Research is key to global success - January 06, 2019

Research is key to global success

Global R&D expenditure reached almost $1.7 trillion in 2017. The USA, China and Japan spent almost 50% of that sum alone. They are the biggest economies as well. It’s  not only them: 8 out of the 10 biggest economies are on the list of the greatest R&D spenders. Research and development is becoming more important than ever.

Research and development (or R&D for short) is a key to success in many ways. Many of the most successful companies spend huge amounts of money on it every year. But R&D expenditure has a serious effect on the success of countries as well.

Who spend the most on R&D?

Global spending on R&D reached almost $1.7 trillion in 2017. The leaders in expenditure might not come as a surprise to you: The United States of America, China and Japan lead the way. What may be a surprise, though, is that these three countries alone spend 50% of all global research money, according to HowMuch.net and UNESCO Institute for Statistics.

Top 10 countries investing in R&D

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What’s even more surprising is that the top 10 countries (seen on the chart above) account for 80% of all research and development spending globally. The top 15 countries spend almost 90% of all R&D expenditure and these figures will go higher in the upcoming years.

What does research have to do with success?

Spending on R&D isn’t only good for companies but for the countries as well. Why? Because many of the biggest research spenders are the greatest global economies as well. Unsurprisingly the US and China leads the way again, but altogether 8 of the biggest R&D spenders are also among the 10 biggest economies.

Largest economies by GDP in 2017

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Only Italy and Canada manage to have a top 10 spot by GDP without being among the biggest spenders. They are not far off, though, Italy and Canada are the 11th and 12th biggest R&D spenders respectively. GDP and R&D expenditure seems to be in an important correlation. Even UNESCO pointed out how “Strong spending by the business sector is an underlying factor for success”.

R&D will be even more important

No wonder governments are trying to spend more and more on it. As the UNESCO study put it: “Many countries try to stimulate greater investment in both the private and public sectors by setting national targets for R&D spending as a share of GDP”. Spending will become even more important as R&D heavy industries are leading economic advancement in many ways.

R&D expenditure of the West and East

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R&D expenditure will also become an important part of becoming or remaining a global power. China for example is trying to become the biggest economy of the world and that shows on their spending. Now, North America and Western Europe still leads the way in research expenditure with $848 billion a year as of 2013. Asia and the Pacific (lead by China) are coming up by the year, however: they spent $653 billion in 2013.

As these leading economies are fighting fiercer for the global lead, their spending will go higher as well.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.