Toyota tops R&D charts

01 November 2012

NEW YORK: Toyota, Novartis and Roche are the biggest-spending firms in the field of innovation, but Apple and Google are seen as the strongest companies in this area, a study has found.

Booz & Co, the consultancy, assessed the R&D expenditure of 1,000 public corporations, and polled 700 executives from 400 of these organisations to determine current attitudes regarding this matter.

Toyota, the automaker, allocated $9.9bn, or 4.2% of sales, to this discipline in 2011. The firm raised its outlay by 16.5% year on year, reflecting the broader rebound experienced by the car industry.

Novartis, the pharma group, boosted such funding by 5.5% to $9.6bn, some 16.4% of returns. Roche, its rival, was in third place in this metric on $9.4bn, or 19.6% of sales, despite cutting budgets by 2.1%.

Fourth place went to Pfizer, another healthcare firm, down 3.2% to $9.1bn. Microsoft, the IT expert, was next on $9bn, up 3.4%. Samsung, the electronics manufacturer, spent the same amount, a 13.9% lift.

However, Apple was viewed as the most innovative organisation by the survey panel. The electronics giant spent $2.4bn on R&D in 2011, a modest 2.2% of sales, and came 53rd in the financial rankings.

Google, the online giant, took second spot here, investing $5.2bn, and 13.6% of revenues, in this area. 3M, the conglomerate, was third, but only committed $1.6bn to R&D, or 5.3% of sales. These two were 26th and 86th in the expenditure table.

"There is no long-term correlation between the amount of money a company spends on its innovation efforts and its overall financial performance," Booz & Co said. "Instead, what matters is how companies use that money and other resources."

Overall, Booz & Co estimated that its 1,000 featured firms boosted their innovation expenditure by 9.6% to $603bn in 2011, but the intensity of spending, as a percentage of sales, actually fell by 0.1%.

Computing and electronics companies raised their outgoings by $13.4bn and held a 28% share of total R&D budgets. Healthcare was up $6bn to 21%, while automotive, on a 16% share, saw a $13.2bn uptick.

Geographically, investment levels rose by 27% in China and India combined in 2011. North America yielded a 9.7% expansion, Europe registered 5.4% growth and Japan delivered a 2.4% improvement.

Just 43% of participants stated that their in-house idea generation efforts were "highly effective" and only 36% said the same for implementing them. Booz & Co thus suggested most companies believed they "simply aren't very good" at such initiatives.

Data sourced from Booz & Co; additional content by Warc staff