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Brussels, 10 December 2004

Key findings of the First Industrial R&D Investment Scoreboard

The European Commission has launched a Scoreboard of the top 500 EU companies investing in Research and Development, which provides instructive, up to date comparisons between companies, sectors, and geographical areas, as well as a full picture of the competitive situation of EU firms in the global R&D environment.

Further decline in EU private sector R&D investments

In contrast to their counterparts outside the EU, EU500 companies did not see a recovery in 2003, a year marked by further declines in net sales and R&D. Indeed, EU500 R&D investments dropped by 2 % last year compared to a rise of 3.9 % for non-EU500. Furthermore, twelve of the top 25 EU companies reduced their R&D over the last year, four of them by double figure percentages. Only four of the top 25 US companies reduced R&D last year, just one by a double figure percentage. However, while over the past four years, EU500 R&D investments have grown by 1.2 % per year on average, this is still significantly lower than the non-EU500 rate of 3.7 %.

Concentration of EU R&D in large companies...

For both EU500 and non-EU500, a small group of firms is responsible for a high proportion of aggregate R&D investment. In the case of the non-EU500, the top 20 account for 37 % of the total R&D, while for the EU-500 the concentration is even higher 55 %.

.... in a few R&D-intensive sectors...

The four largest sectors in terms of aggregate R&D investment are automobiles & parts, pharmaceuticals & biotechnology, IT hardware, and electronics & electrical equipment accounting for 64 % (EU) and 68 % (non-EU) of total R&D. However, there is a sharp difference between the two groups in the relative size of these sectors. The EU500’s largest R&D investment is in automobiles & parts (24 %), while the non-EU’s largest share is IT hardware (23 %).

.... and in a few key countries

Companies with registered head offices located in three EU countries – Germany, France, and the UK – together account for 74 % of EU-500 R&D investment.

Reinforcement of structural imbalances

In seven of the top ten R&D-performing sectors, the EU500 companies have equivalent or higher R&D/sales ratios than the non-EU-500. However, the average R&D/sales ratio for the entire group of companies is significantly lower in the EU at 3.2 %, compared to 4.2 % for Japan and 4.5 % for the US. The main reason is the difference in the mix of industrial sectors between the EU and the non-EU world. The EU has a smaller proportion of output flowing from high R&D/sales sectors.

The example of the IT sector

This phenomenon is particularly noticeable in IT Hardware, and Software & Computer Services. The proportion of US companies in IT hardware and electronics & electrical equipment is twice as large as the proportion of EU companies, and in software & computer services, the proportion of US firms is almost four times as large. Indeed, much of the difference in overall R&D/sales ratios can be explained by the size difference in IT Hardware and Software & Computer Services between the EU and non-EU worlds. Together, IT Hardware and Software & Computer Services represent only 3.3 % of the sales of the top EU firms in this Scoreboard, compared to 15.5 % for the non-EU firms. These structural differences raise important but complex issues that deserve attention in the future.

See also IP/04/1463
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