UK top destination for foreign R&D investment

Internationalisation of research and development drives cross-border flows of research funds. Europe wants more of those funds, but is currently losing investment to US, China and India.   

Today’s increasingly global economy has lead to the internationalisation of research and development, but little is known about how to measure the extent of this internationalisation as many indicators and official statistic relate to national activities only. A recent Eurostat publication tries to “shed light on internationalisation of R&D” by examining very different indicators affecting this phenomenon (such as technology balance of payments; patented co-inventions, and education statistics of students studying abroad). 

One of the indicators is R&D expenditure financed from abroad illustrating to what extent R&D is financed by countries other than the home country. In the EU-25, Malta, Austria and Latvia have the biggest percentage of their total gross domestic expenditure on R&D (GERD) financed by foreign funds, more than 20%, whereas the share in Finland and Germany is hardly 3%. However, in absolute figures, the UK is by far the main EU destination for foreign research funding – €5.8 billion in 2003, followed by France (€2.9) and Germany (€1.2).

Research funds coming from abroad positively affect the growth of recipient countries as they decrease the costs of R&D and stimulate innovation. Policies to attract foreign funds have accordingly increased in importance and become a source of competition among developed and developing countries. Currently, the EU is losing its attractiveness for R&D investment to the US and other third countries such as China, India or Brazil. 

The Commission thinks that strengthening the human potential in research and technology in Europe and the creation of European poles of excellence can help attract more foreign research money. According to a United Nations report, foreign direct investment (FDI) in R&D is increasingly determined by the availability and cost of talented research manpower (see EURACTIV 10 October 2005).

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