Forfas recently published the results of a survey of the level of business expenditure on R&D. While on the surface the report makes for encouraging reading, there are some worrying developments.
Over €1.6 billion was spent on R&D activities in Irish businesses in 2008 according to the survey. The definition of R&D activity is characterised by the “resolution of problems and uncertainties using scientific or technological means”, so the survey may actually understate the level of R&D going on in businesses when a broader approach to R&D is taken. While the €1.6bn level is still quite a bit short of the Strategy for Science, Technology and Innovation target of €2.5bn (1.7% of GDP) in 2013, it represents an increase over previous years – the total expenditure has almost doubled since 2001.
However, the pace of increase has slowed in 2008. From 2001 to 2007 the report indicates that the level of expenditure has increased by 20% over the two years between each survey. However, it is estimated that the growth in investment between 2007 and 2008 is 5.5%. It is unlikely in the current economic climate that businesses will ramp up R&D spending to keep the pace of increase at the levels experienced earlier in the decade.
Another notable statistic in the report is the number of businesses enaged in R&D activities. There were fewer businesses engaged in R&D in 2007 than in 2001. In 2001, 1,264 businesses indicated they engaged in R&D. This rose to 1,370 in 2005 (an 8%) rise. However, in 2007 just 1,211 businesses were engaged.
There are different ways to look at this. Of course with fewer businesses engaged and a higher spend overall, the spend per business is greater. While a greater spend on R&D may improve the prospects of innovation output, the productivity of R&D is far more important than the absolute amount invested. If it was only a case of increasing investment how easy it would be to improve our innovation performance. It is worrying if fewer businesses engage in R&D as this has implications for how they can identify, evaluate and exploit knowledge that is external to the business.