Trends at the Frontier in Corporate R&D in the Digital Era: Facts, Prospects and Policies

Both technological change, especially the digital revolution, and globalisation are predicted to lead to “winner takes most” industries, dominated by a happy few superstar firms. As the importance of large fixed investments driving scale and scope advantages increase, and as network effects become more prominent, sectors will be increasingly concentrated in a small number of firms, leaving an increasingly unequal corporate landscape. This may have important implications for aggregate productivity trends, particularly if the “winners” are the biggest firms with highest productivity growth and innovative performance and the laggards increasingly less likely to produce productivity growth. This contribution examines how concentrated R&D spending is in few “winners”. It finds a high degree of concentration in R&D, much more than sales and employment. The analysis finds no evidence for increasing concentration in the global R&D landscape, only more recently in the digital services sectors, with in particular the top 1 percent of R&D spending firms in these sectors forging ahead.Incumbent R&D leaders slowly lose their positions to new R&D-leading firms. But overall, R&D leadership is persistent and turbulence is relatively modest. Digital services is the most turbulent high-tech sector. The US and China are more likely to produce new R&D leaders taking over top positions from incumbent R&D leaders. This poses difficult questions for Europe, which is at risk of losing out in terms of R&D leadership in more technologically advanced sectors.