Reply #38: Global competition sparks spending spree

[Ghost Dog]

http://www.ft.com/cms/s/2e966372-6771-11db-8ea5-0000779e2340.html

Large companies are pouring money into research and development at an unprecedented rate, in response to growing global competition. The international R&D Scoreboard, published on Monday, shows a 7 per cent increase in spending by the world’s top 1,250 companies.

“In many sectors profits are growing strongly and companies can afford to spend more on R&D,” says Norman Price, an industrialist at the UK Department of Trade and Industry, which publishes the annual scoreboard. “Where profits are weak, such as the automotive industry, the competition is so fierce that companies dare not cut their investment.”

But the scoreboard – the world’s most comprehensive R&D ranking – provides little reassurance for European policymakers who are concerned about Europe’s poor long-term R&D performance. European companies spent 5.6 per cent more in 2005-6 than the average of the previous four years. The comparable increase for US companies was 15.4 per cent.

The most spectacular growth is in Asia. The 44 Taiwanese companies in the scoreboard increased their R&D investment by 30.5 per cent last year, while the 17 South Korean companies posted 11.9 per cent R&D investment growth.

While Taiwanese R&D is spread among a number of electronics and computer companies, the Korean scoreboard is dominated by three fast-growing giants: Samsung and LG in electronics, and Hyundai in cars.

Samsung’s R&D spending has grown to $5.44bn (€4.3bn, £2.9bn) from $1.88bn over the past four years. “The way Samsung has poured resources into R&D has had an impact elsewhere in the electronics industry, with other companies increasing spending so as not to be left behind,” says Mr Price.

But R&D growth in Japan remains modest – a continuing legacy of the country’s long period of economic stagnation. Japanese companies raised spending by 4 per cent in 2005-6 and their investment was only 5.9 per cent above the average of the previous four years.

The most striking sectoral change in the scoreboard since its inauguration in 1992 has been the rise in pharmaceuticals, which provided no companies among the top 20 R&D spenders 14 years ago and has six entries now. In contrast, the telecoms and chemicals industries, each of which had two top-20 companies in 1992, have none now.

/...