Monitoring industrial research the survey on business trends in R&D investment : main results from the 2005 pilot survey (scoreboard companies).
Date: 2007-08-14
Institutions: Directorate-General for Research and Innovation, Institute for Prospective Technological Studies
Subjects: European undertaking, industrial research, information, investment, research and development

Acknowledgements

This Survey on Business Trends in R&D Investment is the result of 
a  close  co-operation  between  the  Joint  Research  Centre  (DG-JRC) 
and  Research  (DG-RTD)  Directorates-General  of  the  European 
Commission. The work has been conducted by the JRC´s Institute for 
Prospective Technological Studies (JRC-IPTS), with overall monitoring 
and guidance provided by Directorate M (Investment in research and 
links with other policies) of DG-RTD.

Within DG JRC-IPTS the project was coordinated and carried out by 
the  Support  to  the  European  Research  Area  Unit  (SERA  -  Head  of 
Unit: Patrice Laget) under the leadership of Pietro Moncada-Paternò-
Castello, who also contributed to the analysis. Alexander Tübke from 
DG JRC-IPTS was the main author of the analysis. Lesley Potters and 
René  van  Bavel  from  the  SERA  Unit  and  James  Gavigan  from  DG 
RTD-M contributed to it.

The  survey  benefited  from  contributions  from  external  experts, 
especially Andrew Dearing (European Industrial Research Management 
Association), Ben Dankbaar (Radboud University Nijmegen), Parimal 
Patel  (University  of  Sussex,  SPRU)  and  Han  Roseboom  (TNO), 
coordinated by Jos Leijten (TNO -Innovation Policy Group) through 
the European Techno-Economic Policy Support network (ETEPS). 

DG JRC-IPTS and DG RTD-M thank all those who have contributed 
to this project, especially Keith Smith as well as the other colleagues 
from the SERA Unit.

Comments and inputs should be sent by email to:
JRC-IPTS-IRI@cec.eu.int 

More information on Industrial Research and Innovation at:
http://iri.jrc.es/

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The European Commission retains the copyright to this publication. 
Reproduction is authorised, except for commercial purposes, provided 
the source is acknowledged. Neither the European Commission nor 
any person acting on behalf of the Commission is responsible for the 
use that might be made of the information in this report.

Technical Report EUR 22162 EN
ISSN 1018-5593

© European Communities, 2006
Printed in Spain

 
Table of contents

Key Findings

 – Introduction

2 – Expectations for R&D investment

3 – Reasons for investing in R&D

4 – Sources of R&D investment

5 – In-house R&D and Outsourcing

6 – Choice of the R&D investment location

7 – Outcomes from R&D investment

8 – Frequently Cited Suggestions

9 – Annex: The Methodology of the Pilot survey

3

4

5

7

9

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The SURVEY on Business Trends in R&D Investment    

2  The SURVEY on Business Trends in R&D Investment

 
Key Findings

This  document  reports  some  results  of  a  pilot  survey  designed  to  gather 
information on trends in R&D investment practices of firms. These results refer to 
the top 500 EU R&D-investing companies. A total of 95 companies responded, 
resulting in a response rate of 19 %. The main findings are as follows:

n  On  average,  respondents  expect  R&D  investment  to  grow  by  about  the 
same rates for the next year (5.6 %) and the next three years (5.8 % p.a.). 
Respondent  companies  in  high  R&D-intensive  sectors  expect  bigger 
growth rates for R&D investment than those in other sectors. The analysis 
indicates positive expectations for R&D investment in 16 of the 22 sectors 
covered. 

n  The incentives to increase R&D investment most often indicated (from 
the list provided) are: changes in market demand for new products and 
services,  changes  in  technological  opportunities  and  changes  in  the 
company’s turnover or profit. New products and services also constitute 
the main output expected from R&D activity. The least important factors 
for increasing R&D investment are changes in labour costs of researchers 
and changes in the availability of researchers. 

n  Own funds are by far the principal source for financing the company’s 
R&D, followed by tax incentives and public grants. Companies in high 
R&D-intensive sectors rely more on the stock market and joint ventures 
than their counterparts. 

n  Outsourcing is a very popular instrument in R&D management, which 
is used to complement in-house R&D. Most respondents outsource an 
average of 15 % of their R&D investment. Two-thirds of the outsourced 
R&D  goes  to  other  companies  and  one-third  to  public  research 
organisations.  Companies  from  high  R&D-intensive  sectors  tend  to 
outsource more R&D activity to other companies and perform less R&D 
in-house than their counterparts. 

