If you’d asked me which company spends most on research and development worldwide, I’d have said IBM (famed for filing lots of patents), or possibly Microsoft (it employs lots of researchers, even if it doesn’t always show), or perhaps Honda (humanoid robots and jet aircraft don’t come cheap, after all, especially when your main business is building cars, motorbikes, marine engines and lawnmowers).

Of course I’d have been wrong, as the good people at IEEE Spectrum have shown. They’ve done the leg work (or mouse work) necessary to comb through all the annual reports and work out who spends what, compiling the R&D global top 100. Their numbers are for 2006 fiscal years, as it’s tough to get good data for the year we’re still in.

The surprising top 10, in pure pile-of-dollars terms, is as follows:

1.    Toyota (Japan) $7.49bn
2.    Pfizer (US) $7.42bn
3.    Ford (US) $7.2bn
4.    Johnson & Johnson (US) $7.13bn
5.    Microsoft (US) $7.12bn
6.    DaimlerChrysler (Germany) $7bn
7.    GlaxoSmithKline (UK) $6.61bn
8.    Siemens (Germany) $6.6bn
9.    General Motors (US) $6.6bn
10.    Volkswagen (Germany) $6.03bn

As you can see, Microsoft and Siemens are the only tech companies in the top 10, with five carmakers (none of them Honda) and three healthcare companies completing the roster. The US and Germany dominate, with the UK and Japan making up the numbers.

IBM comes in at number 14 with $5.7bn spent in 2006, and Asimo fans will find Honda at 19 with $4.6bn.
Other notable entries include Intel at 12th place and $5.9bn; Finland’s Nokia at 17 with $5.1bn; and even acquisitive Oracle at the number 48 spot with $2.2bn spent in the labs.

Frankly I'm surprised that the tech sector is so poorly represented.

Of course Toyota happens to be the world’s largest automaker, and so presumably can afford to splash a bit of cash in the labs. Interestingly, IEEE Spectrum has also provided data for what it calls R&D intensity, or R&D spending as a proportion of turnover.

I put the numbers into a spreadsheet and reordered by intensity, and of course the top 10 looks rather different. These are the firms spending the most per dollar of revenue, and therefore the most committed to making business progress through research:

1.    Qinetiq (UK) 44.9% - defence
2.    Electronic Arts (US) 33.7% - tech
3.    Broadcom (US) 30.5% - tech
4.    Amgen (US) 23.6% - healthcare
5.    AMD (US) 21.3% - tech
6.    Schering-Plough (US) 20.6% - healthcare
7.    Qualcomm (US) 20.1% - tech
8.    Eli Lilly (US) 19.9% - healthcare
9.    NEC Electronics (Japan) 19% - tech
10.    Daiichi Sankyo (Japan) 18.4% - healthcare

This list (and the rest of the top 100 by intensity) seems to better match my own impressions and prejudices about tech sector spending.

Attempts to relate R&D spending to business growth are, of course, far from straightforward. As IEEE Spectrum observes:

“Apple, the one company perhaps most closely associated with innovation, doesn't even show up on the R&D leaderboard this year [and] hasn't appeared there [in the last five years]. Its absence can't be attributed to size, because Apple's sales of  $19.3bn surpassed those of 30 of the list's 100 firms. Comparing those sales to the relatively meager $712m Apple spent on R&D in 2006 yields an R&D Intensity of just 3.7 percent.”

So while it may feel like a forward-looking supplier ought to be diverting a healthy proportion of profit into creating tomorrow’s products - it ain’t necessarily so.