R & D expenditure
From Statistics Explained
- Data from October 2012. Most recent data: Further Eurostat information, Main tables and Database.
This article presents data on research and development (R & D) expenditures within the European Union (EU), according to the sector of performance and the source of funds. The data are obtained through statistical surveys which are regularly conducted at national level covering R & D performing entities in the private and public sectors.
One of the key objectives of the EU during the last decade has been to encourage increasing levels of investment, in order to provide a stimulus to the EU’s competitiveness. The Lisbon strategy set the EU an objective of devoting 3 % of its GDP to R & D activities by 2010. The target was not reached – and subsequently the 3 % target was maintained, forming one of five key targets within the Europe 2020 strategy adopted in 2010.
Main statistical findings
Gross domestic expenditure on R & D (GERD) stood at EUR 245 673 million in the EU-27 in 2010, which was a 3.8 % increase on the year before, and some 43.5 % higher than ten years earlier (in 2000) – note that these rates of change are in current prices and so reflect price changes as well as real changes in the level of expenditure. In 2008 the level of expenditure on R & D in the EU-27 was 88.5 % of that recorded by the United States, although slightly more than double the level of expenditure in Japan and considerably above R & D expenditure levels recorded in the emerging economies – for example, EU-27 expenditure was 5.3 times as high as in China.
In order to make figures more comparable, GERD is often expressed relative to gross domestic product (GDP) – see Figure 1 – or in relation to population. The ratio of GERD to GDP, one of five key Europe 2020 strategy indicators, increased marginally in the EU-27 during the period up to 2002 reaching a high of 1.88 %, before declining modestly through to 2005 (1.83 %), and climbing again to 2.01 % by 2009. There was a small decline in 2010 when the ratio fell to 2.00 %. The decrease – despite the higher absolute level of R & D expenditure – was due to the partial recovery from the financial and economic crisis, as GDP increased at a slightly faster pace than GERD in 2010. Nevertheless, the EU-27’s R & D expenditure relative to GDP remained well below the corresponding shares recorded in Japan (3.45 %) and the United States (2.79 %) in 2008; this pattern has existed for a lengthy period of time. There was a far higher increase in the relative importance of GERD in the Japanese economy, as its share of GDP rose by 0.41 percentage points during the period 2000 to 2008; note however that Japanese economic growth was also subdued during this period.
Among the EU Member States, the highest R & D intensities in 2010 were recorded in Finland (3.87 %), Sweden (3.42 %) and Denmark (3.06 %) – see Table 1. There were eight Member States that reported R & D expenditure accounting for less than 1 % of their GDP in 2010; Greece also had a ratio of less than 1 % although its latest available data is for 2007. The Member States with the lowest R & D intensity were generally in southern and eastern Europe.
The differences in the relative importance of R & D expenditure between countries are often explained by referring to levels of expenditure within the business enterprise sector. Table 2 shows that the share of R & D conducted within the business enterprise sector was equivalent to 1.23 % of the EU-27’s GDP in 2010, compared with 2.70 % in Japan and 2.02 % in the United States (both 2008), while the relative importance of R & D expenditure in the government and higher education sector was broadly similar across all three members of the Triad. An evaluation of the data for the EU Member States also confirms that those countries with relatively high shares of business enterprise expenditure on R & D – namely, Finland, Sweden, Denmark, Austria and Germany – also reported relatively high levels of total GERD. Apart from Germany, these countries also tended to feature near the top-end of the ranking of expenditure by the higher education sector, where the Netherlands also had a relatively high share of R & D expenditure. Government R & D expenditure relative to GDP was highest in Germany, Slovenia, France and Finland.
An analysis of R & D expenditure by source of funds shows that more than half (54.1 %) of the total expenditure in 2009 within the EU-27 was funded by business enterprises, while just over one third (34.9 %) was funded by government, and a further 8.4 % from abroad (foreign funds). Business-funded R & D accounted for 78.2 % of total R & D expenditure in Japan and 67.3 % in the United States (both 2008). Table 3 confirms the relatively important role played by the business enterprise sector as a source of R & D funding in Luxembourg, Finland and Germany (latest available data for 2009), as business-funded R & D accounted for about two thirds of total GERD in 2010. In contrast, a majority of the gross expenditure on R & D made in Cyprus (2009), Bulgaria (2009), Poland, Romania, Slovakia and Lithuania in 2010 was funded by the government sector. There were also considerable differences in the source of R & D funding from abroad, with relatively high shares (in excess of 15 % of total GERD in 2010) reported in Latvia, Lithuania, Malta, Austria, the United Kingdom and Ireland (2009).
Data sources and availability
Statistics on science, technology and innovation are based on Decision 1608/2003/EC of the European Parliament and of the Council concerning the production and development of Community statistics on science and technology. The Decision was implemented by the European Commission as Commission Regulation 753/2004 on statistics on science and technology which was adopted in 2004 following close cooperation with the EU Member States.
Eurostat’s statistics on R & D expenditure are compiled using guidelines laid out in the Frascati manual, published in 2002 by the OECD. R & D expenditure is a basic measure that covers intramural expenditure, in other words, all expenditures for R & D that are performed within a statistical unit or sector of the economy in the Member States.