n  The  most  important  factors  when  deciding  where  to  locate  R&D  are: 
availability of researchers, access to specialised R&D knowledge, market 
access  and  a  predictable  legal  framework  for  R&D.  Labour  costs  of 
researchers and public procurement of innovative products are among the 
least important factors which make R&D investment locations attractive. 

n  A  company’s  home  country  is  considered  the  most  attractive  place  for 
locating R&D investment in more than two thirds of the cases. Germany, 
the United Kingdom and France are the three most attractive EU countries 
for locating R&D activities. Outside the EU, the US is the most attractive 
location before China and India. 

n  Companies’  expected  trends  in  their  own  R&D  activity  in  China  and 
India  are  unambiguously  positive  (unlike  other  countries,  where  some 
firms expect stagnation and a decrease in activity). Trends for the US are 
somewhat more positive than for Germany, France, the UK, Italy or the 
Netherlands, where many respondents expect stagnation. 

n  New  products  from  R&D  are  mainly  exploited  by  the  company  itself, 

which confirms that R&D is considered a strategic core activity.

Note that as these findings are based on the responses from a group of 95 
companies, they cannot necessarily be generalised to whole sectors or larger 
firm populations.

The SURVEY on Business Trends in R&D Investment   3 

Chapter 1

Introduction

Increasing and improving R&D investment in Europe is at the heart of the EU’s 
Lisbon Strategy. In support of this, the present survey gathers information, 
at a European level, on factors and issues which surround and influence R&D 
investment in companies. This survey is part of a wider range of activities within 
the Industrial Research Investment Monitoring (IRIM) initiative undertaken 
jointly by the Directorate Generals Research (DG-RTD M) and Joint Research 
Centre,  Institute  of  Prospective  Technological  Studies  (DG-JRC  IPTS).  The 
IRIM survey covers R&D investment levels and trends, R&D location strategy 
and management, and expected outcomes of R&D strategy. 

This document describes the results of the first part of the pilot phase of the 
IRIM survey. 95 of the 500 European companies in the 2004 EU Industrial 
R&D Investment Scoreboard1 responded to this first part of the pilot phase2, 
resulting  in  a  response  rate  of  19  %.  However,  while  these  companies 
represent one-fifth of the Scoreboard’s 500 EU companies, they account for 
more than one-fourth of the total R&D investment in the Scoreboard. 

For the purpose of the analysis, the sectors were grouped by their Scoreboard 
R&D/Sales ratio into high (more than 5 %), medium (between 2 and 5 %) 
and low (less than 2 %) R&D-intensive sectors. 

Further  information  about  the  methodology,  sectors  and  average  R&D 
investment amounts can be found in the Annex4.

1  See http://EU-IRIscoreboard.jrc.es/
2  The second part addressed a sample of 6 100 companies in the sectors pharmaceuticals & 

biotechnology, chemicals and engineering & machinery in autumn 2005.

  R&D intensity is the ratio between R&D investment and net sales.
4  See section 9 Annex: The Methodology of the Pilot survey

4  The SURVEY on Business Trends in R&D Investment

 
Expectations for R&D investment

Chapter 2

The surveyed companies expect their R&D investment to grow by about the 
same rates for the next year (5.6 %) and the next three years (5.8 % p.a.). As 
shown in Figure 1 below, the expected changes grow with the R&D intensity 
of the sector group.

Figure 1

Expected changes in R&D investment and average R&D investment, by sector group

Note: The sectors were grouped by their Scoreboard R&D/Sales ratio into high (more 
than  5  %),  medium  (between  2  and  5  %)  and  low  (less  than  2  %)  R&D  intensive 
sectors. 
For 9 cases after elimination of 2 outliers with expected changes of more than 100 % 
for the next year. 
Source: Own compilation

On average, companies in the higher R&D-intensive sectors spend more on 
R&D than their counterparts. However, especially in the high and low R&D 
intensity groups, the averages are drawn up by relatively few companies which 
invest much more than their counterparts5. The average expected changes in 
R&D investment increase with R&D intensity of the sector groups. The figure 
shows that the most significant increase in the volume of R&D investment 
is between the medium and the high R&D-intensive sector group, while the 
biggest increase in expectations lies between the low and the medium R&D 
intensity group. Thus, although starting from a considerably lower level of 
investment, companies from the medium R&D-intensive sectors seem to be 
subject to a similar technological pace in terms of R&D investment increases 
to their high R&D-intensive counterparts. 

The sector analysis is not statistically significant due to the low representation 
of most sectors, so its findings should be interpreted with care. It reveals 

5  Only  14  %  of  the  firms  in  the  high  R&D  intensity  group  invest  more  than  the  group 
average. With 20 %, this figure is also low for the low R&D intensity group. Compared to 
these two, it is much higher (40 %) for the medium R&D intensity group. 

