As a group, OECD economies continued to increase investments in research and development (R&D) in 2020 despite the sharp decline in economic activity due to the COVID-19 pandemic. According to the latest data published in the OECD Main Science and Technology Indicators (MSTI) database, R&D expenditure in the OECD area grew by 1.5% in real terms in 2020. This figure revises downward the 1.8% increase reported in March 2022. While this represents a sharp slowdown compared to previous years when R&D was growing at ~5% annually, it marks the first time on record in which a global recession did not translate into a drop in R&D expenditures. This reflects how investments in R&D have been an integral part of the response to the crisis.
Since the global financial crisis in 2009, businesses have accounted for nearly three quarters of total expenditure on R&D performance in the OECD area and have been leading OECD R&D growth. However, the business sector trailed other sectors in terms of R&D expenditure growth in 2020. R&D in the Higher Education sector rose by 1.0%, while R&D expenditures in the Government sector increased by 2.8%. R&D in the business enterprise sector still managed to grow by 1.3% despite the pro-cyclical nature of R&D and adverse economic conditions.
Real growth in R&D in the OECD area in 2020 was primarily driven by growth in the United States at 5%, in contrast with R&D expenditures in Germany and Japan, which declined at -4.9% and -2.7% respectively. In the EU27 area, business R&D performance was the principal reason for the aggregate fall in R&D. In other words, if European business R&D performance had been on a par with the United States, its overall R&D performance would have been more similar. The structure of business R&D in the EU is more concentrated in industries that have been more negatively impacted by the COVID-19 crisis, as noted further below. China’s reported R&D expenditure grew by 9.6% in 2020, a figure comparable with previous years. The implications for comparisons with respect to the United States depend on how figures in different countries are adjusted for differences in purchasing power (PPP) for R&D investments. If forthcoming revisions to PPP conversion rates turn out as on previous occasions, China’s R&D expenditure gap with respect to the United States would have remained stable, with China’s R&D expenditure at close to 74% of that of the United States.
OECD R&D intensity (a headline measure of domestic expenditure on R&D expressed as a percentage of GDP) rose from 2.5% in 2019 to nearly 2.7% in 2020. This increase was the combined result of exceptional real growth in R&D expenditure (+1.5%) and the major decline in real GDP (-4.4%). For most countries in which R&D expenditure declined in 2020, increases in R&D intensity rates can be principally explained by the drop in GDP. For this reason, shifts in R&D intensity within the context of the COVID-19 crisis should be interpreted with caution.
In the case of Germany, R&D intensity did not change in 2020 because similar falls in R&D and GDP offset each other. Across the OECD, Israel and Korea continued to display the highest levels of R&D intensity, at 5.4% and 4.8% of GDP respectively. China’s R&D intensity went from 2.2% to 2.4%. R&D intensity in the EU27 area increased from 2.1 to 2.2% of GDP.
Although official statistics on R&D expenditures for 2021 will only be available in the first quarter of 2023 for most countries, the OECD develops and monitors a number of leading indicators to provide more timely insights into R&D investment. To do this, the OECD has developed a preliminary view of R&D spending in 2021 by combining data from government budgets for R&D, provided by official contacts within countries, with exploratory analysis of published quarterly reports and accounts for a panel of large business R&D investors. The OECD Short-term Financial Tracker of Business R&D (SwiFTBeRD) dashboard reports quarterly and annual R&D data for several of the world's major R&D investors, providing company-specific and sectoral insights to deliver the timeliest possible view of R&D data reported by companies. Estimates of real growth in R&D expenses for the ensemble of firms in the OECD SwiFTBeRD panel map very closely the evolution of official Business Expenditure on R&D (BERD) estimates over periods in which the latter are available. The final 2020 estimates of the September 2022 MSTI release confirm the “nowcasts” made in the March 2021 release for 2020. The implied SwiFTBeRD nowcast for 2021 is positive real annual growth in the order of 7% compared to 2% in 2020, suggesting that a significant recovery in business R&D spending was under way in 2021.
Government R&D budget indicators for the OECD area present the amounts that governments agree to allocate for R&D as part of their budgetary processes, rather than actual expenditure reported by R&D performers. In addition to shedding light on governmental R&D funding intentions, these figures provide early insights into R&D performance in sectors that are highly reliant on government support, such as higher education and government research institutions. After a significant 15% growth in real terms in 2020, government R&D budgets for the entire OECD area decreased by 3.0% in 2021 compared to 2020 (less than the 4.4% decrease reported in March 2022). This decline is not large enough to offset the gains in 2020, but it signals a retrenchment in government R&D support just as business R&D appears to be recovering.
The MSTI database provides a selected set of indicators in the field of science and technology that principally reflect the R&D performance over time of OECD member countries and seven other economies: Argentina, China, Romania, Russian Federation, Singapore, South Africa and Chinese Taipei. These data include final or provisional results as well as provisional estimates provided by national statistical organisations. The indicators cover the resources devoted to research and development, patent families, and international trade in R&D-intensive industries.
Indicators on R&D expenditures, budgets, and personnel are derived from the OECD’s Research and Development Statistics database (Research and Development Statistics Database (RDS), which is based on the data reported to OECD and Eurostat in the framework of the joint OECD/Eurostat international data collection on resources devoted to R&D.
The sources for the other indicators include the OECD databases on Patents and Bilateral Trade in Goods by Industry and End-use category (BTDIxE).
MSTI is published twice yearly, in March and September, with the former representing the first available R&D performance figures with a global scope. The September publication consolidates the March publication with final data provided by countries.
Data for Costa Rica, which became the 38th member of the OECD in May 2021, have not yet been included in MSTI. The OECD is currently working with Costa Rica’s authorities to collect and report internationally comparable R&D data for publication the OECD R&D statistics and in future editions of MSTI. In this latest edition, Costa Rica does not appear in the list of OECD members and is not included (except for patent indicators) in the OECD zone aggregates.
The MSTI indicators can be best visualised using the OECD STI Scoreboard platform, where they can be analysed alongside different STI indicators.
The electronic edition is available via the OECD’s data dissemination service, “OECD.stat”. From there, the MSTI Excel file can be downloaded by clicking “export” and then “related files”. The MSTI database is also available online through OECDiLibrary.
The OECD R&D and GBARD Sources and Methods Database contains metadata relevant to the interpretation of R&D series included in MSTI and RDS.