BRUSSELS: Major brand owners in the European Union expect to boost innovation budgets by over 4% in each of the next two years, but this growth rate remains below that recorded prior to the downturn.

The European Commission, the executive arm of the European Union, polled 187 firms, together investing €56bn in R&D per year, and found annual spending was set to rise by 4.2% from 2012–14.

Expenditure here was pegged to increase by 5% in the same study last year, covering the 2010–13 period. Equivalent research from two years ago, relating to 2010–12, placed this figure at just 2%.

Five years ago, however, respondents had forecast that the resources allocated to innovation would leap by 7% every 12 months from 2008–10, showing the downturn has exerted a meaningful negative impact.

By category, players in the software and computer services market expected their outlay to expand by 11% a year from 2012–14, followed by industrial groups on 6.8% and the auto segment on 6%.

In contrast, pharmaceutical and biotechnology firms posted only 3.6% here, trailing the cross-industry average, and lagging substantially behind the long-term norm for this sector.

Over the last three years, new or "significantly improved" products yielded 18% of sales on average for the featured enterprises, although performance on this metric varied by category.

More specifically, this revenue contribution reached 33% for companies in fields where R&D is of "high intensity", such as healthcare equipment, technology hardware or software.

This total matched the average of 18% for "medium intensity" activities like food production, automotive and fixed-line telecoms, but fell to 10% for "low intensity" areas like construction and mining.

Alongside classic R&D, cited by 95% of the panel, over a third of participants mentioned market research, advertising and marketing support for product launches as key innovation drivers.

These tasks ranked ahead of innovation training, the purchase of new tools and systems, improved design and making greater use of R&D outsourcing programmes as priorities.

"Market research, launch advertising, and related marketing activities for new product introduction was rated less relevant for low R&D intensity companies than acquisition of new or highly improved machinery, equipment and software or training to support innovative activities," the study said.

"The reason for this may be that many companies in these sectors are very large and capital intensive."

Data sourced from European Commission; additional content by Warc staff