The SURVEY on Business Trends in R&D Investment   5 

that the overall outlook for changes in R&D investment is positive for 16 
of the 22 sectors covered. R&D investment increases considerably above 
10  %  are  expected  in  pharmaceuticals  &  biotechnology.  Higher  than 
average expectations for R&D investment increases also exist in software 
& computer services, engineering & machinery and support services. On 
the other side of the spectrum, there are sectors where R&D is expected 
to grow much less than average, e.g. tobacco, personal care & household, 
food  producers  &  processors,  forestry  &  paper  or  telecommunication 
services.  In  the  latter,  R&D  investment  growth  is  expected  to  be  below 
the inflation rate and the outlook in the utilities sector is negative for this 
year, but positive for the coming three years. 

6  The SURVEY on Business Trends in R&D Investment

 
Reasons for investing in R&D

Chapter 3

Reasons  for  deciding  how  much  to  invest  in  R&D  were  addressed  with 
respect  to  their  importance  (i.e.  which  is  the  most  important  factor)  and 
their direction of influence (i.e. whether a factor makes the company invest 
less, the same or more in R&D). The first aspect, importance, is shown in 
Figure  2  below  and  reveals  that  the  R&D  investment  decision  is  mainly 
guided  by  three  aspects:  changes  in  market  demand  for  new  products 
and  services,  changes  in  technological  opportunities  and  changes  in  the 
company’s turnover or profit. The two former reflect the well-known role 
of market-pull and technology-push, while the latter confirms the finding 
that own funds are the most important source of R&D investment6. 

Figure 2

Importance of factors affecting the decision to invest in R&D

Note: Refers to the 95 companies 
Source: Own compilation

Three  other  factors,  which  concern  changes  in  competition  from  other 
companies, still have some importance for the decision how much to invest 
in R&D. The whole group of the six most important factors is market-related. 
Then follows a group of seven less important factors, which are all related 
to  framework  conditions.  Among  them  are  changes  in:  R&D  cooperation 
opportunities,  public  R&D  support,  the  legal  framework  for  R&D,  e.g. 
Intellectual Property Rights (IPR) or regulation. Compared to the other factors, 
changes in labour costs of researchers and the availability of researchers play 
the least important role. 

The  second  aspect,  direction  of  influence,  is  shown  in  Figure  .  It  reveals 
that changes in market demand and technological opportunities, in addition 
to  being  the  most  important  factors  for  this  decision,  are  also  those  with 

6  See section 4 Sources of R&D investment
  Competition from companies located in (a) the European Union, (b) other industrialised 

countries, e.g. the US or Japan, (c) emerging countries, e.g. China or Russia.

The SURVEY on Business Trends in R&D Investment   7 

the strongest positive influence in it. No respondent claimed that changes in 
market demand would lead the company to invest less in R&D8.

Figure 

Direction of influence of factors affecting the decision to invest in R&D

Note: The factors are sorted by the balance of the number of mentions “invest more” 
and “invest less”. 
Refers to the 95 companies, for which a total of 502 mentions were made. 
Source: Own compilation

These two factors are followed by nine other factors, ranging from changes in 
company turnover or profit to R&D productivity, which on balance constitute 
a  smaller  incentive  to  invest  more  in  R&D.  Changes  in  the  availability  and 
labour costs of researchers have a tendency to make the companies invest 
less in R&D.

8  There were many mentions saying the company would invest the same in R&D, i.e. this 
factor is neutral for the company’s R&D investment behaviour. Except for market demand, 
where the number of these mentions was very low, the number of mentions saying “invest 
the  same”  was  similar  for  all  the  other  factors.  This  indicates  an  even  more  positive 
influence of market demand of new products/services for the level of R&D investment. 

8  The SURVEY on Business Trends in R&D Investment

 
Sources of R&D investment

Chapter 4

Own funds are by far the principal source for financing the company’s R&D. 
Tax incentives and public grants rate second and third. Joint ventures, public 
loans and guarantee schemes, raising capital on the stock market, equity and 
venture capital and bank loans are much less important. This is summarised 
in Figure 4 below.

