The growth rate of R&D spending by companies in China and India led all geographic regions last year though they lagged behind in actual spending, a study by global management consultancy Booz Allen Hamilton found.

 

The company's third annual study of the world's 1,000 largest corporate R&D spenders, titled "Global Innovation 1000", found that these corporations increased their research and development spending last year by twice the amount in 2005.

 

The study found that Chinese companies are racing to catch up with R&D spending in developed markets, showing they have taken the cue from the government to ratchet up their efforts to make China a knowledge-based economy.

 

According to a previous report by Booz Allen Hamilton, China's R&D expenditure in terms of gross domestic product rose from 0.69 percent in 1998 to 1.42 percent last year. The government aims to lift the figure by 2010 to 2 percent, closer to the levels of 2.5-3 percent in developed countries.

 

R&D spending by the Global Innovation 1000 companies rose last year by US$40 billion to US$447 billion, a 10 percent increase. For the first time in four years, the pace of R&D spending in 2006 caught up with the rate of sales growth among these companies.

 

PetroChina and China Petroleum & Chemical were the top R&D spenders among the mainland companies. The top 10 global R&D spenders were Toyota, Pfizer, Ford, Johnson & Johnson, DaimlerChrysler, General Motors, Microsoft, GlaxoSmithKline, Siemens and IBM.

 

China, India and the rest of the developing world represented just 5 percent of overall corporate spending on R&D in 2006, but their five-year average growth rate shows their drive to catch up with the big players.

 

The Asian neighbors' R&D spending last year grew by 25.7 percent over the previous year, in keeping with a five-year average rate of growth of 25 percent, whereas the rest of the developing world increased spending by 14.4 percent. While the total R&D spending in China amounted to US$1.96 billion, that in India stood at US$208 million last year.

 

The study identified 118 companies from the list of 1,000 as high-leverage innovators, who consistently reap greater financial reward for every dollar spent on R&D.

 

These companies regularly outperformed their peers over the five-year period, while simultaneously spending less on R&D as a percentage of sales than their industry medians.

 

(China Daily October 18, 2007)