Introduction

One of the key indicators of how much a company supports innovation is how much they spend on Research & Development (R&D).

In this article, you will find out the updated list of the Top 1000 companies which spend the most on R&D, which of the Fortune 500 biggest companies in the world don’t spend enough on R&D, and what trends we can find across industries.

Many companies will classify their innovation spend as part of their Research & Development spend, and so it acts as one of the best available indicators for how much each company is spending on innovation. Nonetheless, it is important to remember that there are several ways of innovating beyond creating new or improving existing products.

While R&D spending is not the only indicator of how a company approaches innovation and will vary across industries (as we will see below), for large companies it serves as a very important key performance indicator.

However, when I was analysing the three major data sources which are most commonly cited for R&D spending in the world’s largest companies (Strategy& 2018 Global Innovation 1000 study / 2018 EU Industrial R&D Investment Scorecard / Fortune 500 list), it quickly became apparent that there were some considerable issues with the data quality being used across sources. Major companies which were on one list were completely missing from other lists, making it previously impossible to get a full view of which companies spent the most on innovation.

Therefore, I have spent many hours comparing and cleansing the three major sets of data to remove duplicates, including missing companies from each other’s lists, converting into the same currency and identifying the most likely actual spend on R&D where there were discrepancies. At the bottom of this article, you can find a detailed methodology of how I cleaned and improved the data. The cleaned source data is also available here if you want it sent to your email address:

Here, I provide you with the updated, cleaned data to provide the most accurate analysis on the world’s Top 1000 companies based on who spends the most on R&D in 2018.

So let’s get into it.

Top 1000 Companies which spend the most on R&D

In total, the Top 1000 Companies spent at least a combined US$858 billion on R&D in 2018.

According to Strategy&, their list of the Top 1000 companies accounted for approximately 40% of all R&D spending worldwide.

So we can extrapolate that total R&D Spending worldwide is in the region of US$2 trillion annually.

Let’s begin by looking at the companies which spend the very most on R&D:

Top 25 R&D Spenders in the world

According to my research, the Top 25 companies based on their R&D Spend in 2018 are:

  1. AMAZON.COM: US$22.62bn
  2. ALPHABET: US$16.225bn
  3. VOLKSWAGEN: US$15.772bn
  4. SAMSUNG: US$15.311bn
  5. MICROSOFT: US$14.735bn
  6. HUAWEI: US$13.601bn
  7. INTEL: US$13.098bn
  8. APPLE: US$11.581bn
  9. ROCHE: US$10.804bn
  10. JOHNSON & JOHNSON: US$10.554bn
  11. DAIMLER: US$10.396bn
  12. MERCK US: US$10.208bn
  13. TOYOTA MOTOR: US$10.02bn
  14. NOVARTIS: US$8.51bn
  15. FORD MOTOR: US$8bn
  16. FACEBOOK: US$7.754bn
  17. PFIZER: US$7.657bn
  18. BMW: US$7.33bn
  19. GENERAL MOTORS: US$7.3bn
  20. ROBERT BOSCH: US$7.121bn
  21. HONDA MOTOR: US$7.079bn
  22. SANOFI: US$6.571bn
  23. BAYER: US$6.194bn
  24. SIEMENS: US$6.103bn
  25. ORACLE: US$6.091bn

And here is a list of the Top 100 Companies by R&D Spend in the World (2018 known data)

The full list of 1000 companies can be downloaded using the button below.

According to an analysis by Strategy&, R&D Spending overall in their list of the Top 1000 spenders on R&D has continued to rise over the past decade, even following the recession.

Companies missing from this list

It is important to note that the data above, and the two major data sources they rely on, only include R&D spend for companies which publicly disclose it.

This may be one of the reasons why so many of the Fortune 500 companies do not appear to spend anything on R&D (see more analysis below).

These are usually available for publicly-traded companies, which will include them in their annual reports or summaries to investors at least once a year.

However, privately held companies do not have to disclose their financial documents in the same way, so often we have no idea how much (if anything they spend on R&D).