The figure reveals some differences between sector groups. Strong statistical 
evidence  underlines  that  raising  capital  on  the  stock  market  is  much  more 
important  for  companies  in  high  R&D-intensive  sectors  than  for  their 
counterparts.  The  same  is  true  for  joint  ventures,  while  the  differences 
are  not  statistically  significant  for  the  other  sources  of  finance.  However, 
companies in high R&D-intensive sectors also show a certain preference for 
tax incentives, equity and venture capital and bank loans. The figure suggests 

Figure 4

Sources of R&D funds by sector group 

Note: * “Joint ventures” refers to a situation where funds for joint R&D projects are 
also provided by  project partners, so that the company does not finance this project 
on its own. 
Refers to the 95 companies
Source: Own compilation

that these companies use a wider spectrum of sources of R&D funds than 
their counterparts. The role of public grants for financing R&D seems to be 
comparatively bigger for companies in low R&D-intensive sectors.

The SURVEY on Business Trends in R&D Investment   9 

0  The SURVEY on Business Trends in R&D Investment

 
In-house R&D and Outsourcing

Chapter 5

Outsourcing  is  a  very  popular9  instrument  in  R&D  management,  which  is 
used  to  complement  in-house  R&D.  The  respondents  outsource  an  average 
of 15 % of their R&D investment10. Two-thirds of the outsourced R&D goes 
to other companies and one-third to public research organisations. Companies 
from  high  R&D-intensive  sectors  tend  to  outsource  more  R&D  activity  to 
other companies and perform less R&D in-house than their counterparts. An 
overview of the levels of in-house and outsourced R&D is shown in Figure 5.

Figure 5

Degree of in-house and outsourced R&D by sector group

Note: Refers to the 95 companies 
Source: Own compilation

There  are  no  significant  differences  for  outsourcing  by  R&D  intensity  of 
the sector group. There is weak indication that companies from high R&D-
intensive sectors perform less R&D in-house and outsource more activity to 
other companies than their counterparts. 

Disaggregating the analysis further by sector leads to results which are no 
longer significant due to the small number of cases by sector. As an indication, 
more than 25 % of R&D is outsourced in the sectors electricity, beverages, 
pharmaceuticals  &  biotechnology  and  software  &  computer  services.  On 
the other hand, in the sectors leisure, entertainment & hotels, IT hardware, 
telecommunication  services,  engineering  &  machinery  and  electronic  & 
electrical equipment, health, automobiles & parts and chemicals, more than 
90 % of R&D is performed in-house. 

9  Nine out of ten respondents outsource R&D.
10  This figure confirms other studies on the level of outsourcing, see e.g. EIRMA: “Responsible 
Partnering: Joining forces in a world of open innovation”, European Industrial Research 
Management Association, January 2005

The SURVEY on Business Trends in R&D Investment    

2  The SURVEY on Business Trends in R&D Investment

 
Choice of the R&D
investment location

Chapter 6

The  respondents  made  statements  about  twelve  factors  for  locating  or 
increasing some of the company’s R&D investment in another country than 
its home country. The answers can be split into three groups. The first one 
contains the most important factors, namely high availability of researchers, 
access to specialised R&D knowledge, market access and a predictable legal 
framework for R&D, e.g. Intellectual Property  Rights (IPR).  Three  of these 
four are supply-side factors.

A  second  group  contains  five  other  important  factors,  ranging  from 
macroeconomic and political stability to proximity to technology poles and 
incubators.  The  third  group  contains  factors  which  are  less  important,  like 
labour  costs  of  researchers,  proximity  to  suppliers,  public  procurement  of 
innovative products and a low degree of regulation of the company’s product 
markets. All factors are shown in Figure 6 below.

Figure 6

Importance of location factors by sector group

Note: Refers to the 95 companies 
Source: Own compilation

Four  of  the  above  factors  were  also  examined  with  regard  to  their  role  in 
the decision how much to invest in R&D11. R&D collaboration opportunities 

11  See also section  Reasons for investing in R&D

The SURVEY on Business Trends in R&D Investment   3 

have a moderate and labour costs of researchers a low impact both for the 
R&D  investment  decision  and  the  choice  of  location.  On  the  other  hand, 
the  availability  of  researchers  and  the  legal  framework  for  R&D  are  highly 
important for the choice of location but much less important for the decision 
to invest in R&D. This suggests that these latter two are true location factors 
which, once the location decision is taken, are considered rather as boundary 
conditions than factors which determine the level of R&D investment.

Only few sector differences could be found. There is weak evidence that, in 
medium R&D intensive sectors, public procurement of innovative products 
plays a smaller and proximity to suppliers a bigger role than for other sectors. 
Also, proximity to other company activities and low labour costs of researchers 
seem to have a slightly bigger role in medium than in low and high R&D-
intensive sectors. A reason for this may be that companies in this sector group 
are mainly from automobiles & parts and engineering & machinery, which 
are mature sectors relying on established industrial clusters. 

