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MEMO/09/19

Brussels, 22 January 2009

"Towards a more research-intensive and integrated European Research Area" - Science, Technology and Competitiveness key figures report 2008

This memo provides the main data and detailed analysis of EU's performance in Science, Technology and Competitiveness compared with its main competitors. This Key Figures report is prepared and published by the Directorate-General for Research of the European Commission. The 2008 report present an overview of the progress in both EU investment and in implementing the European Research Area from 2000 to 2006. This MEMO only focuses on the first part of the report. For more information on progress of the European Research Area, please refer to the report: http://ec.europa.eu/research/era/

1. Has the EU made progress on increasing investment in R&D?

Gross Domestic Expenditure on R&D (GERD) in EU-27 grew by 14.8% in real terms between 2000 and 2006. GDP experienced a similar rate of growth over the same period. As a result, EU-27 R&D intensity (GERD as a % of GDP) has not fundamentally changed over this period and stood at 1.84% in 2006.

Over the same period, R&D expenditure in the US grew by 10.1% in real terms and US R&D intensity decreased by 4.6%. This decrease was exclusively due to a lower intensity of business funding of R&D.

[ Figures and graphics available in PDF and WORD PROCESSED ]

The stability of R&D intensity at EU-27 level hides a more dynamic and at the level of individual countries. In 17 Member States, R&D intensity increased between 2000 and 2006, mainly in the less R&D-intensive Member States. However, the performance of Austria and Switzerland demonstrate that increases in R&D intensity can be achieved even when starting from high levels. R&D intensity has not increased at EU-27 level because the countries with increasing R&D intensities do not have very high shares of EU-27 GDP. In particular, R&D intensity has not increased in the United Kingdom, France and Italy, and has increased only slightly in Germany. These are the four countries with the highest GDP in EU-27.

[ Figures and graphics available in PDF and WORD PROCESSED ]

2. Has the financing of R&D progressed towards the public and private funding targets of 1% and 2% of GDP?

In 20 Member States, the share of the government budget for R&D in total general government expenditure increased between 2000 and 2007. As a result, the intensity of government funding of R&D has increased in a majority of Member States. However, at EU-27 level, this intensity has remained stable because there have been no increases in some Member States with a high share of EU-27 GDP.
[ Figures and graphics available in PDF and WORD PROCESSED ]

At EU-27 level, the intensity of business funding of R&D has slightly declined between 2000 (1.05% of GDP) and 2006 (1.00% of GDP). In the US, the decline was much more significant, although from a substantially higher level. The intensity of business funding of R&D has increased almost exclusively in those Member States where this intensity was already low or very low. Except for Austria, EU Member States with medium and high levels of business funding have not been able to increase substantially their business R&D funding intensities. EU-27 is lagging behind the US, Japan and South Korea in terms of overall R&D intensity because of this lower level of R&D funded (and performed) by the business sector.

Since 2000 an increasing share of domestic R&D in EU Member States has been funded from foreign sources. However, so far it has not been possible to break down foreign sources of funding into public and private.

3. Why is business-sector R&D intensity lower in the EU than in the US?
Figure I.1.15 (a) Manufacturing value added - % distribution by type of industry
, 2003
Figure I.1.15 (b) Manufacturing BERD as % of manufacturing value added by type of industry
(1)
, 2003
(2)
Source:
DG Research
Key Figures 2008
Data:
EU KLEMS database, Eurostat, OECD
Notes:
(1) See Methodological Annex for the list of sectors included in each type of industry.
(2) 2003 is the latest year available for which it is possible to compute an EU-27 aggregate for manufacturing BERD by type of industry; it is also the latest year

for which data are available for the US.

(3) EU-27 does not include BG, LV, LT, LU, MT, AT, PT, RO, SK.
EU-27
(3)
High-Tech
(12.0%)
Medium-High-
Tech (31.7%)
Low-Tech
(32.1%)
Medium-Low-
Tech (24.3%)
US
High-Tech
(18.3%)
Medium-High-
Tech (28.0%)
Low-Tech
(32.7%)

The US has both a larger and more research-intensive high-tech manufacturing industry than the EU – these are the underlying reasons for the R&D gap between the EU and the US in the business sector.

The overall business R&D intensity of the EU and the US is predominantly determined by the research intensity and size of the high-tech and medium-high-tech manufacturing industries. The US has a higher level of manufacturing R&D intensity (1.18%) compared to the EU (1.01%) because high-tech industry has a larger share of the economy in the US than in the EU (the share of high-tech industry in total manufacturing value added is 18.3% in the US and 12% in the EU). Furthermore, high-tech industry is about 20% more research-intensive in the US than in the EU.

The services sector and the low-tech and medium-low-tech manufacturing sectors make very little contribution to overall business R&D intensity. The importance of services in the EU economy continues to increase while that of manufacturing industry as a whole continues to decline. Services accounted for 72% of total EU-27 value added in 2005, whereas manufacturing industry was responsible for 17% of EU-27 value added.

Therefore, although a majority of sectors in manufacturing industry and almost all services sectors have become more research-intensive between 1995 and 2003, this has resulted in only a relatively modest increase in overall business R&D intensity from 1.13% in 1995 to 1.19% in 2003.