This includes some of the world’s largest companies, like Cargill. With estimated revenues of US$114bn in 2018, it would comfortably be in the top 50 largest companies in the world, and yet we don’t have any indication how much they spend on R&D as they can pick and choose which financial data to release, and it therefore often does not appear in the financial databases used to produce lists of companies. In fact, their 2019 Annual Report does not mention the words “Research” or “R&D”. However, I would anticipate that part of the US$2.81 billion they say they invested in strategic acquisitions, joint ventures, and new and existing facilities would count towards R&D.

Even smaller private companies known for high spend on R&D, like Dyson, make it impossible to predict exactly how much they spend on R&D. Estimates I could find range from US$624 million per year in 2018, to 46% of EBITDA in 2016.

Additionally, other non-company organisations which spend a large amount on R&D will not be included in this list. For example, the US Military spends a huge amount on Research & Development every year, especially through their Defense Advanced Research Projects Agency (DARPA). According to its website, DARPA’s budget for FY2019 was US$3.556 billion. If it was a company, that research spend would put it at rank 50 on the list of Top 1000 companies spend on R&D.

This also doesn’t account for other US Military research & development programs. According to a report Analysing the US Military’s most recent FY2020 Budget Request, out of a total budget of US$750 billion (yes, you read that correctly), US$104.3 billion goes to research, development, test and evaluation (RDT&E) activities.

The United States military spends more than US$100 billion on R&D, making it likely the world’s largest spender on Research & Development.

This is more than Amazon, Alphabet, Volkswagen, Samsung, Microsoft and Huawei (the top 6 companies) combined.

For another example of the scale of spending on R&D by the US military, their F-35 Joint Strike Fighter program is estimated to cost over US$1 trillion over its 60-year lifespan. This equates to US$16.6 per year for this one project each year, which is more than every company apart from Amazon spent on R&D last year. (Note, while the F-35 program is certainly research-heavy, not 100% of that budget will likely go towards R&D).

There are countless other governmental organisations around the world who spend heavily on R&D as well, and yet their contributions are not shown on the list above.

R&D Intensity

I found it particularly interesting to see the relationship between how much a company spent on R&D and the total amount of revenue they earned in 2018. This is referred to as their ‘R&D Intensity‘.

According to research in HBR, R&D Intensity (and therefore spending on R&D overall) have increased sharply over the past 40 years, and now significantly outstrips spend on marketing in many companies. This is likely a direct result of the 1981 introduction of the Research & Experimentation Tax Credit scheme in the US, and similar schemes in other countries. This gave an added incentive for companies to invest in innovation.

A lot of the companies in the Top 25 R&D Spenders had R&D Intensity ratios of above 10%, and in a few cases above 10%.

However, there is a clear trend that the higher up a company is the ranking of the total amount they spend on Research & Development, the higher their R&D Intensity will be as well:

R&D Intensities based on R&D Spend rankings:

  • Top 25 companies: 8.86%
  • Top 100 companies: 7.44%
  • Top 1000 companies: 4.73%

Therefore, there is a clear trend that who are serious about R&D put a lot more resources behind it.

If you look at the full list of the Top 1000 R&D Spending companies, you will also find outliers where companies will spend more than they earn on R&D. These are primarily companies whose purpose is research, and is especially common in the Pharmaceuticals and Biotechnology industry, where companies will research for years before their product is ready, at which point they will be acquired by a larger Pharmaceutical company.

The record value of R&D Intensity in the Top 1000 companies was 15,611% for Alder Biopharmaceuticals, who spent US$253 million on R&D while only making about US$2 million in revenue.

It would be interesting to find out how the relationship between the total amount spent on R&D was related to how many innovation projects were supported, and how effective this spend was. However, that is a question for further study.

What also quickly becomes apparent is the types of companies in the top 25 and top 100 list come from a small group of types of companies:

  • Technology
  • Automotive
  • Pharmaceutical

So if we look at the full list of the Top 1000 companies, which industries spend the most on R&D?