An important aspect in location is the choice of a country. The respondents, all 
from companies based in the EU, ranked EU and non-EU countries (including 
the home country) by their attractiveness for R&D investment. The results for 
the former are shown in Figure  below. 

Figure 

Popularity index* of EU countries to locate R&D investment (including the home country)

* Note: Based on a popularity index for 95 cases: most favourable country =  points, 
2nd = 2 points,  rd = 1 point
Source: Own compilation

Overall,  Germany,  the  United  Kingdom  and  France  form  a  group  of  the 
three  most  favoured  countries,  followed  by  the  Netherlands,  Sweden,  Italy 
and Spain. In more than two-thirds of the cases, companies chose their home 

4  The SURVEY on Business Trends in R&D Investment

 
country as the most attractive location. The preference for the home country 
was  the  most  marked  for  responses  from  the  Netherlands,  Germany,  and 
Denmark. Underlying reasons for the preference of the home country may be 
geographic proximity to other company sites or familiarity with the language 
and environment. When eliminating the home base as a possible choice, the 
New Member States gain over-proportionally in weight but do not enter the 
top five. It is interesting to note that the home-base seems to play a role for 
choosing an R&D investment location, but without implying changes in the 
level of R&D activity and personnel. It seems that, while companies prefer to 
choose an R&D location within their country, this location is then subject to the 
same R&D strategy like any other company site outside the home-country. 

Regarding the preferred location outside the EU, a group of three countries 
can be distinguished. The United States had a popularity index twice that of 
China and three times that of India. This is shown in Figure 8.

Figure 8

Popularity index* of non-EU countries to locate R&D investment

* Note:  Based on a popularity index for 95 cases: most favourable country =  points, 
2nd = 2 points,  rd = 1 point
Source: Own compilation

The high preference for the US and the difference in preference of the first 
three countries with respect to the others are noticeable. An explanation for 
this may be that the US has a very large internal market and those of China 
and India are growing strongly and expected to develop into a considerable 
size12. It is also interesting to note that Asian countries, like South Korea or 
Singapore, are not frequently mentioned.

12  See also section  Reasons for investing in R&D, where market demand for new products/

services is the most important reason to invest in R&D.

The SURVEY on Business Trends in R&D Investment   5 

In  addition  to  the  attractiveness  for  location,  respondents  also  made 
statements about the expected development of R&D activity and personnel 
within the next three years at the company’s present or future locations. The 
numbers of statements of decreases, no change or increases of R&D activity 
are shown in Figure 9 below. 

Figure 9

Expected changes in R&D activity at the company’s present or future locations for 
the next three years

Note:  For  5  cases  considering  only  countries  which  were  mentioned  at  least  three 
times.  The  countries  are  ordered  top-down  by  and  intensity  (number  of  statements) 
and clarity  (unanimity of statements). 
Source: Own compilation

In  those  cases  where  statements  about  the  trends  for  R&D  activity  were 
made,  they  were  unanimously  positive  for  China  and  India.  For  the  other 
countries, they included also stagnation and decrease. The expected trend 
for  R&D  activity  in  the  US  is  somewhat  more  positive  than  for  Germany, 
France, the UK, Italy or the Netherlands, where there are more respondents 
who expect stagnation.

Like for R&D activity, expectations were collected for R&D personnel, and 
there is a statistically significant correlation between these two. The relation 
between  the  expectations  for  R&D  activity  and  personnel  reveals  that  a 
considerable share of R&D investment goes into human resources. However, 
especially  in  the  first  five  countries  in  Figure  9,  the  expectations  for  R&D 
activity are more pronounced than for R&D personnel, suggesting that the 
companies expect an overall increased R&D efficiency.

6  The SURVEY on Business Trends in R&D Investment

 
Outcomes from R&D investment 

Chapter 7

For  the  companies  in  the  sample,  the  main  expectations  from  R&D  are 
the  creation  of  new  products,  processes  and  services  and  increased  sales 
or  market  share.  New  products  from  R&D  are  mainly  exploited  by  the 
company  itself.  They  represent  also  the  main  output  expected  from  R&D 
activity1. Also increased quality, productivity and flexibility and technological 
leadership  are  expected  as  important  outcomes  of  R&D  investment.  Less, 
but still considerable, expectations are related to improving the image of the 
company or brand, increasing intellectual assets (e.g. IPR), reducing time to 
market, carrying-out R&D in collaboration with companies and institutions 
and  reducing  costs.  Outsourcing  R&D  activities  to  companies  and  public 
research organisations and the exploitation of new products by third parties 
through licensing play a minor role. This means that responding companies 
generally do not undertake R&D for other parties, which confirms that R&D is 
considered a strategic core activity14. The expectations from R&D investment 
are shown in Figure 10 below.

