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Friday 14.12.2018 | Name days: Gaisma, Auseklis

Study: Europe and China invest the most in innovations

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUCompared to other territories in the world, Europe’s and China’s expenses on research and development have increased the most, with investments reaching USD 782 billion. The largest amount of money is spent on consumer industry, according to Innovation 1000 study performed by PricewaterhouseCoopers and Strategy&.

Amazon remains the world’s leading company when it comes to research expenses.

According to results of the study, Apple is the most innovative company in the world. For the first time in years Netflix has been included in the Top 10.

Ten most innovative companies in the world include: Apple, Amazon, Alphabet, Microsoft, Tesla, Samsung, Facebook, General Electric, Intel, and Netflix.

The report compiled by international audit company PricewaterhouseCoopers’ subsidiary Strategy&, concludes that research and development expenses of the largest companies in the world have grown 11% in 2018, with the total investment volume reaching USD 782 billion.

PwC Strategy& mentioned in the Global Innovation 1000 study that investments in innovations are associated with long-term development – investment volumes have increased in all regions and in nearly all industries.

Investments in research and development have increased in all regions of the world (+34% in China, +14% in Europe, +7.8% in North America and +9.3% in Japan). In total, the cost/turnover proportion has reached the highest level in recent years (4.5%).

PwC US Strategy& President Barry Jaruzelski: «The standard of innovation excellence has been rising as businesses have become more competitive in the 21st century. Despite the record high levels of investment, the study’s findings are a further confirmation that innovation excellence isn’t something that can be bought by simply spending more on R&D. Rather, it’s the result of painstaking attention to strategy, culture, senior executive involvement, deep customer insights, and disciplined execution across the innovation cycle».

PwC Latvia Counseling Director and Digital Information leader Baiba Apine explains investment habits in Latvia: «Latvia cannot compete with leading economies at the moment. Nevertheless, activity does continue growing bit by bit in our country. According to data from the Central Statistical Bureau of Latvia, there had been an increase in the number of scientists and researchers working in different companies in 2017, especially when compared to 2016 and the three previous years, when research activity in companies was in decline. I would like to hope this growth tendency will continue in the future.»

She continues: «Economic growth will definitely benefit this growth, as will Latvian companies’ desire and ability to compete on global markets and growing popularity of innovative solutions. I also welcome LIAA efforts to commercialize ideas of Latvian scientists. Effective use of research and innovations in Latvia is influenced by the break experienced during the crisis – companies lost the ability and culture to use innovations, as well as researchers in general. Now we have to use the innovations available to us to the maximum extent.»

In the 2018 report, 88 companies were declared the most efficient innovators in the world. They managed to get ahead of other industry representatives in the main long-term financial indexes. At the same time, they spend less than other industry representatives on research and development in proportion to their turnover. Financial accomplishment indexes include turnover growth, market capitalization increase, profits from economic activities, gross profits, gross profit increase and general shareholders’ profits.

Although both effective operating profit of innovative innovators and gross profit norm was similar to other Global Innovation 1000 companies, turnover growth was 2.6 times larger and market capitalization growth was 2.9 times larger than that of other companies included in the study. In all other indexes innovators accomplished at least two times better results than other companies. At the same time, they spent less money on research and development than the average in the industry in proportion to their turnover.

Signs of rapidly growing companies:

Coordination. 77% of the most rapidly growing companies say their innovation strategy is coordinated with their business strategy, as opposed to 54% of respondents who demonstrated similar growth rate and 32% of respondents who demonstrated slower growth.

Culture. 71% of respondents whose turnover grows more rapidly than their competitors’ turnover say their in-office culture is coordinated with their innovation strategy, as opposed to 53% of companies showing similar growth rate and 33% with slower growth rate.

Leadership. 78% of companies with bigger turnover growth than other industry representatives say the work performed by their management is closely tied to their company’s R&D and innovation strategy, as opposed to 62% of companies with similar growth rate and 53% with slower growth rate.

Region-wise this list reflects continuing growth of Chinese companies – from 3% in the 2007 report to 17% in 2017. Europe has also experienced considerable growth – from 18% in 2007 to 30% in 2017. In North America, on the other hand, the number of innovative companies has declined 45% over the past decade. The number of innovators in Japan has declined 8%.

Industry-wise the number of innovators has increased in telecommunications, consumer goods, healthcare, industrial goods, machine-building, aviation and space, as well as defence industry in the 2007-2017 period. Declines were recorded in chemical production, energy, computer and electronics, as well as programming and internet industry.

Other important conclusions:

For the second consecutive year Amazon remains in first place in the Global Innovation 1000 study as the company with the largest investment expenses. Additionally, Sanofi and Siemens have returned to the TOP 20.

For the first time in five years, consumer foods industry ended up ahead of the programming and industry with a more rapid investment growth rate (26% as opposed to 20.6%).

Healthcare may become the industry with the largest expenses somewhere around 2020.

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