Industries which spend the most on R&D

R&D spend by Top 1000 companies by industry in 2018 (US$ billions)

Much like the list of the Top 25 companies, the overall split of R&D is dominated by the three major industries outlined above.

You can see this clearly on the chart above for the Top 1000 R&D spenders in 2018, where Technology, Pharmaceuticals and Automotive make up almost two-thirds of the total R&D spend.

The full breakdown of how much each industry spends on R&D:

  1. Technology: US$268.8bn – 31.3%
  2. Pharmaceuticals & Biotechnology: US$160.7bn – 18.7%
  3. Automobiles and Components: US$143.9bn – 16.8%
  4. Industrials: US$46.8bn – 5.4%
  5. Telco: US$38.8bn – 4.5%
  6. Electronic & Electrical Equipment: US$33.2bn – 3.9%
  7. Aerospace & Defence: US$24.9bn – 2.9%
  8. Chemicals: US$23.5bn – 2.7%
  9. Healthcare: US$20.7bn – 2.4%
  10. Household Durables: US$20.6bn – 2.4%
  11. Finance: US$16bn – 1.9%
  12. Construction, Real Estate & Engineering: US$14.6bn – 1.7%
  13. Energy & Utilities: US$14.1bn – 1.6%
  14. Consumables: US$9bn – 1%
  15. Food & Beverage: US$6.9bn – 0.8%
  16. Metals & Mining: US$6.3bn – 0.7%
  17. Transportation: US$1.8bn – 0.2%
  18. Media: US$1.8bn – 0.2%
  19. Tobacco: US$1.5bn – 0.2%
  20. Retail: US$1.3bn – 0.2%
  21. Support Services: US$1.3bn – 0.1%
  22. Apparel & Luxury: US$1.2bn – 0.1%
  23. Hotels, Restaurants and Leisure: US$0.9bn – 0.1%
  24. Forestry & Paper: US$0.3bn – 0%
  25. Grand Total: US$858.8bn – 100%

Also keep an eye on the amount spent by Finance, which we will come back to again later.

So how about which countries have companies spending the most on R&D?

R&D Spend by country

Top 10 countries by total 2018 R&D Spend across industries (37 total countries in list)

Based on which countries the Top 1000 R&D Spenders come from, the list is completely dominated by the United States, Japan, Germany and China.

Combined, these four countries make up 72% of the 2018 R&D spend, out of a total list of 33 countries with at least 1 company in the Top 1000. Of this, the United States itself makes up more than 39% of spend.

However, that doesn’t mean that the United States spends the most on every industry.

To pick a few examples, The US is the leader in R&D spending by Technology, Pharmaceutical, Telco, Healthcare and Industrial companies.

Japan spends the most on R&D in Electronics, Household appliances and Chemicals.

Germany spends the most on Automotive.

China invests the most in R&D on Construction.

But is this just due to the fact that the United States has more companies in the Top 1000, equating to more total spend?

Let’s look at the average spend on R&D per company by country:

Here we see that while Germany only has 70 companies out of the Top 1000, on average they spent over $1.3bn each on R&D in 2018 (ranging from the lowest amount of $131m up to a maximum of $15.7bn for Volkswagen).

Interestingly, here we also see how some countries with fewer companies in the list have their averages skewed positively. Finland has only 5 companies in the Top 1000, and Nokia’s $5.9bn spend brings up all their averages to almost the same level as Germany.

Now, instead of just looking at companies that spend the most on R&D, let us look at the R&D spend of the world’s very largest companies.

These are usually listed as the Fortune 500, or the 500 countries with the highest known revenue in the world:

Fortune 500 companies and their R&D spending

This is the first statistic I wanted to highlight.

When comparing the list of the Fortune 500 companies to the base data of the 2500 companies for whom I had R&D spend data, less than half of the Fortune 500 were on the list of the top 2500 R&D spenders. For reference, the smallest company on the list fo 2500 R&D spenders only spent $30m on R&D, which means the Fortune 500 companies would have only an R&D Intensity of 0.12% OR LESS to make it onto this list.

