Global Innovation Index 2024: Analyzing global R&D trends with the Orbis dataset

Written by Santhosh Metri

The World Intellectual Property Organization (WIPO) recently published its 2024 Global Innovation Index (GII). This report analyzes current innovation, rapid technology progression, and the resulting societal impacts.

The index tracks more than 130 economies worldwide to identify investment into research and development (R&D) and to benchmark innovation and its associated economic impact. The 2024 report uses Moody’s datasets, offered through our collaboration on entity reference data. Using these datasets brings a unique perspective on the top corporate R&D spenders globally.

The WIPO created some of the approximately 80 indicators for the innovation rankings using our award-winning Orbis entity data. One of the key pieces of data was on corporate R&D expenditure, collated through the R&D Scoreboard project for the European Commission’s Joint Research Center. This data comes from local financial accounts and statements and is fine-tuned using Global Standard Format for firm-level financial statements. 

The 2024 GII leverages data from about 1,700 of the top 2,500 corporate R&D spenders worldwide. This data, sourced from Moody’s Orbis database, provides detailed corporate R&D expenditure trends from 2019-2023. Key highlights include:

• Total R&D expenditure: In 2023, corporate R&D expenditure reached approximately $1.2 trillion — an 8.3% nominal increase and a 6.1% real increase over the previous year.
• R&D intensity: Despite fluctuations in growth rates, R&D intensity (R&D expenditure as a percentage of total revenue) has remained constant.
• Sectoral insights: The index highlights significant sectoral variations, with the pharmaceutical sector experiencing a notable rebound in R&D expenditure while the information and communications technology (ICT) hardware and software sectors saw a slowdown.

Key takeaways from the 2024 index and comparison to 2023

Economic uncertainty, geopolitical tensions, supply chain challenges, and post-pandemic adjustments influence some of the key trends and year-on-year changes in global innovation, particularly in corporate R&D spending and sectoral growth rates.
 

Key takeaways:

• Global R&D spending: In 2023, the global corporate R&D expenditure real growth of 6.1% was slower than the 7.5% real growth rate in 2022.
• Sectoral growth rates: Growth rates in the ICT hardware and electrical equipment sectors, as well as software and ICT services, halved between 2022 and 2023. In contrast, the pharmaceutical sector saw a significant boost in R&D spending, with growth more than tripling from 3% in 2022 to 10% in 2023.
• R&D intensity leaders: The pharmaceutical sector led in R&D intensity in 2023, investing 19% of total revenue into R&D, followed by the software and ICT services sector at 14%.
• Investment trends: While most of the top 15 R&D spenders increased their investments in 2023, 25 firms reduced them. Notably, four of the top ICT hardware companies cut their R&D budgets, going against the overall positive trend. The pharmaceutical and automotive industries saw significant growth, with companies like Eli Lilly and Tesla leading the way.
• Category leaders: Companies like Eli Lilly, Novartis, and Merck US recorded substantial R&D growth rates, exceeding 20%. The automotive industry also reported a substantial rise in R&D expenditure, particularly Tesla, which saw a 30% increase.

R&D super firms:

Significant contribution to global R&D: The index highlights that R&D super firms, which are the top corporate R&D spenders, play a crucial role in global innovation. In 2023, these firms collectively contributed to a substantial portion of the total $1.2 trillion in corporate R&D expenditures.

Stability in R&D intensity: Despite fluctuations in overall R&D growth rates, the R&D intensity of these super firms has remained constant. This indicates a sustained commitment to innovation even during economic uncertainties.

Sectoral leadership: As referenced above, R&D super firms — including Eli Lilly, Novartis, and Merck US — are leaders in various sectors. 

Impact of economic conditions: The report notes that top corporate R&D spenders’ real growth halved during the pandemic years of 2020 and 2021 compared with the pre-pandemic period of 2019. However, these super firms have shown resilience, continuing to invest heavily in R&D despite economic challenges.

Diverse investment trends: While most R&D super firms increased their investment in 2023, some sectors experienced reductions. For example, four of the top ICT hardware companies reduced their R&D budgets, contrasting with the overall positive trend in other sectors like pharmaceuticals and automotive.

The points above underscore the pivotal role R&D super firms play in driving global innovation and their ability to maintain a steady focus on research and development across various industries.

Data observations:

As previously mentioned, real top corporate R&D growth experienced a significant decline, reducing by up to half during the pandemic years of 2020 and 2021 compared with the pre-pandemic period of 2019 (see Figure 1).

Interestingly, despite these fluctuations, R&D intensity has remained stable.

Figure 1: R&D expenditures and growth rates of top global corporate R&D spenders by industry and year from 2019-2023.

Figure 2 indicates the nominal R&D expenditure and intensity of top R&D spenders by industry and year from 2019- 2023. It highlights the significant rebound in the pharmaceutical sector and the slowdown in the ICT hardware and software sectors.

Figure 2: Nominal R&D expenditure and intensity of top R&D spenders by industry and year from 2019–2023 (billion USD).

What determines the rankings?

GII rankings are based on the following seven pillars, split into the innovation input and output indexes. The economies are then scored based on the overall aggregated associated scores on each of them:
 

Innovation inputs:

• Institutions/filmographic details
• Human and capital research
• Infrastructure
• Market sophistication
• Business sophistication
   

Innovation outputs:

• Knowledge and technology outputs
• Creative outputs/technology clusters

How did the WIPO use the Orbis data?

The R&D Scoreboard project provided the necessary variables through publicly listed and unlisted privately held companies and their firmographic data through Global Standard Format financials. For long-term innovation trends and R&D output measure, the details on a firm’s R&D expenditures year –on year are a good indicator.
 

Which indicators did the Orbis data contribute to?

• Average expenditures of a country’s top three global companies on R&D in millions of US dollars 
• Top three global companies’ average expenditures on R&D in 2023
   

NOTE: If a country has fewer than three global companies listed, the figure is either the average of the sum of the two companies listed or the total for a single listed company. A score of zero is given to countries with no listed companies. The data includes economies outside the European Union (EU).

Orbis data is also used to compute year-on-year R&D spending, as depicted in the GII’s Global Innovation Tracker. Data for the top global R&D spenders comes from a compilation of top spenders in the European Commission’s 2023 EU Industrial R&D Investment Scoreboard as a starting point; the Orbis database facilitates the WIPO calculations, with all figures in current US dollars. With more than 2,500 public companies included, it is the most comprehensive global R&D study that uses the Joint Research Center’s methodology.

Find out more about how our Orbis and Orbis intellectual property solutions facilitate this form of complex entity data analysis.

You can also read the full report on the index, published by WIPO.