Global Innovation Index 2020

According to IMF forecasts from January 2020, global GDP was expected to fall by 9.4% in 2020, with the hardest impacts on top innovators—high-income countries and China. While some projections assumed a short-term decline with a rebound in the second half of 2020, others predicted a decade-long economic downturn with higher unemployment and long-term damage to global supply chains.

The specific impact on innovation remains uncertain, but financial resources—both public and private—will be limited. History shows that after pandemics, innovation investment often declines. The key question is whether R\&D spending will also shrink, or if it will remain resilient despite the economic cycle.

Historically, R\&D, IP filings, and venture capital have moved in sync with GDP, decreasing significantly during recessions (e.g., early 1990s, early 2000s, and 2009). Causes include reduced revenue, cautious investor behavior, and cuts in spending. It is likely the 2020 recession will also impact R\&D budgets. Past recessions have led to a drop in trademarks and, to a lesser extent, patents and licensing rights.

However, short-term impacts may not be visible until Q2 or Q3 2020, and full data on the pandemic’s effect on innovation may not be available until early 2022 due to reporting delays.

Some countries and firms may maintain R\&D spending despite the downturn. After the 2009 crisis, countries like Argentina, China, Costa Rica, Egypt, France, India, South Korea, Mexico, Poland, and Turkey did not reduce R\&D spending. Others, such as Brazil, Chile, Germany, the UK, the U.S., Singapore, and South Africa, saw only brief declines. The critical role of IP today has helped shorten the negative impact of recessions on innovation.

Mid-term innovation outcomes depend on how fast economies recover, the sensitivity of R\&D to economic cycles, and supportive policies. Past crises have affected sectors and countries differently. This pattern may repeat in 2020, with varying post-crisis innovation outcomes across regions.

Interestingly, a large share of global R\&D is concentrated among a few thousand firms. The top 2,500 global R\&D companies account for around 90% of global R\&D, and the top 100 make up 50% of total spending. Some of these firms, particularly in ICT and software, have shown resilience during the COVID-19 crisis.

Major tech companies like Alphabet, Microsoft, Facebook, Oracle, Alibaba, Tencent, Baidu, Softbank, and Ubisoft may even benefit from the crisis due to increased demand for internet services, cloud computing, gaming, and remote work. These firms reported strong revenues and R\&D commitments in Q1 2020.

However, ICT hardware and electronics—representing the largest R\&D sector—face challenges due to declining global demand and supply chain disruptions. Companies like Samsung, Huawei, and Apple have already experienced reduced revenues and anticipate further impact.

Pharmaceuticals and biotechnology, the second-largest R\&D sector, are expected to maintain or increase R\&D efforts. Companies like Roche are likely to benefit from ongoing health-related innovation.

The automotive sector, the third-largest in R\&D, is facing uncertainty. Despite short-term R\&D cuts, long-term investment may recover, especially with goals like safer and greener vehicles. Volkswagen, the world’s top R\&D spender, increased R\&D in Q1 2020 despite revenue losses.

Other sectors hit hardest by the recession—such as travel, hospitality, services, and real estate—may reduce R\&D, but their overall contribution to global innovation is limited. For these industries, digital transformation is key to survival and future growth.