Tycho Brahe's great brass globe

Tycho Brahe’s great brass globe © The Royal Society

In December, the UK Government published a strategy for science and innovation, entitled ‘Our plan for growth’. It outlined recent developments in the UK science and innovation system, as well as setting out the Government’s ambitions for the years to come.

But what is the more general situation for research and innovation systems globally?

The OECD’s biennial Science, Technology and Industry Outlook can help to answer this question; and the recently published 2014 version covers trends in science and innovation up to 2012.

The OECD (Organization for Economic Cooperation and Development) is an international economic organisation of 36 countries, mostly from the developed world, with a mission to promote policies that will improve the economic and social well-being of people around the world. Its Science, Technology and Industry directorate is a well-known and reliable source for global statistics on research and innovation.

Global trends in science and innovation investment

Predictably, investment in research and innovation was badly hit by recession. At 1.6%, yearly growth in total R&D expenditure in OECD countries over 2008-12 was half the rate for the years 2001-08. Both public and private investments have suffered. In the UK for example, total investment in R&D declined in recent years to the current level of 1.72% of GDP, well below the OECD median.

In both absolute and relative terms, the UK invests in research less than similar-sized European economies such as France and Germany.

Public R&D budgets have levelled off in many countries, and declined in others. In the UK, since the 2010 spending review, the Government’s ‘flat cash’ science budget will have lost to inflation over £1bn by the end of 2015/16. Expenditure by businesses on R&D in OECD countries grew by 1.1% a year in 2008-12, which is notably slower than the 4.2% increases seen in 2002-08, although it did accelerate in 2012. R&D investment by smaller firms suffered particularly from the crisis, as they face falling incomes and restricted access to finances.

According to the OECD, under current conditions, a strong resurgence in R&D spending in the next two years remains unlikely. Any increase is likely to be driven primarily by business investment. This is especially worrying for the UK where investment by businesses is lower than in other advanced economies, even adjusting for differences in the industrial landscape.

Which countries are leading the way?

Globally, the balance of research and innovation is shifting away from traditional leaders to emerging economies, especially in Asia. Measured on R&D spend, patents and scientific publications the US, EU and Japan’s share of scientific research is diminishing, slowly giving way to emerging economies, led by China.

At 2%, the percentage of China’s GDP devoted to R&D is now on par with that of the EU 28, albeit it still invests less in absolute terms as its economy is currently smaller than that of the EU. If recent trends continue, China is poised to become the top performer of R&D in the world by the end of the decade. Its Medium and Long-term National Plan for S&T Development (2006-2020) fixes a target for R&D spending of 2.5% of GDP by 2020.

The EU has set for itself the target of 3% of European GDP to be spent on R&D by 2020, but European countries’ response to this have been mixed. Some, such as Germany, are moving towards meeting their R&D intensity target, while others, notably southern European countries, have fallen behind.

The UK has not set an official target for R&D investment, but analysis from the Department for Business, Innovation and Skills (BIS) suggests that a level of R&D spend consistent with securing future economic success for the UK is likely to be closer to 2.9% of GDP.

How are governments responding?

Throughout the OECD, research and innovation policies are being given more prominence, with governments seeking to leverage private funding for innovation and increase the impact of public investment, for example through a renewed interest in technology transfer.

Governments are also looking at ways to attract more foreign investments, which in the UK for example accounted for 20% of R&D spending in 2012. This has led governments worldwide to pay further attention to the attractiveness to investors of the national educational and research systems, to skill policies and to the intellectual property rights framework.

With responsibility for defending and looking after the health of their citizens and running a complex bureaucratic machinery, governments remain one of the biggest customers of R&D-intensive businesses, from defence to pharma to IT. Some countries are therefore trying to make smarter use of their public procurement budgets to foster innovation, through schemes such as Small Business Innovation Research in the US and Small Business Research Initiative in the UK.

Research and Innovation policies are increasingly challenge driven, and the target and focus of public research have evolved to respond to wider socio-economic and political developments and to strengthen competitiveness.

The report highlights that as research funding becomes more competitive and project-based, a balance needs to be struck between competition and stability. In the UK, research is supported through the dual support system, by which institutions receive core funding through the higher education funding bodies and project funding from the research councils. This system is often considered to be one of the foundations for the country’s great scientific results and the Royal Society has repeatedly called for it to be maintained.

Another trend has been a move towards increased efficiency. Public programmes to fund research and innovation have undergone streamlining and consolidation, in a view to lower administrative and application costs. One of the biggest complaints about EU research and innovation funding was about its complexity and bureaucratic burden. The latest Framework Programme launched last year, Horizon 2020, promises a much leaner and straightforward system.

Researching research

In summary, reports like the OECD’s allow us to see the wider global landscape within which our national R&D policy is set.

Countries around the world are trying to grow knowledge economies, and key trends in policies are emerging, but no one yet knows the secret mix of policies that efficiently link research and innovation to growth. Policy evaluation in the area is becoming of increasing interest.

Evaluation practices are being strengthened and a more accurate understanding of research and innovation policies is being built, thanks to programmes such as the US ‘Science of Science and Innovation Policy’. In London, the King’s College Policy Institute is organising a lecture next week on the Science of Science.