4. How is R&D developing in China?

China's R&D intensity is still lower than that of the EU and US (1.42 vs 1.84 and 2.61 respectively). However, it is catching up rapidly, with a 50% growth in intensity between 2000 and 2006 – growth which was almost entirely in the business sector. In 2006, the EU-27's overall R&D intensity only exceeded China's because of higher public funding of R&D in the EU. This underlines the importance of mobilising business investment in R&D to keep the EU competitive.

Other signs of China's growing strength in R&D are the growth in scientific publications (178% growth between 2000 and 2006), and the growing number of researchers (annual growth of 9.9% between 2000 and 2006).

Regarding technology, China has shown rapid growth in the number patent applications filed under the Patent Cooperation Treaty, with a 137% increase between 2000 and 2005; however, the growth is from a very low basis and overall patenting activity is still relatively low. By contrast, China's growth in high-tech exports (mainly computers and office machinery) has been sufficient to put it in a world-leading position. China is now the largest exporter of high-tech products, having increased its share of the world market from 4.1% in 2000 to 17.1% in 2005. This has been to the detriment of the US and Japan, with the EU's market shares also declining more recently.

5. Investing in human resources for R&D: Is the pool of human resources in S&T growing? Is the number of researchers increasing?

The EU has produced more graduates and doctoral graduates than the US and Japan since 2000. Furthermore, the growth rates in the numbers of graduates and doctoral graduates were much higher in the EU than in the US. In 2005, 100,000 doctoral degrees were awarded in EU-27 compared to 53,000 in the US and 15,000 in Japan. The Nordic countries have in general achieved the highest growth rates for graduates, science and technology professionals, R&D personnel and researchers.

The number of researchers (FTE) has grown twice as fast in the EU as in the US and Japan since 2000. The increase in the number of researchers in the EU has occurred primarily in the business sector. Despite this increase in the number of researchers in the business sector, in 2006 only 640,000 researchers were employed in the business sector in the EU compared to 1.1 million in the US.

The growth of the number of researchers (FTE) as a proportion of the labour force has been almost three times as high in the EU as in the US since 2000. However, the EU still has a much lower share of researchers (FTE) in the labour force than the US and Japan (0.56% compared to 0.98 % and 1.07%).

The most significant global change since 2000 has been the doubling of the number of researchers in China to 1.22 million in 2006.

6. The scientific and technological outputs of R&D activities and their high-tech outcomes: Has the EU increased its efficiency in producing scientific publications since 2000?

The EU-27 remained the largest producer of scientific publications in the world, increasing its share from 37.6% in 2000 to 39.7% in 2006. However, the EU contributes much less than the US to high-impact publications, and slightly less than would be expected from its overall share in world publications.

China's share of world scientific publications has more than doubled within six years and is now larger than the Japanese share.

7. Has the EU's inventiveness, as measured by patent applications, improved since 2000?

The number of patent applications with EU-27 inventors filed under the Patent Cooperation Treaty (PCT) increased by 13% between 2000 and 2005, compared to an increase of 9.6% for patent applications with US inventors. In comparison, the numbers of PCT patent applications from Asian countries have increased dramatically: Japan (100%), South Korea (161%), China (137%), India (241%). However, except for Japan, these growth rates are from relatively small absolute numbers.

US and Japanese inventions are concentrated to a higher degree than the EU in enabling technologies (biotechnology, ICT and nanotechnology). The Asian countries for their part account for a rapidly growing share of ICT patents in the world. Source:
DG Research

Key Figures 2008
Data:
Fraunhofer ISI, EPO, WIPO
Figure I.3.6 Technology Specialisations (2004-2005), based on patenting activity
-100
-50
0
50
100
Computers, office machinery
Telecommunications
Audiovisual electronics
Electronic components
Measurement, control
Optics
Medical equipment
General machinery
Machine tools
Special machinery
Electrical machinery, energy
Energy machinery
Transport
Metal products
Textiles, wood, domestic appliances,
food
Non-polymer materials
Basic chemicals
Polymers
Pharmaceuticals
US
JP
EU-27

[ Figures and graphics available in PDF and WORD PROCESSED ]

8. Attractiveness of the ERA and the integration of R&D: Is the EU attracting foreign funding of research?

The EU remains an attractive location for R&D investment by US firms, which invested 20 times more in R&D in the EU (62.5% of their foreign R&D investment) than in R&D in China in 2005 (3.3% of their foreign R&D investment). Moreover, in the period 2003-2005 the gap between US R&D spending in EU-15 and EU-15 R&D spending in the US decreased by over a half.

[ Figures and graphics available in PDF and WORD PROCESSED ]

9. Is the private sector moving towards increased integration across ERA countries?

In a number of EU Member States, business R&D performed by foreign affiliates of parent companies from other EU Member States and EFTA countries has reached a high level. In Ireland, over 60% of business sector R&D expenditure is in affiliates under foreign control. In the Czech Republic, Belgium, Austria and Sweden, this figure exceeds 40%. In all other Member States, excluding Slovakia, Poland and Finland, the figure exceeds 25%. For all countries apart from Ireland, the majority of this foreign R&D funding is from an EU or EFTA parent company. This is an indication of a relatively high level of integration of the private sector in the European Research Area.

For more information:

Full report on Science, Technology and Competitiveness (ST&C) key figures 2008:

http://ec.europa.eu/research/era/

Full report on Innovation Scoreboard 2008:

http://www.proinno-europe.eu/metrics

See also IP/09/92


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