1. Innovation’s New World
Order
2015 Global Innovation
1000 study
October 2015 SlideShare

2. Strategy& | PwC
Innovation’s New World Order
We researched the global R&D footprint of:
• Top 100 companies from the Global Innovation 1000 (the 1,000
public corporations worldwide that spent the most on researching
and developing products and services for their markets)
• Top 50 companies in the largest three industries: auto, healthcare,
and computing & electronics
• Top 20 companies in industrials, and software & Internet
This resulted in 207 companies – reflecting overlap – which
are headquartered in 23 countries, conducting R&D
activities at 2,041 R&D sites in more than 60 countries, and
represent 71% of the total Global Innovation 1000 R&D
spend.

3. Strategy& | PwC
Innovation’s New World Order
The largest corporate spenders by region have remained
the same, but where they spend their R&D has changed
Source: Strategy& 2015 Global Innovation 1000 analysis
Corporate in-region (domestic &
imported) R&D
2007 & 2015 $US billions
Corporate R&D by companies headquartered
region
2007 & 2015 $US billions
Asia is now the top regional destination for corporate R&D spending, followed by North
America and Europe. In 2007, that order was reversed
2015
Rest of
world
Europe
0%
25%
45%
2007
24%
42%
30%
1%
Asia
$480
North
America
+37%
34%
$351
35%
33%
2015
35%
5%
$480
4%
Europe
North
America34%
27%
$351
Asia
+37%
2007
28%
Rest of
world

4. Strategy& | PwC
Innovation’s New World Order
Asia’s rise as the top region for R&D spending was driven
by both robust imports and domestic spending
Source: Strategy& 2015 Global Innovation 1000 analysis
Asia in-country (domestic & imported) R&D
2007 & 2015 $US billions
$10
$50
$40
$30
$20
$0
$60
$25
China Japan
$3
South Korea
$5
Rest of Asia
+24%
$7
+120%
India
$7
Taiwan
$7
$50
+115%
+98%
+32%
$13
$3
Singapore
$6
$13
+121%
$40
+121%
$55
$28
2015
2007

5. Strategy& | PwC
Innovation’s New World Order
Leading the way for Asia was China, which is closing in on
the U.S. as the largest destination for imported R&D
Source: Strategy& 2015 Global Innovation 1000 analysis
Top five countries that China imported
R&D from
2007 & 2015 $US billions
Imported R&D by country
2007 & 2015 $US billions
$44
+79%
Switzerland
Japan
+141%
U.S.
22%
Germany
Rest of World
South Korea
41%
2015
21%
10%
7%
6%
15%
2007
$25
31%
20%
12%
9%
7%
$10$0 $50$30$20 $60$40
+74%
Singapore +121%
+64%
+23%
+116%
France
Germany
U.K.
U.S.
+79%
+12%
India
Canada
Japan
-7%
Israel
+12%
-21%
China
2007
2015

6. Strategy& | PwC
Top three responses are based
on proximity
Innovation’s New World Order
R&D professionals ranked proximity higher than cost
advantages when moving R&D activities to China
Source: Strategy& 2015 Global Innovation 1000 survey data and analysis
What are the benefits of moving R&D functions to China?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Lower
development
costs
53%
59%
54%
Proximity to
key
manufacturing
sites
Proximity to
high growth
market
39%
Proximity to
key suppliers
Access to
technical
talent
Reliability
of project
execution
71%
26%
33%
30%
Easier place
to export to
the rest of
the world
Experienced
labor market

7. Strategy& | PwC
Innovation’s New World Order
The U.S. remains the largest in-country R&D spender...
Source: Strategy& 2015 Global Innovation 1000 analysis
In-country (domestic & imported) R&D
2007 & 2015 $US billions
$150
$0
$50
$100
France
+120%
+34%
Germany ItalyIsrael
+115%
-21% +98% +69%
-5%
+15%
+12%
South
Korea
+41%
China
$109
U.S.
$25
$145
$11$7
$13
$7
$16$20$22$23
$28
$13
$32$28
$50
$40
Canada
$55
$11$8 $9 $10
Japan U.K.India
+24%
2015
2007

