The countries and firms that put the most into R&D

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Given a choice of being the disruptor or the disrupted, many would prefer to choose the former.

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But it’s not as easy as just flipping a switch and subsequently reaping the benefits of a forward-looking vision, new product categories, and forthcoming patents. Instead, an organization has to proactively acquire this innovation and intellectual capital from somewhere.

For many established companies, there is no other choice but to buy innovative startups through M&A to get their innovation fix, though this typically comes at a marked up price. On the flipside, especially for companies in tech, auto, and pharmaceutical spaces, innovation likely has to be in the DNA of the company culture, managerial decisions, and any new talent hired.

R&D Spending

Global Leaders in R&D Spending

For those companies that aim to innovate internally, money needs to go into the research and development (R&D) line of their income statement.

Today’s chart looks at the countries that put the most into R&D (in % of GDP terms, and absolute $ terms), as well as the companies that have spent the most on R&D in the last 12 months trailing.

It’s also worth noting that money put into R&D is like any other investment – the money can be used wisely or simply squandered into initiatives that don’t pay off. Despite this, R&D spending is a loose approximation for global innovation.

R&D by Country

Global R&D spending is heavily concentrated in the G20 countries. In total they account for 92% of all R&D spending, and 94% of all patents granted at the U.S. Patent and Trademark office.

Here is a breakdown of R&D spending by GDP of select G20 countries:

Country R&D Spending (% GDP)
South Korea 4.23%
Japan 3.29%
Germany 2.93%
United States 2.79%
France 2.22%
Australia 2.11%
China 2.07%
Canada 1.71%
United Kingdom 1.70%
Italy 1.33%
Russia 1.10%
Turkey 0.88%
South Africa 0.73%
Argentina 0.63%
Mexico 0.53%

By total dollar spend, however, massive economies like the United States, China, and the EU take their rightful place.

Rank Economy R&D Spending ($) in 2015
#1 United States $463 billion
#2 China $377 billion
#3 European Union $346 billion
#4 Japan $155 billion
#5 South Korea $74 billion

R&D by Company

On a company basis, the top five R&D spenders today are mostly technology companies.

Rank Company R&D Spending (Last 12 months)
#1 Amazon $17.4 billion
#2 Volkswagen $15.1 billion
#3 Alphabet $14.5 billion
#4 Intel $12.8 billion
#5 Samsung $12.8 billion

Interestingly, that wasn’t always the case – even as short as 10 years ago, the largest R&D spenders tended to be pharmaceutical companies like Pfizer, or automobile manufacturers like GM and Volkswagen.

A final note: Amazon doesn’t list R&D on its income statement directly, and instead classifies everything under a “Technology and Content” line which includes R&D. While it is likely Amazon is an R&D leader, there isn’t an exact number for it as of now.

Article by Jeff Desjardins, Visual Capitalist