Until recently, the global context for innovation activities, not only in science technology industry, has been favourable. OECD investment in R&D climbed to USD 818 billion in 2006, up from USD 468 billion in 1996. Gross domestic expenditure on R&D (GERD) grew by 4.6% annually (in real terms) between 1996 and 2001, but growth slowed to less than 2.5% a year between 2001 and 2006. Future investment will depend in part on the longer-term impacts of financial market instability on business spending.
However, the global distribution of R&D is changing. China’s GERD reached USD 86.8 billion in 2006 after expanding at around 19% annually in real terms from 2001 to 2006. Investment in R&D in South Africa increased from USD 1.6 billion in 1997 to USD 3.7 billion in 2005. Russia’s climbed from USD 9 billion in 1996 to USD 20 billion in 2006, and India’s reached USD 23.7 billion in 2004. As a result, non-OECD economies account for a sharply growing share of the world’s R&D – 18.4% in 2005, up from 11.7% in 1996. The growing weight of these countries in the global economy accounts for part of this shift, but so does the growing intensity of investment in R&D relative to GDP, notably in China. In 2005, the global shares of total R&D expenditure in the three main OECD regions were around 35% for the United States, 24% for the EU27 and 14% for Japan. While Japan has maintained its global share since 2000, the United States fell by more than 3 percentage points owing to very slow growth in business expenditure on R&D (BERD), and the EU’s share fell by 2 percentage points.