’s basic research share is the lowest, at slightly more than 5% in 2015; however, this still amounted to about $21 billion of basic research performance that year.

The shares for applied research for these countries range from 11% (China) to 43% (United Kingdom), with the U.S. share nearly in the middle, at 20%. Nonetheless, in terms of overall volume, the United States dominates this category, with $97.3 billion of applied research spending in 2015. The overall volume of spending by the second and third ranked countries in this category are comparatively far behind: China, at $44.2 billion, and Japan, at $33.8 billion.

With regard to experimental development, China exhibits the highest share by far—84% of its R&D total in 2015, which was $344.2 billion of spending in this category that year. For the United States, the development share that year was 64%, totaling $315.3 billion of spending in this category. Japan and South Korea also exhibit comparatively high shares for development, respectively, 64% and 62% in 2015; however, the dollar amounts of those countries’ performances were well below the levels for China and the United States.