Figure 10

Expected outcomes of R&D investment

Note: Refers to the 95 companies 
Source: Own compilation

1  See section  Reasons for investing in R&D
14  See section 5 In-house R&D and Outsourcing

The SURVEY on Business Trends in R&D Investment   7 

For  high  R&D-intensive  sectors,  there  is  some  evidence  that  increasing 
intellectual assets is a significant expectation as well as licensing new products 
to  third  parties,  while  cost  reduction  as  an  outcome  of  R&D  is  considered 
less significant than in the other sector groups. For medium R&D-intensive 
sectors,  there  are  some  indications  that  increased  quality,  productivity  and 
flexibility and a better image are more important expectation from R&D than 
for the other sectors. For companies in the low R&D-intensive sector group, 
R&D  collaboration  with  companies  and  institutions  and  a  reduced  time  to 
market play a relatively bigger role than for the others.

8  The SURVEY on Business Trends in R&D Investment

 
Frequently Cited Suggestions

Chapter 8

The most frequently cited suggestion is an easier and less bureaucratic access 
to the Commission’s R&D funds, especially the Framework Programme. A high 
number of suggestions also called for a European Patent, the strengthening 
of  European  competitiveness  in  the  light  of  competition  from  emerging 
economies, e.g. China, stronger links between science and the business sector 
and the support of innovation, also with respect to its links with R&D.

The SURVEY on Business Trends in R&D Investment   9 

20  The SURVEY on Business Trends in R&D Investment

 
Annex: The Methodology
of the Pilot survey

Chapter 9

9. Sample: Companies from the 2004 Scoreboard

The  specificity  of  the  information  needed  made  it  necessary  to  generate 
primary  data  through  a  self-administered  questionnaire.  The  questionnaire 
was directly sent to the 500 European companies of the 2004 EU Industrial 
R&D  Investment  Scoreboard15  together  with  a  cover  letter,  which  also 
included a link to the website of the questionnaire. 

A humble 48 responses were received by the first deadline (6 May 2005). 
Therefore, the deadline was extended to 2 June 2005, reminders were sent 
to the Scoreboard companies that hadn’t responded up to that date. In the 
end, 95 responses from Scoreboard companies have been received. 

9.2 Composition of the responses

The responses are classified in the same FTSE sector16 as in the Scoreboard1. 
There are two cases where multiple responses for the same company were 
averaged and treated as one answer from one company. 

As shown in Table 1, most of the responses come from chemicals, followed 
by  pharmaceuticals  &  biotechnology,  steel  &  other  metals,  automobiles  & 
parts and IT hardware. 

The 95 responses from the Scoreboard lead to a considerable response rate 
of 19 %. As shown in Table 2 further down, they companies reported an 
R&D  investment  of  €  26  604  million.  Ninety  of  these  95  companies  are 
large  and  the  remaining  five  are  medium  size.  In  terms  of  turnover  and 
employees, the average firm is quite big18. This is also true for the average 
R&D investment, the number of R&D employees and the R&D investment 
by employee19, although the averages are drawn up because relatively few 
companies invest a lot while many others invest relatively little. 

Examining  further  the  distribution  of  R&D  investment  captured  by  the 
survey, Table 2 below compares it to the 2004 EU Industrial R&D Investment 
Scoreboard,  which  reflects  a  sizeable  share  of  European  R&D20.  For  that 

15  See http://EU-IRIscoreboard.jrc.es/
16  The 2004 Scoreboard contains 1 sectors of the FTSE global classification system (see: 

http://www.ftse.com/indices_marketdata/global_classification/overview.jsp)

1  In the 2004 Scoreboard, each company is classified according to the sector it chose when 
it was first listed on an official stock exchange or, if this was not the case, the sector it 
declares as its main activity in its financial accounts or annual reports. 

18  The average turnover is € 9 15 million and the average number of employees is 0 512.
19  The average R&D investment is € 280 million, the average number of R&D employees 

1 0 and the average R&D investment per employee is € 2 thousand.