The main analysis of R & D statistics is by four institutional sectors of performance. These four sectors are the business enterprise sector, the government sector, the higher education sector, and the private non-profit sector (the latter is not shown in this article). Gross domestic expenditure on R & D (GERD) is composed of expenditure from each of these four sectors. Expenditure data considers the research spend on the national territory, regardless of the source of funds; data are usually expressed in relation to GDP; this ratio is often referred to as R & D intensity. Additional analysis of R & D expenditure are available by: source of funds; field of science; type of costs; economic activity (NACE); enterprise size class; type of R & D; socio-economic objectives; and regions (NUTS).
The European Commission has through its innovation union flagship initiative (which forms part of the Europe 2020 strategy) placed renewed emphasis on the conversion of Europe’s scientific expertise into marketable products and services, through seeking to use public sector intervention to stimulate the private sector and to remove bottlenecks which stop such ideas reaching the market. Furthermore, the latest revision of the integrated economic and employment guidelines (revised as part of the Europe 2020 strategy) includes a guideline to optimise support for R & D and innovation, strengthening the knowledge triangle and unleashing the potential of the digital economy.
The European Commission compiles three levels of indicators to support research and innovation policymaking. These may be grouped together as: the headline indicator; innovation union scoreboard (or core) indicators; and a comprehensive set of other indicators. The headline indicator is the 3 % target for research intensity to be reached within the EU by 2020; this is one of five Europe 2020 headline indicators being tracked within the Europe 2020 strategy. The scoreboard indicators are designed to monitor research and innovation for the Competitiveness Council, while the comprehensive set of other indicators are for in-depth economic analytical purposes and Commission services to produce a science, technology and competitiveness report.
One area that has received considerable attention in recent years is the structural difference in R & D funding between Europe and its main competitors. Policymakers in Europe have tried to increase R & D business expenditure so that it is more in line with relative contributions observed in Japan or the United States. The European Research Area (ERA) is designed to overcome some of these barriers that are thought to have hampered European research efforts, for example, by addressing geographical, institutional, disciplinary and sectoral boundaries.
In December 2008, the Competitiveness Council adopted a 2020 vision for the ERA. According to the opening statement of this vision, all players should benefit from: the ‘fifth freedom’, introducing the free circulation of researchers, knowledge and technology across the ERA; attractive conditions for carrying out research and investing in R & D intensive sectors; Europe-wide scientific competition, together with the appropriate level of cooperation and coordination. The 2020 vision for the ERA is part of the wider picture of Europe’s 2020 strategy for smart, sustainable and inclusive growth.
In November 2011 the European Commission presented a successor for the 7th Framework Programme by announcing Horizon 2020, an EUR 80 000 million programme for investment in research and innovation, implementing the innovation union. Horizon 2020 focuses on turning scientific breakthroughs into innovative goods and services that have the potential to provide business opportunities and change people’s lives for the better. Running from 2014 to 2020 this programme is part of the EU’s drive to create new growth and jobs in Europe.
Further Eurostat information
- Science, Technology and Innovation in Europe (Pocketbook - 2011 edition)
- Science, Technology and Innovation in Europe (Pocketbook - 2010 edition)
- Science, technology and innovation in Europe - Edition 2010 (Statistical book)
- Science, technology and innovation in Europe (Pocketbook - 2009 edition)
- Science, technology and innovation in Europe (Statistical book - 2009 edition)
- Science, technology and innovation in Europe (Pocketbook - 2008 edition)
- Science and technology, see:
- Research and development (t_research)
- Statistics on research and development (t_rd)
- Research and development expenditure, by sectors of performance (tsc00001)
- Gross domestic expenditure on R&D (GERD) by source of funds (tsiir030)
- Statistics on research and development (t_rd)
- Science and technology, see:
- Research and development (research)
- Statistics on research and development (rd)
- R&D expenditure at national and regional level (rd_e)
- R&D personnel at national and regional level (rd_p)
- Scoreboard main indicators (rd_scb) (Excel tables)
- Government budget appropriations or outlays on R&D (gba)
- Total GBAORD by NABS 2007 socio-economic objectives (gba_nabsfin07)
- Total GBAORD by NABS 1992 socio-economic objectives (gba_nabsfin92)
- Total GBAORD as a % of total general government expenditure (gba_nabste)
- Statistics on research and development (rd)
- Government budget appropriations or outlays on R&D (ESMS metadata file - gba_esms)
- Scoreboard main indicators (ESMS metadata file - rd_scb_esms)
- Statistics on research and development (ESMS metadata file - rd_esms)
Source data for tables and figures (MS Excel)
- Decision 1608/2003/EC of 22 July 2003 concerning the production and development of Community statistics on science and technology
- Regulation 753/2004 of 22 April 2004 implementing Decision 1608/2003/EC
- European Commission - Cordis - Seventh Framework Programme (FP7)
- European Commission - Lisbon Strategy for Growth and Jobs - Towards a green and innovative economy
- OECD - Innovation - Measuring science and technology
- The EU Industrial R&D Investment Scoreboard (European Commission - Joint Research Centre (JRC))