Times of crisis and opportunity

Business research and innovation have been affected unevenly by the crisis


The COVID-19 crisis has disrupted the normal functioning of innovation systems. On an aggregate basis, business investments in research and innovation are pro-cyclical, and thus prone to contracting in times of crisis (see figure).

The impact of the business cycle on business R&D and government support

 OECD area, annual growth rate


Source: OECD Main Science and Technology Indicators (database), (accessed October 2020). StatLink

This crisis may be different, however, since some of the companies that spend most on R&D appear to be expanding their R&D activities during the crisis. Some businesses, particularly in the digital and pharmaceutical sectors, have thrived during the pandemic, raising their R&D investments, while major companies in other sectors – including automotive, aerospace and defence – have reduced their R&D spending (see figure).

Reported R&D expense and revenue growth in selected R&D companies

 Percentage change between April-September 2019 and April-September 2020

Source: OECD calculations, based on published quarterly business financial reports, December 2020. StatLink

The crisis has also accelerated the use of digital technologies to facilitate telework, e-learning, e-commerce and other activities. This has enabled parts of the economy and society to continue working, thereby mitigating the pandemic’s impact. The extent to which such applications permanently change behaviours is uncertain, but there are strong indications of a lasting shift that will drive and co-evolve with advances in digital innovation. However, the crisis could exacerbate existing gaps in the uptake and use of digital technologies – between large firms and small and medium sized enterprises (SMEs), in particular, but also between sectors. If not addressed, such uneven diffusion may have important implications for firms’ productivity performance as the pandemic continues to accelerate digitalisation. It could widen the productivity gap between digital adopters and digital laggards, deepen the vulnerability of laggards, and reduce economic resilience. Greater policy efforts will therefore be needed to boost the adoption and diffusion of digital tools, in particular for SMEs. 

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