Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Research and development (R&D) refers to the activities which governments and corporations undertake to create new products and services, and/or improve existing products and services. R&D includes both the work done by engineers to develop specific new products, as well as research done by industrial scientists that may result in future unspecified products. Aside from the cost of salaries, R&D requires significant investment in materials and equipment. This makes R&D a very expensive process, with total global R&D expenditures amounting to almost 2.5 trillion U.S. dollars in 2022 (once local currencies are adjusted for purchasing power parity). The United States and China are by far the two largest spenders. However, when expenditure is considered as a share of overall gross domestic product, smaller countries with tech-heavy economies such as Israel and South Korea invest larger shares of their GDPs into R&D.
Leading R&D industries
The three industries accounting for the highest share of R&D spending worldwide are information and communication technology (ICT) software producers, hardware producers, and health industries, accounting for over 60 percent of global R&D expenditure. Although all of these sectors have a global presence, different regions outspend each other in different areas: while the United States and the EU are the largest R&D spenders within aerospace and defense, China is dominating R&D spending in construction. R&D-intensive industries also have differing levels of importance to different economies, with a high share of the major companies within healthcare and software producers based in the U.S..Leading R&D companies
Amazon top the list of largest corporate R&D spenders, investing over 70 billion U.S. dollars in R&D in 2022. Most of the other major spenders were producers of ICT. This is a result not only of their need to create new consumer products, but also because many of these companies are at the cutting edge of developing future, high-growth technologies like artificial intelligence. Corporate investment in healthcare R&D is also expected to remain high into the near future, despite this industry seeing a decrease in return on investment over recent years, with the exception of 2021.Influence of global challenges on the R&D sectror
Of course, all market-based projections made prior to the global COVID-19 pandemic need to be taken with caution. However, key R&D markets such as healthcare and computing have been relied upon in global efforts to deal with the crisis: pharmaceutical R&D has been necessary to develop a vaccine, while computing and software technology has helped reducing social contact. Moreover, countries are increasing R&D spending within aerospace and defense as global affairs become more tense. And R&D spending within sectors such as renewable energy will be a key part of tackling climate change.
