Firms Invest In Themselves
U.S. businesses are likely to spend nearly $280 billion on research and development in 2012, up 3.8%, according to R&D Magazine. Overall U.S. R&D spending, which includes government and academic expenditures, is expected to increase 2.1% to $436 billion — nearly one-third of total global research outlays. In fact, U.S. expenditures will likely dwarf the $198 billion projected for China, the second-biggest spender. In the U.S., R&D spending accounts for an estimated 2.9% of gross domestic product (GDP), above China (1.6%) but below Japan (3.5%), the third-largest spender.
Growth in R&D spending in emerging economies, particularly in Asia, is outpacing U.S. growth. For 2012, the Asian share of global R&D expenditures is estimated to approach 36.7%, up from 33.6% in 2009. In contrast, U.S. spending is expected to account for 31.1% of global outlays, down from 34.7% three years ago.
Many U.S. multinationals are spending heavily to expand R&D facilities overseas, in part because researchers prefer to work near the market where products are manufactured and tested. In addition, an offshore research presence makes it easier for companies to tailor products to foreign
Investors tend to view R&D spending as a positive, as companies that invest in new products are often confident in their prospects. R&D spending promotes growth and helps sustain sales, earnings, and cash flow over the long haul.
The nine A-rated companies in the table above posted double-digit increases in R&D spending over the last 12 months and three years. Below, we chart the R&D spending of three companies from the list. Drug and medical-products giant Abbott Laboratories ($57; ABT) committed an average of 11% of its sales to R&D over the last three years. Farm-equipment maker AGCO ($52; AGCO) boosted its R&D spending 26% over the last year. And while Google's ($618; GOOG) R&D spending slowed in the December quarter, 2011 expenditures topped $5 billion, 82% higher than 2009 levels.