Less than half (47%) of the Fortune 500 companies spent anything substantial on R&D

Here is the full 2018 Fortune 500 list of 500 largest companies in the world.

Companies highlighted in red were not in the list of the Top 2500 spenders on R&D, indicating they spend less than 0.12% on R&D (if anything) and therefore are listed as having an R&D Intensity (and spend) of zero.

I want to point out a trend in the Fortune 500 companies which aren’t investing much in their R&D.

Look for the number of big-name Financial companies which are not investing much (if anything) in their R&D.

Berkshire Hathaway, Industrial Bank of China, AXA, Ping An Insurance, Allianz and many more. All Financial companies which are not investing much in R&D, yet have extremely high revenue levels and profits. In fact, the highest-ranking Financial company in the Top 1000 R&D Spending list is Banco Santander which doesn’t even make the top 100 (rank is 101).

Does this imply that not every industry needs to invest in R&D or innovation?

No, every industry will need to continue to innovate or face disruption and Finance is no exception.

Another interesting example from the list is the world’s largest company, Walmart, which also doesn’t appear to spend anything on R&D. However, this may be the way they define their innovation strategy. Walmart is known for using an acquisition-based innovation strategy

R&D Intensity of the Fortune 500

If we look at the R&D intensity of the Fortune 500 (graph below), you will see more than half of companies at 0%, which are the ones outlined in red above.

However, we also see an interesting trend which is the opposite of the R&D intensity trend of the Top 1000 R&D spenders.

According to this analysis, the smaller Fortune 500 companies tend to spend more on R&D than their larger counterparts, as a proportion of their revenue. This could mean they are spending more to catch up with larger companies, or that larger companies have grown over time to focus more on cost reduction rather than innovation.

We should always be careful when working with percentages (which R&D Intensity is), as a large company could be spending more than their smaller competitors but due to their revenue have a lower R&D intensity.

For example, Tesla spent $1.4bn on R&D in 2018 from revenue of $11.8bn, which is an R&D intensity of 12%. At the same time, Volkswagen spent more than 11 times as much on R&D ($15.7bn) but since its revenue was more than 20 times as large ($277bn), it had a lower R&D Intensity of about 6%.

So in that case, which company was more innovative? Let me know your thoughts in the comments below.

Conclusions

There is a lot to learn from the analysis above.

It is positive news to see how much companies are investing in innovation and Research & Development, and how the R&D Intensity of companies is actually rising over time. In many cases, they will be embracing innovation alongside or even within their transformation initiatives.

This shows how even the largest companies recognise that they need to continue to innovate in the face of disruption.

However, the shocking statistic than less than half of the Fortune 500 companies are investing in R&D is an indicator that those companies will face growing competition in the coming years. While they may be profitable (only 39 of the Fortune 500 companies made a net loss in 2018), these are the companies which are at the greatest risk from new competitors, startups, changing customer demands and market shifts.

If you work for a company which is listed in red above, I strongly suggest you contact your head of innovation (if you have one) or your leadership to ask them what their innovation strategy is. Otherwise

If you would like to find out how to improve your innovation success rate, or bring more structure to your innovation capabilities, then contact me (Nick Skillicorn) to see how I can help you navigate the changes.

