Benchmarking R&D

Nov. 4, 2009
Top innovators increased their research-and-development spending even as the economy sank.

When it came to research-and-development spending in 2008, the leading innovative companies matched their deeds to their words. Simply said, while many companies pronounce innovation as critical to their organizations' success, the world's top public R&D spenders went the extra mile and actually boosted their research-and-development expenditures even as the economy sank.

That's the word from Booz & Co. in its fifth annual analysis of global innovation spending. According to the global consulting firm, R&D outlays from the world's largest 1,000 publicly traded corporate R&D spenders rose by 5.7% to $532 billion in 2008.

"Reducing efforts on innovation would be similar to unilateral disarmament in wartime," stated Barry Jaruzelski, Booz & Co. partner. "Now is an opportune time to build advantage over competitors, especially weaker ones that may have to skimp on R&D for financial reasons."

Top 10 R&D Spenders

2008 Spend
(in billions)





Roche Holding




General Motors




Johnson & Johnson








Source: Booz & Co.

Further cementing their belief in the importance of innovation, more than two-thirds of companies maintained or grew their R&D spending even as a third (34%) said net income plunged in 2008. At the same time, more than a quarter decreased their spending in 2008.

The top 100 companies of these "Global Innovation 1,000" increased R&D spending by 3.9% while reducing overall capital expenditures by 1%, the Booz & Co. results show.

Still, the poor economy took its toll on certain industries' R&D spend. For example, in 2008 nine of the top 10 R&D spenders in the automotive category cut their spending in this area. And 60% of the auto companies in the Global Innovation 1,000 decreased R&D expenditures last year. Even so, on a net basis R&D spending overall grew by 0.6% in the auto category last year.

Only aerospace and defense saw R&D spending sink in 2008, down 2.3%.

Not surprisingly, eight of the top 10 R&D spenders in the software and Internet sector grew their spending in 2008. In computing and electronics, R&D spending was up more than 4%.

One final benchmarking note: Among the top 20 spenders, R&D spending as a percentage of sales was 8% in 2008.

The complete study is available online in PDF format at Profits Down, Spending Steady: The Global Innovation 1000.

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