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What makes a successful R&D strategy?

23 May 2019

James Tooze takes a look at what the UK can learn from successes abroad

The UK Government has set out its intentions to increase R&D intensity in the next decade and beyond, but has yet to publish a comprehensive strategy to outline how it plans to do so. The UK is by no means the first country seeking to increase R&D intensity, so I decided to take a look at how other countries have found success, full or partial, and how the UK can learn from them.

A sustained vision

Over the last twenty years, no fewer than fourteen countries have successfully achieved an increase in R&D intensity similar to the scale of the UK’s challenge in the same period of time. These countries range from those with the highest R&D intensities in the world (Korea and Israel) to those attempting to develop themselves on the world stage (China and Portugal). Much of the increases in R&D intensity have come through increased private investments, but public investment has played a key role in leveraging private investment and ensuring that the increase is sustainable.

As of 2017, South Korea was the country with the highest R&D intensity in the world. The South Korean Government framework to facilitate growth in research and innovation was published in 1999, a document called Vision 2025: Korea’s Long-term plan for Science and Technology development. The vision was broken down into three major steps; the first focused on building capability, the second to enhance the environment for R&D and the third being to secure a place as a world-leader in scientific and technological research. The government refreshed the plan at five year intervals, keeping it up to date and relevant to support and enhance research in the country.

Between 2000 and 2016, domestic business and Korean government investment in R&D tripled in real terms, raising R&D intensity from 2.18% to 4.23% of GDP. Outcomes of Korea’s Vision 2025 is are not without weaknesses, persistent lack of basic research funding, low levels of international collaboration and inefficiencies around public investment are still problem areas. The key strength of Korea’s R&D growth is a strong policy precedent across government and a shared national vision for the role of R&D in the economy and for society. This has allowed the country to develop a highly-educated, readily available STEM skills base, develop integrated supply chains with R&D in manufacturing and have advanced infrastructure to facilitate R&D. This truly cross-governmental ownership of research and innovation policy is something we feel is central to the success of making the UK more research-intensive.

Driving improvements without hitting targets

The success of a sustained vision such as that of Korea’s cannot be expected to be the norm. While many countries have succeeded in surpassing R&D targets, many countries have failed. This, however, does not mean that countries have not made progress in research and innovation through strategies and policies striving for higher research intensity. Two examples of this are Austria and Germany, different Western European countries who found some success despite not meeting their self-set targets. The graph below shows where the countries started with regards to the percentage of GDP spent on R&D, where they were aiming (the top number) and how far they got by the end of each target cycle.

Since 1997, Austria has set out plans to increase R&D intensity in the country several times. It has also published national plans in 2002 and 2005, the latter focusing on promoting research and innovation quality broadly while also building excellence in existing areas of strength. Austria made a concerted effort to attract private R&D investment by increasing financial incentives provided by the government. Direct and indirect government support for business R&D in Austria is twice the OECD average[1], which helped to treble domestic business investment in R&D between 2000 and 2016. Public investment in Austrian R&D almost doubled over the same period, highlighting the importance of investment from all sectors in increasing R&D intensity.

Germany is an industrial powerhouse, who’s manufacturing base has played a key role in coordinating R&D both regionally and nationally. Germany set out to reach the EU’s target to spend 3% of GDP on R&D, initially planning on doing so by 2010. This deadline was postponed until 2015, by which time R&D intensity was 2.9%. Published by the German Government in 2006, a High-Tech strategy aimed to forge links between science and industry, encourage innovation and improve international competitiveness.

While Germany did not quite meet its R&D target in time, it has not rested on its laurels in driving increased R&D intensity. Germany reached an R&D intensity of 3.02% in 2017 and has already set its sights on increasing its R&D intensity to 3.5% of GDP by 2025. Earlier this month, German Federal Ministries pledged to increase public research budgets by 3% a year for the next decade, providing some welcome relief for research organisations in a struggling German economy. Setting out long-term commitments to R&D is something that not only provides certainty for public research institutes but gives a degree of certainty to businesses who invest in R&D. This is something we think the UK should commit to, outlining how serious the Government is in its endeavour to increase R&D intensity.

Perhaps the most important message to take away from the relative success of others is to be persistent. Persistence of policy initiatives and the shared goal of improving countries by investing in R&D have led to improvements in the research landscape across the globe. Policy initiatives will likely differ in the UK from those abroad, and rightly so, but it is imperative that they are supported across the whole of government with appropriate buy-in from important stakeholders.