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The global economic and financial downturn: What does it imply for firms' R&D strategies?

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Author Info

  • Peter Voigt

    ()
    (JRC-IPTS)

  • Pietro Moncada-Paternò-Castello

    ()
    (JRC-IPTS)

Abstract

R&D and the entire innovation process are likely to be affected by the current crisis. Apart from changes in R&D spending, as any crisis usually provides also chances it may stimulate a new wave of networked / open innovation and in this regard lead to 'creative destruction' as Schumpeter called it. Thus, high-technology manufacturing is far better-positioned to face the crisis compared to low-tech manufacturing, which is assumed to fare especially badly. The figures of R&D expenditure are assumed to evolve accordingly. And small companies and particularly those which are financially restricted (many SMEs) are supposed to suffer most. In general, the downturn is supposed to accelerate the shift of EU manufacturing towards higher value-added, highly integrated, and internationally oriented sectors. Assumed that the latter tends to be characterised by higher R&D-intensity this in turn may have a positive impact on R&D investment figures. But, as structural changes usually happen slowly, this leverage effect may appear just in the long-run. Empirical evidence from a series of recent business surveys [mainly capturing R&D-performing / higher R&D-intensity sectors] suggests that the perception as well as the funding of corporate R&D and innovation activities are holding up fairly well so far which suggests an anti-cyclic firm behaviour in terms of R&D engagement in the light of the current economic and financial crisis. For 2008/09 the estimates of R&D expenditure changes differ significantly among the sources – mainly due to the corresponding assumption on the further evolvement of the current financial and economic crisis with the estimate of 4.1% for EU – based on the JRC-IPTS' IRMA-Survey – well in-between. However, across the sources, the corridor for the R&D investment change is assumed to be above the corresponding assumptions on GDP and sales growth. Evidence suggests that the impact of the crisis on R&D activities and the correspondingly assumed adjustments of firm strategies is sector specific. However, looking at micro level, there is no unique company strategy obvious commonly applied to face the crisis. In fact, some companies leave their R&D engagements unchanged, others cut them down, and a third group even accelerates their R&D and innovation activities (inclusive a significant leveraging of spending on R&D). In this regard experiences from past downturns suggest that companies having the farsightedness and the courage to invest more in R&D and innovation activities while others are cutting back have a significant advantage in the inevitable upswing that will come. Market rewards will follow – but not immediately.

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Bibliographic Info

Paper provided by Institute of Prospective Technological Studies, Joint Research Centre in its series JRC-IPTS Working Papers on Corporate R&D and Innovation with number 2009-12.

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Length: 33 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:ipt:wpaper:200912

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Keywords: corporate strategy; R&D and innovation; R&D spending; economic crisis;

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Cited by:
  1. Gheorghe ZAMAN & Zizi Goschin, 2012. "Industrial R&D Investment In Eu: Recent Trends And Lessons For Romania," Romanian Journal of Economics, Institute of National Economy, vol. 34(1(43)), pages 68-83, June.
  2. Pietro Moncada-Paterno-Castello & Peter Voigt & Marco Vivarelli, 2011. "Evolution of Globalised business R&D: Features, drivers, impacts," JRC-IPTS Working Papers on Corporate R&D and Innovation 2011-02, Institute of Prospective Technological Studies, Joint Research Centre.

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