8. Strategy& | PwC
Innovation’s New World Order
… however, its lead against key Asian countries is eroding
Source: Strategy& 2015 Global Innovation 1000 analysis
*Eastern Europe Includes: Russia, Poland, Romania, Czech Republic, Slovakia, Croatia, Hungary, Bulgaria, Estonia, Latvia, Serbia, Turkey, and Slovenia
% Change 2007-2015, in-country (domestic and imported) R&D relative to the U.S.
Height of bar = 2015 in-country R&D spend ($US billions)
0% 40% 60%50%-20% -10% 70%-50% -40% -30% 10% 20% 30%
France $16
$55 64%
-41%
U.K. -29% $22
Canada -16% $10
Germany -14% $32
Japan -7% $50
Italy 5%$11
Eastern Europe* 15%$14
Israel 26%$11
South Korea 48%$13
India 61%$28
China
Asia
Europe
North America
Rest of world
U.S. = 0 Gained advantageLost advantage

9. Strategy& | PwC
Innovation’s New World Order
U.S. firms significantly increased R&D performed in low-
cost Asian countries such as China and India
Source: Strategy& 2015 Global Innovation 1000 analysis
U.S. HQ firms’ R&D allocation
2007 & 2015 $US billions
Top 7 countries that the U.S. exported R&D to
2007 & 2015 $US billions
$214
25%
U.S.
Rest of world
Europe
43%
11%
21%
Asia
2015
$146
17%
2007
27%
11%
45%
5%
45%
10%
7%
9%
2007
$80
9%
8%
6%
2015
Rest of World
$121
India
Canada
Japan
U.K.
Israel
Germany
China
5%
9%
7%
5%
15%
15%
36%
7%

10. Strategy& | PwC
Innovation’s New World Order
Europe’s decline results from low growth in domestic and
imported R&D, and high growth in exported R&D
Source: Strategy& 2015 Global Innovation 1000 analysis
% change in R&D spending by region
2007-2015
North America Europe Asia
R&D by
domestic
companies
R&D
imported
R&D
exported
46%
18%
2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
50%
40%
R&D by
domestic
companies
R&D
exported
21%
R&D
imported
16%
86%
60%
R&D by
domestic
companies
R&D
exported
R&D
imported

11. Strategy& | PwC
Innovation’s New World Order
R&D professionals ranked access to talent and proximity to
customers as top factors in choosing where to conduct R&D
Source: Strategy& 2015 Global Innovation 1000 survey data and analysis
The most important attributes when considering where to conduct your R&D
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
38%
Software design Tax advantages
34%
Labor costs
44%
Operating costs
56%
Insight into local
market needs
64%
Proximity to
customers
68%
Access to
technical talent
71%

12. Strategy& | PwC
Innovation’s New World Order
Key guidelines
for executing
global innovation
Create clear missions, roles
and lines of authority to align
R&D sites with the company’s
innovation strategy.
Strategy & innovation
Operational excellence
As part of the overall business
strategy, articulate the role that
innovation plays in the
company’s strategy.
Competitive advantage
Talent management
The role of innovation in the
company’s competitive advantage
should inform the company’s
global footprint.
Construct a global talent
management strategy that has
common standards for
development and retention.
Customers & markets
Corporate culture
Define the markets and the
customers within those
markets that are central to the
company’s growth strategy.
Foster a culture that supports
the company’s unique
innovation strategy and
encourages collaboration
worldwide.

13. Strategy& | PwC
Innovation’s New World Order
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advisors.
See more of the findings from this year’s Global
Innovation 1000 study, including videos,
interactive graphics, and an in-depth look at the
globalization of R&D:
www.strategyand.pwc.com/innovation1000