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Article Excerpt
Double-digit increases in profits during 2007 were reflected by continued strong growth in industrial R&D both in the United States and abroad. Table 1 shows that the top 100 U.S. R&D firms increased their R&D investment by 9.6% last year, somewhat less than the 11.6% increase by the top 100 during 2006, but extending their uninterrupted R&D growth to five years.
R&D investment by the top 1,000 R&D firms rose by 9.9%, also less than their 12.1% increase in 2006. The top 1,000 firms represented 94% of total R&D investment by the 35,000-plus companies performing R&D in the United States. Even though sales and profits showed healthy gains last year, the data indicated a gradual slowing of R&D growth that will undoubtedly continue into 2008. Total R&D investment by industry in 2007 was $245.0 billion, representing 67% of the total R&D investment in the United States.
The top 100 U.S. R&D investors held their R&D/sales ratio (R&D intensity) even at 5.4% in 2007. This ratio increased slightly for the top 1,000 investors, to 4.3%. R&D as a percent of profits for the top 100 investors also held steady at 41.1% in 2007, down slightly from 42.3% in 2006. Capital investment by the top 100 investors increased only 0.3% in 2007, compared with a very strong 12.9% in 2006. Capex represented 5.3% of sales, down from 5.6% of sales the year before. The same pattern held for the top 1,000 firms, another sign of a slowing economy.
With a 22.7% increase in its R&D, General Motors moved back to the top of the U.S. R&D Leaderboard. Pfizer fell to number two even though its R&D expenditures increased by 6.4%. Johnson & Johnson held the third position with a 7.8% increase, and Ford fell from second place to fourth, with a 4.2% increase. Microsoft kept fifth place, with an 8.2% increase. All of the top five increased their R&D in 2007, whereas three of the top five had decreases the year before.
The next five R&D investors, again dominated by four electronics firms plus one healthcare firm, were nearly the same as the year before, although there were minor changes in their ranking. Merck moved up to eighth from tenth with a 13.4% increase, Cisco Systems held ninth and Motorola dropped from eighth to tenth. Google kept the upward momentum in its R&D investment alive with a 73.7% increase in 2007, moving up to 23rd from 34th, following a 110.9% increase in 2006. Other strong increases were by AT&T at 70.7% and Advanced Micro Devices, Gilead Sciences and Celgene at around 54% each.
Altria's 37.2% decrease was the largest on the downside (due to a restructuring), followed by CA Inc.'s 27.5% drop. The only two petroleum firms in the top 100 investors, Exxon Mobil and Chevron, number one and two in sales, increased their R&D by 11.1% and 20.1%, respectively. Of the top 100 R&D investors, 47 increased their R&D by 10% or more, well ahead of inflation as well as sales growth. However, this number was 60 last year. And 19 firms reduced their R&D, versus only 12 last year.
Although the tables do not provide data on patents, it can be noted that U.S. corporations were granted 70,498 U.S. patents in 2007. Patent data show that the 70 firms in the top 100 U.S. R&D investors receiving more than 40 patents last year accounted for 24,294 of these patents, more than one-third of the total.
Non-U.S. R&D Leaders
As shown in Table 2, four of the top five non-U.S. R&D-investing firms increased their R&D investment by double-digit levels in 2007, with number one Toyota at 26.8% and number two Nokia at 44.9%. Sales of the top non-U.S, firms were 28% higher than those of the top 100 U.S. firms, but the top 100 U.S. firms invested over $22 billion, or 15%, more in R&D than their non-U.S. counterparts. The top 100 non-U.S, firms also had a slightly lower increase in their R&D budgets, at 9.2% versus 9.6%. The R&D intensity of the top non-100 U.S.
Prepared by Charles F. Larson, president emeritus of the Industrial Research Institute, Inc. and president of Innovation Research International in Washington, D.C., IRI20001@aol.com, and Roger L. Whiteley, IRI survey consultant, rogerwhiteley@rcn.com.
R&D firms was also considerably lower than that of the top 100 U.S. R&D firms, at 3.7% versus 5.4%, respectively. These ratios were nearly unchanged from both sets of firms in 2006. As noted above, profits of the top 100 U.S. and non-U.S. R&D firms increased at double-digit levels in 2007. The top 100 non-U.S. firms showed 15% profit growth in 2007, somewhat ahead of the 12.6% growth by the top 100 U.S. R&D firms.
Capital investment by the top 100 non-U.S. firms also continued to outstrip the top 100 U.S. firms. The non-U.S. capex expenditures were $162 billion more than their U.S. counterparts and at a significantly higher percentage of sales: 8.4% versus 5.3% for the U.S. firms.
Toyota held its position as number one in the list of non U.S. R&D investors during 2007. Nokia jumped from number nine to number two. Volkswagen moved from fifth to third, replacing GlaxoSmithKline. Roche Holdings rose from eighth to fourth in 2007 and Sanofi-Aventis moved from sixth to fifth. The top five non-U.S. firms had two automakers, two healthcare and one electronics firms. The top five U.S. list showed a similar pattern, with two automakers, two healthcare, and one software firm.
The top 25 non-U.S. R&D firms again had a stronger focus on electronics and software, with 14 in that category, in contrast to only 10 of the U.S. R&D firms. Eleven of the top 25 U.S. R&D firms were in the health care and consumer-products businesses, versus six in the non-U.S, top 25. The transportation and industrial sectors were nearly the same, with five firms in the top 25 non-U.S. and four in the U.S. lists. R&D increases of 10% or more were found in 47 of the 100 non-U.S. firms, and 21 non-U.S. firms decreased their R&D (very close to the 48 and 19 firms in the U.S., respectively). The largest increase in R&D was 230% by Sasol, followed by Embraer-Empresa's 130% and BHP Billiton's 122%. Other petroleum firms also showing strong increases included BP at 43.3%, Royal Dutch Shell at 35.7% and imperial Oil at 21.9%. Three firms--Siemens, Schering and Teliasonera--decreased their R&D by some 33%.
Fiscal 2007 Data
Data for fiscal year 2007 reported in Tables 1 and 2 were from Standard & Poor's Compustat database as of July 31, 2008. Firms covered in the survey were limited to those publicly held firms that reported sales of $50 million or R&D expenses of at least $5 million. R&D expense per employee was based on the reported number of employees at year-end. Profits as reported were pretax income. R&D expenses as reported excluded acquired in-process R&D expenses. For the non-U.S. firms, the percent changes in R&D expenses, sales, profits, and...
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