Methodology

  • I downloaded the three major data sources available which include data for R&D Spend and the list of the largest companies in the world. Outlined below are the data source (available to you as well, sometimes with email address required) as well as how they sourced their original data sources:
    • Strategy& (PWC Network) 2018 Global Innovation 1000 Study: This includes the list of what Strategy& consider to be the World’s Top 1000 R&D spending companies in 2018. They gathered their data as follows: For each of the top 1,000 companies, we obtained from Capital IQ and Thomson Eikon the key financial metrics for 2013 through 2018, including sales, gross profit, operating profit, net profit, historical R&D expenditures, and market capitalization. All sales and R&D expenditure figures in foreign currencies were converted into U.S. dollars according to an average of the exchange rate over the relevant period; for data on share prices, we used the exchange rate on the last day of the period.
    • 2018 EU Industrial R&D Investment Scoreboard (World 2500 companies): This includes the list of 2500 companies which the European Commission has found to be the world’s largest spenders on R&D in 2018. They gathered their data as follows: The data for the 2018 Scoreboard have been collected from companies’ annual reports and accounts by Bureau van Dijk – A Moody’s Analytics Company (BvD). They also included the following note about gathering R&D Data:  due to different national accounting standards and disclosure practices, in some cases, R&D costs cannot be identified separately in companies’ accounts, e.g. appearing integrated with other operational expenditures such as engineering costs. To avoid overstatement of R&D figures, the Scoreboard methodology excludes R&D figures that are not disclosed separately.
    • Fortune 500 2018: This includes the list of the 500 companies which the highest known revenue in 2018, however, does not include figures for R&D spend. They gathered their data as follows: Companies are ranked by total revenues for their respective fiscal years ended on or before March 31, 2019. All companies on the list must publish financial data and report part or all of their figures to a government agency.
  • I then cleaned the data to make it possible to compare the data for companies across the lists. Firstly, this involved ensuring the names for companies were the same from different data sources so that they could be compared. In some cases this was simple, as a company listed as “Apple” in the EU list and “Apple Inc” in the Strategy& list was easily found as the same company. However, other companies had different names, such as BMW in one list and Bayerische Motoren Werke Aktiengesellschaft in the other, which required manual updating. Finally, some companies had different names as holding companies, such as EXOR Group in one list and their subsidiaries (Fiat Chrysler, Ferrari…) in another list. In this case, I included the subsidiaries as they had their own R&D spend listed. This naming check was then also completed against the list of Fortune 500 companies.
  • All figures were converted to US$ to ensure consistency. Since the EU list gave all financial figures in EUROS, which in many cases been converted from US$ previously, I used the Strategy& data as the source of truth for US$ figures, and converted the EUROS to US$ for comparison at the rate of $1.20/1EUR outlined in the methodology of the EU report summary on page 93.
  • I then compared the two sets of R&D spend figures for each company across the two data sets to see where a different figure was presented. If the R&D spend figures were within 10% of one another, that was likely due to currency fluctuations and I used the figures from Strategy&’s list. Where the figures differed by more than 10%, the higher figure of the two was used so, as companies were unlikely to massively underreport their R&D spend.
    • This analysis was necessary as some companies had wildly different figures for R&D spend between data sources. The most prominent example is for the number 1 ranked company, Amazon.com, who had a reported spend of US$22.6 billion in the Strategy& dataset, but only US$395 million in the EU data (putting it at rank 343), which is obviously incorrect. In fact, the EU report highlighted this potential issue itself in their report summary on page 55.
    • Additionally, there were companies which did not appear at all on each others lists. Huawei and Robert Bosch were not listed at all in the Strategy& data and was ranked as number 6 and 20 overall, while several companies appeared in the Top 1000 list from Strategy& and not the list of the Top 2500 from the EU.
  • Using the consolidated list of R&D spend for all companies across both data sets, we could now rank them again to create the list used for analysis in this article, resulting in a full ranked list of 2600 companies across the world. This produced the lists of the Top 25, 100 and 1000 spenders on R&D available here, as well as all of the further analysis.
  • The combined full list was then compared against the list of the Fortune 500, to find out which of the Fortune 500 also had a known figure for R&D spend.

What did you think of this analysis? Did something surprise you? Let me know in the comments below, and please share it with other people who would find it interesting.

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Chief Editor of Ideatovalue.com and Founder / CEO of Improvides Innovation Consulting. Coach / Speaker / Author / TEDx Speaker / Voted as the world's #5 Innovation blogger in 2016, I help individuals and companies build their creativity and innovation capabilities, so you can develop the next breakthrough idea which customers love.