20  The worldwide R&D investment of the top 500 companies in the 2004 Scoreboard reflects 
just  more  than  half  of  the  overall  world’s  (business)  R&D  investment  (BERD).  The  R&D 
investment  included  in  the  Scoreboard  is  the  cash  investment  which  is  funded  by  the 
companies themselves. It excludes R&D undertaken under contract for customers such as 
governments or other companies as well as the companies’ share of any associated company 
or Joint Venture R&D investment. Where part or all of R&D costs have been capitalised, 
the  additions  to  the  appropriate  intangible  assets  are  included  to  calculate  the  cash 
investment  and  any  amortisation  eliminated.  In  order  to  implement  the  calculation  itself, 
the  R&D  expensed  to  the  profit  and  loss  account  (i.e.  R&D  “expenditure”)  are  summed 
with any capitalised R&D intangibles (i.e. R&D “investment”) and then any amortisation of 
capitalised R&D charged to the profit and loss account is subtracted from the resulted R&D 

The SURVEY on Business Trends in R&D Investment   2 

Table 1
Sources of responses to the questionnaire and distribution of sectors

Responses

Automobiles & Parts

Banks

Beverages

Chemicals

Diversified industrials

Electricity

Electronics & Electrical equipment

Engineering & Machinery

Food producers & processors

Foresty & paper

Health

Household goods & textiles

IT Hardware

Leisure, entertainment & hotels

Oil & gas

Personal care & household

Pharmaceuticals & biotechnology

Software & computer services

Speciality & other finance

Steel & other metals

Support services

Telecommunications services

Tobacco

Utilities - other

other

Total (25 sectors)

Source: Own compilation

6

1

1

15

2

4

4

7

4

2

4

1

6

2

2

2

13

2

1

8

1

3

1

3

0

95

purpose, the sectors were grouped by their Scoreboard R&D/Sales ratio into 
high (more than 5 %), medium (between 2 and 5 %) and low (less than 2 %) 
R&D intensive sectors. It should be noted that the reporting periods between 
the Scoreboard and the survey differ21. Further, surveys are always subject to 

expenditure amount. There are important differences between the EU R&D Scoreboard data 
and data on Business Expenditure on R&D (BERD) as published by the OECD or Eurostat. 
R&D investment in the Scoreboard is taken from the companies’ financial reports, which are 
based on the accounting standards for private companies. The Scoreboard therefore refers 
to the R&D financed by a particular company and allocates the amount to the registered 
office  location  of  the  ultimate  parent  company,  regardless  of  where  the  R&D  is  actually 
performed. On the other side, BERD data are established from a government perspective in 
order to know how much R&D is carried out within the national territory or sectors. BERD 
thus includes the entire R&D performed by businesses within a particular sector and territory, 
regardless of the source of financing or the registered office location of the company.

21  The Survey reflects the latest financial year (i.e. 2004), while the 2004 Scoreboard relates 

to data from the financial year 200.

22  The SURVEY on Business Trends in R&D Investment

 
Table 2
Comparison of R&D amounts in the Survey and the 2004 Scoreboard

FTSE sector

Automobiles & parts
Banks
Beverages
Chemicals
Diversified industrials
Electricity
Electronic &electrical equipment
Engineering & machinery
Food producers& processors
Forestry & paper
Health
Household goods & textiles
IT Hardware
Leisure, entertainment & hotels
Oil& gas
Personal care & household
Pharmaceuticals & biotechnology
Software &computer services
Speciality & other finance
Steel & other metals
Support services
Telecommunication services
Tobacco
Utilities-other
Other
Total (25 sectors)

R&D investment 
(million €)

Survey
2 364
400
14
5 351
196
150
936
460
90
79
240
88
4 113
155
314
1 607
7 356
17
44
1 083
18
404
6
1 118
-

SBO4
24 037
91
35
7 241
1 106
913
10 391
4611
1 721
253
1 756
592
12 498
166
1 890
938
17 109
2632
85
364
342
2 853
115
624
8 429
26 604 100 792

Representation 
in Survey vs. 
SB04*
Ú
Ò
Ò
Ò
Ú

Ú
Ú
Ú

Ú
Ú

Ò
Ú
Ò
Ò
Ú

Ò
Ú
Ú

Ò
Ú

R&D intensity

SB04

Survey
3.73% 4.60%
5.56% 1.30%
0.16% 0.20%
4.30% 4.20%
3.22% 3.30%
0.27% 0.80%
7.05% 6.50%
3.52% 2.50%
0.82% 1.70%
0.68% 0.60%
3.20% 5.10%
1.36% 1.30%
12.29% 15.60%
0.77% 0.80%
0.32% 0.30%
2.95% 2.70%
14.47% 15.20%
16.50% 12.80%
3.06% 3.20%
1.05% 0.80%
0.86% 0.70%
0.47% 1.00%
1.16% 0.70%
1.19% 0.40%
2.62%
3.05% 3.20%

-

Note:  “SB04” refers to the 2004 EU Industrial R&D Investment Scoreboard 
*  Representation  with  respect  to  the  numbers  of  companies,  shares  of  total  R&D 
investment and R&D investment amounts: sector is well (Ò), weakly () or not well 
(Ú) represented in the Survey compared to the Scoreboard

**  R&D/Sales ratio, often called “R&D intensity”, is a company’s R&D investment as a 

percentage of net sales

- means not available due to non response
Source: Own compilation

a self-selection bias and there might be an additional bias from the fact that 
the figures stated in the responses are not always audited22.

