US Companies Lead in R&D Spending, but UAE Companies Might Have Another Way In
In a globalised world where corporate activity spans across multiple countries, competition is fierce. If companies want to stay ahead of the game, they need to invest in constant evolution and novelty. Sadly, research suggests that UAE companies still lag behind their US counterparts, which dominate the list of big spenders on research and development.
US Companies Lead the Way on the Global Map
New research data reveals that US tech companies spend more on R&D than any other companies in the Standard & Poor’s 500 index – which is surely connected to the surge in the use of technological novelties in day-to-day life, ranging from the Internet of Things to social media platforms that become more and more comprehensive (Facebook recently announced it will launch Watch, a competitor to YouTube, that will allow it to pocket 45% of the ad break revenue on videos created exclusively for the social network). Last year alone, Amazon spent a whopping $16.1 billion on R&D, followed by Alphabet (the parent company of Google) at almost $14 billion, while Apple ranked fifth with $10 billion.
In contrast, US Big Pharma companies that distribute medicine products around the globe – and have fallen out of grace with the public lately, partly due to raises in drug prices – focus more on share buybacks than research. A new academic study found that in the period from 2006 to 2015, a total of $516 billion was spent on share buybacks and dividends among the 18 US pharmaceutical companies in S&P 500, while they only spent $465 billion on R&D – a difference of roughly 11% – relying instead on patents that are decades old. The scholars behind the research also found that this focus on buybacks instead of R&D hurts the companies’ performance in the long run.
R&D Crucial for Corporate Growth – How Could UAE Companies Participate More?
Investing in research and development then seems crucial for a company’s long-term performance – as is putting technological developments to good use. For instance, as more and more companies rely heavily on their online presence, cybersecurity seems one of the most pivotal sectors that organisations invest in – a 2017 study found that the total amount spent on cybersecurity in the US climbed from $49 billion in 2015 to a projected figure of almost $55 billion in 2016, and is set to reach $66 billion by 2020.
With the growth in the online world comes the difficulties of managing load – ensuring customer data stays in one region, for example, because of regulation or privacy concerns as well as making sure you can balance traffic spikes, rather than bringing your site or application down when stressed under load.
Research and development leads to the growth of a connected world, as well as novel solutions like load balancing, which optimise traffic distribution across different servers and reduces too much load on any single resource – thus ensuring reliable and uninterrupted application performance, crucial for most companies. Recent developments have seen load balancing services provided through the cloud, which allows organisations to scale even more effectively.
Yet UAE companies still lag behind in terms of focusing on R&D – a trend that sadly mirrors the policies of the country itself, which in 2014 had invested only 0.7% of its GDP in R&D. According to the Global Innovation 1000 Study published in 2016, only one Middle Eastern company ranked high enough among big R&D spenders to be included in the top 1000 public companies with regard to innovation outlays. Among themselves, the 1000 companies spent around $680 billion on R&D in the year the study was conducted. A finding that might be more interesting to the UAE market though is the fact that according to the same research, is that 94% of the biggest global innovators now carry out part of their R&D programmes abroad – which means that UAE could position itself as such a destination. After all, the same source reveals that the Middle East ranks high on two of the factors that organizations take most into account when deciding where to conduct their R&D – being close to consumers and allowing insight into the local market and its needs.
This aspect of the study might illustrate ways in which UAE companies can still play in the big league in the R&D game, despite being yet unable to afford the investment of substantially more funds in conducting innovative research themselves.