Albert Cliff Blog

Industries that Spend the Most Money on Research & Development: Who Are They and Why Do They Do It?

There are many ways towards business development, both internal and external. For some companies, it's easier to buy technology from third parties, although this usually comes for a market price. For others, it seems more prudent to invest in R&D in order to gain long-term growth and an advantage over competitors. Why, when, and for whom does R&D matter the most?

R&D is a costly affair and the bigger the company, the more it can invest. Here is the list of companies that spent the most on R&D in 2018 (in US dollars):

  • Amazon – 22.6 billion
  • Alphabet – 16.2 billion
  • Volkswagen – 15.8 billion
  • Samsung – 15.3 billion
  • Intel Co – 13.1 billion

Interestingly, in the recent past, the top positions in R&D expenditure were occupied by pharmaceutical and healthcare companies. Nowadays, companies like Roche, Johnson & Johnson, Novartis, Merck, and other pharma businesses each spend less than Amazon or Samsung; but nevertheless, make an impressive total expenditure.

Innovation in the healthcare industry is booming, and this sector occupies the second position in the R&D top-spending list for 2018. According to statistics, these are the leading industries in R&D (from global R&D expenditure):

  • computing and electronics – 22.5%
  • healthcare – 21.7%
  • auto – 16%
  • software and Internet – 15.7%
  • industrials – 10.6%

Billions of dollars are spent on R&D every year with no immediate profit or other visible benefits. Research takes time, but companies across all sectors need to be a step ahead of their competitors, right here, right now. One could ask, why invest so much in R&D if there are other ways of gaining market dominance?

For better or worse, no company can just switch the lever and get unlimited access to valuable knowledge at any moment. In order to remain competitive, companies must carry on research for many years and create a proactive scientific environment that will generate innovation and intellectual capital. People are eager to use more and more technology in their daily lives, and consumers expect companies to provide excellent products and services. In some industries, these goals can only be achieved with long-term R&D investment.

Should every company follow the example of the aforementioned industry leaders? While not every business is able to fund R&D expenses and technology development is not crucial for every industry, it's worth thinking about the ways technology can contribute to your business. A recent PwC study has shown how companies use their resources is more important, rather than the sheer amount of money invested in R&D. You don't have to outspend Amazon in order to positively transform your customers' experience!