22  The responses to the questionnaire do not always include audited figures. It should be noted 
that the Scoreboard covers only audited R&D investment figures from own sources at the 
level of the ultimate parent company. This is not the case for the Survey, where, despite 
the  definition  provided  in  the  questionnaire,  some  firms  might  have  reported  contract 
research  funds  or  amortizations  as  own  R&D  investment.  Where  possible,  consistency 
checks were undertaken but there were a number of cases where no further information 
on R&D investment was available and the figures stated in the questionnaire were taken 
as such. It goes without saying that outliers were eliminated in the analysis. 

The SURVEY on Business Trends in R&D Investment   23 

With just one fifth of the top 500 companies the survey reflects more than one 
fourth of the R&D investment in the Scoreboard. Compared to the Scoreboard, 
the  sectors  banks,  leisure,  entertainment  &  hotels  and  steel  &  other  metals 
are  fully  covered  in  the  survey2.  In  these  sectors,  R&D  investment  changes 
with respect to the Scoreboard are mainly due to variations between the two 
reporting periods. The sectors beverages, chemicals, personal care & household, 
pharmaceuticals & biotechnology, and utilities are well, but not fully, represented 
in the survey24. The sectors electricity, forestry & paper, IT hardware, specialty 
& other finance and tobacco are rather moderately represented25, whereas the 
other 12 sectors are under-represented in the survey. 

The  table  also  reveals  that  the  average  R&D/Sales  ratio  of  the  companies 
in the survey closely approaches that of the Scoreboard, although less than 
one third of the R&D investment volume is covered. The highest variations in 
R&D/Sales ratios occur if there are relatively less responses, if the company 
reported  a  significant  change  in  R&D  investment  between  the  reporting 
period  in  the  survey  and  the  Scoreboard26  or  in  sectors  that  are  weakly 
represented in the survey. 

2  “Fully covered” means that all the companies of that sector in the Scoreboard responded 

to the survey.

24  “Well represented” means that half or more of R&D investment or number of firms of the 

Scoreboard are captured in the Survey.

25  “Moderately represented” means that between 20 % and 50 % of R&D investment or 

number of firms of the Scoreboard are captured in the Survey.

26  As e.g. in the Banks sector

24  The SURVEY on Business Trends in R&D Investment

 
European Commission 

EUR 22162 EN – DG Joint Research Centre, Institute for Prospective Technological Studies 
Title: The Pilot Survey on Business Trends in R&D Investment: Main Results from the 2005 Pilot Activity 
Authors: Alexander TÜBKE, René VAN BAVEL, Lesley POTTERS 
Luxembourg: Office for Official Publications of the European Communities 
2006 
EUR - Scientific and Technical Research series; ISSN 1018-5593 

Abstract 

This document reports the results of part of a pilot survey designed to gather information on trends in R&D 
investment practices of firms. The part in question targeted the top 500 EU R&D-investing companies. A 
total of 95 companies responded, resulting in a response rate of 19 %. On average, respondents expect 
R&D investment to grow by about the same rates for the next year ( 5.6 %) and the next three years ( 5.8 
% p.a.). The incentives to increase R&D investment most often indicated by respondent companies (from 
the list provided) include market demand for new products and services, technological opportunities and 
the  company's  turnover  or  profit.  The  most  important  factors  when  deciding  where  to  locate  R&D  are 
availability of researchers, access to specialised R&D knowledge, market access and a predictable legal 
framework for R&D. A company's home country is considered the most attractive place for locating R&D 
investment in more than two thirds of the cases. Germany, the United Kingdom and France are the three 
most  attractive  EU  countries  for  locating  R&D  activities.  Outside  the  EU,  the  US  is  the  most  attractive 
location before China and India. 

 
 
 
 
 
 
 
 
 
 
 
The  mission  of  the  JRC  is  to  provide  customer-driven  scientific  and  technical  support  for  the 
conception, development, implementation and monitoring of EU policies. As a service of the European 
Commission, the JRC functions as a reference centre of science and technology for the Union. Close 
to  the  policy-making  process,  it  serves  the  common  interest  of  the  Member  States,  while  being 
independent of special interests, whether private or national.