Brazil needs to create an environment that facilitates in-house research by companies

By Elton Alisson  |  FAPESP Innovative R&D – Brazil needs to create an environment that facilitates in-house research by companies so as to drive up investment in science, technology and innovation (ST&I) and reap its economic and social benefits.

Said assessment was done by Carlos Henrique de Brito Cruz, Senior Vice President of Elsevier Research Networks and a former Scientific Director of FAPESP, in his speech during the closing event in the cycle of FAPESP 60 Years Conferences, on December 14, 2022.

“The ST&I discussion in Brazil hasn’t yet recognized the significance of the corporate sector to research. Companies all over the world create knowledge, and sometimes it’s more advanced than the knowledge created by universities,” he said, citing as an example the ongoing progress of quantum computing led by companies such as Google, Microsoft and IBM. 

“The research done by companies is essential to economic development. Most of any country’s economy isn’t driven by the ideas of universities, but by people educated at university and now working for companies. That’s where GDP [gross domestic product] comes from,” he said. 

If companies are to do relevant research, they have to employ researchers and not just establish partnerships with universities, he added, yet the number of researchers employed by companies in Brazil is lower than the average for 44 other countries. Indeed, Brazil is one of the lowest-ranking countries in this regard, alongside South Africa and Argentina. Data for 2017 shows that Brazil had 59,000 researchers working in companies, or 290 per 1 million inhabitants. This corresponds to 19 researchers per 1 billion of GDP in purchasing power parity terms. South Korea, whose population is only a fifth of Brazil’s, has six times more, and the United States has ten times more, Brito Cruz said. 

Investment in research, development and innovation (RD&I) by companies established in Brazil is also less than the world average. According to statistics produced by MCTI, in 2019 Brazilian investment in RD&I totaled BRL 89 billion, or 1.21% of GDP. Government and public and private universities accounted for 51% of the total, and companies for 49%. 

The percentage has not changed despite the introduction of subsidies in recent years to foster research in the business sector and has never surpassed 0.6% of GDP. “It’s widely believed in Brazil that innovation is driven by incentives, but the problem is that the economic environment doesn’t oblige Brazilian companies to want to be the best in the world in their field. They won’t do so, however many incentives are offered,” Brito Cruz said. 

He presented data showing that expenditure by several countries on incentives to foster corporate research has fallen since 1980 and is currently less than 10% of total spending on ST&I, although investment in RD&I by their companies has risen in the same period. This is another sign that it is not direct subsidies that stimulate companies to invest in research.   

“Companies do research not because of tax incentives but to be competitive, to seek new markets, to perform better and better. They can benefit from incentives in pursuit of further development, of course,” he said. 

Spending boost

According to data presented by Brito Cruz on the variation in government spending in ST&I in recent years in several countries, the increase in global expenditure for this purpose has been driven by the investments of companies.

In the United States, for example, total annual spending by companies in R&D amounts to USD 400 billion. By contrast, the annual budget of the US government agency for research support – the National Science Foundation (NSF) – is USD 8 billion.

“US companies’ spending on research is 400 times higher than the NSF’s annual spending to support the recently launched program in the country to encourage chip development [the Chips and Science Act, which will raise USD 52 billion in the coming years to strengthen semiconductor research and development in the country],” compared Brito Cruz.

In the case of Brazil, to increase the total expenditure on ST&I from 1.2% to 2% of GDP in the coming years, for example, the contribution of companies will also be essential. “Most of this difference will have to be borne by spending on research in companies and not by the government,” he said.

The talks delivered to the 17th FAPESP 60 Years Conference and the presentation of A Ciência no Desenvolvimento Nacional can be watched in full at: youtube.com/watch?v=1Yh3Qhaewx0.