2.1Total expenditure for R&D: GERD

By Koenraad Debackere (KU Leuven), Machteld Hoskens (KU Leuven), Wytse Joosten (KU Leuven), Laura Verheyden (KU Leuven), and Peter Viaene (EWI).

Flanders has fully endorsed the European Lisbon strategy and has put in efforts towards achieving the 3% R&D target of spending at least 3% of its gross domestic product (GDP) on research and development (R&D). This target is part of the broader goal of strengthening Europe’s competitive and innovative position. Within the framework of the 3% R&D target, the various European governments seek to account for 1% of the financing for R&D, while the business enterprise sector accounts for 2% of R&D financing.

A first translation of the 3% R&D target in Flanders was the ‘Innovation pact’, which was signed in March 2003 and included the official commitment of all actors involved within the Flemish innovation landscape (i.e., government, business enterprise sector, universities and research centers) to realize the 3% R&D target through common and complementary efforts. This ambition was reinforced on January 20, 2009 when ‘Pact 2020’ was signed.

Gross domestic expenditure on research and development (GERD) is broken down by sector of performance (see chapter 2.1.1). Four sectors are considered:

  • The business enterprise sector, yielding BERD or business enterprise expenditure on R&D. BERD covers R&D performance by business enterprises as well as the collective research centers servicing them.
  • The government sector, yielding GOVERD or government expenditure on R&D.
  • The higher education sector, yielding HERD or higher education expenditure on R&D. HERD covers R&D performance by colleges and universities, as well as research centers that are associated with either of them.
  • The private non-profit sector, yielding PNPERD or private non-profit expenditure on R&D.

For each performance sector only in-house R&D activities are taken into account and all expenditure for this intramural R&D is considered, regardless of its source of funding. The sum over all four components yields GERD, the gross domestic expenditure on research and development for a specific geographical area (see chapter 2.1.1):

    GERD = BERD + GOVERD + HERD + PNPERD

By relating GERD to the gross domestic product (GDP) of a region we obtain the R&D intensity (see chapter 2.1.2) of that region. This indicator eliminates the influence of a region’s size and makes it an ideal indicator for international comparisons (see chapter 2.1.3).  When monitoring R&D expenditure against GDP, source of funding is also taken into account to determine to what extent the goal of 1% public funding and 2% private funding of R&D is achieved (see chapter 2.1.4).

Continuous monitoring of R&D expenditure is required for good R&D and innovation policy. This chapter gives an overview of the most recent R&D expenditure numbers for Flanders. For the business enterprise sector, the 2018 R&D numbers were derived from the Innovation Survey 2019 (CIS 2019), and the 2019 R&D numbers were derived from the R&D Survey 2020. For all non-profit organizations, the R&D numbers were derived from a dedicated R&D survey.

Results show an increasing trend in gross expenditure (in absolute numbers) on R&D (GERD) over the most recent years, both for the public and the private sector. R&D expenditure as a percentage of GDP has also been growing over the past ten years. For 2019 we observe a percentage of 3,35%, effectively achieving the 3% target in Flanders. When comparing Flanders with other regions within Europe, we observe that the Flemish percentage is much higher than the European average. Only for Sweden a higher R&D intensity is observed. The privately funded share of GERD represents 2,55% of GDP whereas the publicly funded share of GERD represents 0,79% of GDP. Hence, for the privately funded share the 2% target is obtained, but the publicly funded share still falls short of the 1% target.