R&D Dollars

To develop new biotechnology-based technologies and products, countries must invest in R&D. As shown in “Spending on Biotechnology R&D,” there’s a wide range of spending on biotech R&D—even when adjusted for purchasing power parity—and the U.S. spends the most by far.

By comparing OECD data on the percentage of business spending that goes to general R&D with our overall innovation score, as shown in “Buying Innovation,” some general connections emerge. First, one should not expect a perfect correlation from this comparison, since the data on R&D spending apply to many fields and our innovation score focuses on biotechnology. However, if you take the R&D spending percentage as an indicator of the overall interest in funding R&D, this comparison provides some general information. Despite the lack of a tight correlation between these metrics, countries in which businesses spend a higher percentage of their expenditures on R&D tend to score higher on our overall innovation score, and countries in which businesses spend a lower percentage tend to score lower on our overall innovation score. These correlations appear most relevant at the higher and lower ends of the percentage-spending spectrum.

For example, among the top five spenders on R&D as a percentage of business expenditures, three had the top six overall innovation scores. In contrast, the four countries that showed the lowest percentage of business spending going to R&D all finished in the bottom half of our overall innovation scores. Some anomalies also exist. For instance, businesses in Finland spend a relatively low percentage of their money on R&D, yet this country finished seventh on our overall innovation scorecard. On the other hand, Estonian businesses spend a relatively high percentage on R&D, but the nation finished in the bottom half (albeit near the top of it) on our overall innovation list. It would be interesting to have enough data to assess this metric against the innovation scores for all of the countries on our list, but those data were not available to us.

It’s no secret that biotechnology takes capital. Countries and companies must invest in a wide range of initiatives, from computation and information science to manufacturing and marketing. Without making such investments, biotechnology languishes instead of prospering. In some ways, investing in biotech R&D is like rain to a farmer. Without that water, seeds will not germinate and crops will never develop. Likewise, it takes R&D spending to force the seeds of biotechnology ideas to germinate. Without that spending, ideas—like seeds—merely wither away, buried and never seen.