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R&D Investment

Europe Accelerates in R&D&I but Remains Behind the U.S. and China

In an increasingly competitive world, where research, development, and innovation (R&D&I) are key drivers of economic progress, the EU Industrial R&D Investment Scoreboard 2024 presents a complex picture: European companies are increasing their R&D investment but still face significant challenges compared to their global competitors.

“The report confirms a trend we have already been observing: Europe is making progress in investment, but it still struggles to translate these efforts into global competitiveness,” explains José Alberto de la Parte, Director of Strategic Projects at Zabala Innovation.

In 2023, the world’s 2,000 largest companies invested €1.26 trillion in R&D, a 7.8% increase compared to the previous year. In this context, European companies achieved a 9.8% growth, surpassing the United States (5.9%) and China (9.6%). However, as De la Parte points out, “this growth, while positive, cannot hide the long-term trend: Europe is losing ground to the United States and China in strategic sectors such as software and healthcare.”

Among the 800 largest European companies included in the report, the automotive sector continues to lead R&D investment, accounting for 34.2% of the total. Industry giants such as Volkswagen, Mercedes-Benz, and Stellantis top the list. Nevertheless, De la Parte highlights that “we rely too heavily on this industry. Although sectors such as ICT are growing rapidly, Europe is still far from leading in digital technologies, where the United States invests nearly ten times more than we do in software.”

Global Competition and Concentration

One of the most striking findings of the 2024 Scoreboard is the high concentration of global R&D investment in just a few companies and sectors. The world’s 50 largest companies, led by Alphabet, Microsoft, and Amazon, accounted for 40.1% of all R&D investment. In Europe, only Volkswagen made it into the global top 10, ranking fifth with an investment of €22 billion.

“This level of concentration is a challenge for Europe. We need more ambitious policies that not only support large companies but also help SMEs grow and scale,” says De la Parte.

At the sector level, technology and healthcare lead global R&D investment. However, while the United States dominates in software and biotechnology, China has increased its ICT investment eightfold since 2013. Meanwhile, Europe remains a leader in the automotive sector but has failed to diversify its leadership into areas with greater future growth potential.

Structural Challenges

The report also highlights a concerning trend: the return on R&D investment is declining worldwide, and Europe is one of the most affected regions. According to the analysis, European companies require more and more resources to generate tangible results, such as new products or patents.

“This is a structural problem. It’s not just about spending more on R&D but spending better. We need to attract talent, improve innovation processes, and create more effective policies that incentivize high-impact results,” notes De la Parte.

The report also emphasizes the role of mergers and acquisitions as a tool for enhancing competitiveness. Companies that are active in this area tend to perform better in terms of employment, sales, and profitability. However, the impact on productivity is not always positive, especially in sectors where Europe already faces a competitive gap.

A Call to Action

Looking ahead, the Scoreboard underscores the urgent need for Europe to adopt more ambitious measures to maintain its global relevance in R&D. The current political and economic landscape, marked by regional conflicts and increasing competition for technological supremacy, puts even more pressure on the EU.

“The report makes it clear that we need a broader, long-term competitiveness strategy, as suggested by the Draghi report. We cannot just increase budgets—we must foster disruptive innovation and create the right conditions for companies to scale globally,” concludes De la Parte.