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Technology R&D Spending on the Rise

Technology companies in the U.S. are taking the lead in R&D spending.

If you think pharmaceutical companies or car manufacturers are the leading spenders on R&D, you would have been right in the past. Technology is now leading R&D spending, at least in the United States, according to Recode, an online technology magazine. Rani Molla writes that Amazon is now the number one spender on R&D among the companies included in the Standard & Poor’s (S&P) 500 Index.1

In the article, Molla cites figures provided by FactSet Research Systems, a financial data and software company, which indicate that Amazon spent $16.1 billion last year on R&D. This makes it the biggest spender in R&D of all of the S&P 500 reporting companies. Amazon also recently surpassed car manufacturer Volkswagen as the top R&D spender in the world.2

Amazon Isn’t Alone in Spending Money on Technology R&D

Recode notes that Amazon isn’t the only technology company spending a lot of money on R&D in the U.S. Other technology firms such as Alphabet (Google’s parent company), Intel, Microsoft and Apple each spent $10 billion or more on R&D last year. This is well ahead of what car manufacturers and pharmaceutical companies, which had previously led R&D spending in the U.S., are now investing.  

The U.S. Government Is Prioritizing R&D Technology Spending, Too

The private sector is not alone in investing in technology: the U.S. government seems to have made R&D technology spending a priority, according to an article by Randy Showstack. Citing a Trump administration Memorandum for the Heads of Executive Departments and Agencies, Showstack notes that the U.S. government is focusing on R&D spending in “American military superiority, security, prosperity, energy dominance, and health.”3 The very first line of the memorandum states that “American leadership in science and technology is critical to achieving this Administration’s highest priorities,”4 which suggests that government spending will focus specifically on technology R&D.

Canada’s Government Also Notes that Technology Is Leading R&D 

Based on the Budget Plan 2017, it seems that technology R&D has also not gone unnoticed by the Canadian federal government. It noted a shift between 2001 and 2016 in the world’s largest firms by market capitalization: In 2001, General Electric, Exxon, Citi, Microsoft and Walmart were the top five largest firms, with Microsoft the only technology company on that list. However, by 2016, all of the top five companies were technology companies (Apple, Alphabet, Microsoft, Amazon and Facebook).5

Thus, the federal government stated in the budget plan that “its approach to innovation is centred on what Canadians need to succeed in an evolving economy.”6 It will be interesting to see what action the government takes to back up its plan, and if it will follow both the private sector’s and the U.S. government’s lead in making technology a top R&D spending priority.

Have experience claiming R&D in the USA or Canada? Have you claimed SR&ED for technology or software projects?
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Show 6 footnotes

  1. Molla, R. (September 1, 2017.) Tech companies spend more on R&D than any other companies in the U.S. Recode.com. (Accessed: September 13, 2017.) Retrieved from: https://www.recode.net/2017/9/1/16236506/tech-amazon-apple-gdp-spending-productivity.
  2. Fox, J. (June 16, 2017.) Amazon isn’t just spending big bucks on groceries. Bloomberg News. (Accessed: September 13, 2017.) Retrieved from https://www.bloomberg.com/view/articles/2017-06-16/amazon-isn-t-just-spending-big-bucks-on-groceries.
  3. Showstack, R. (August 29, 2017.) White House R&D Priorities Differ from Its Budget Requests. Eos Online. (Accessed: September 13, 2017.) Retrieved from https://eos.org/articles/white-house-rd-priorities-differ-from-its-budget-requests.
  4. Kratsios, M. and Mulvaney, M. (August 17, 2017.) Memorandum for the Head of Executive Departments and Agencies. White House. Executive Office of the President. (PDF Document). (Accessed: September 13, 2017.) Retrieved from: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/m-17-30.pdf.
  5.  Government of Canada. (March 22, 2017.) Budget 2017: Building a Strong Middle Class. (Accessed: October 5, 2017.) Retrieved from http://www.budget.gc.ca/2017/docs/plan/intro-en.html#Toc477707290.
  6.  Government of Canada. (March 22, 2017.) Budget 2017: Building a Strong Middle Class. (Accessed: October 5, 2017.) Retrieved from http://www.budget.gc.ca/2017/docs/plan/intro-en.html#Toc477707290.

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