Economic crisis raised the research and development intensity to the record level

news release no 158

According to Statistics Estonia, in 2009 the ratio of research and development (R&D) expenditures to the gross domestic product (called the intensity of the R&D) reached unprecedented level of 1.42% despite the actual decrease of those expenditures.

The statistical somersault was enabled by the economic crisis causing the 16% falloff of the gross domestic product (GDP) in 2009 compared to 2008. The expenditure on R&D decreased from 3.26 billion kroons in 2008 to 3.09 kroons in 2009 or only by 5%. As a result the R&D intensity was lifted from 1.29% to 1.42%. For comparison: in 2008 this indicator equalled 3.73% in Finland, 1.43% in Ireland, 1.35% in Spain and 1.03% in Russia, EU mean reaching 1.90%.

At large the units performing R&D are divided into two groups: non-profit institutional sectors (higher education, government and private non-profit sectors) and business enterprise sector. Analysing details of data it became apparent, that under the shadow of the expenditure decrease truly certain rise took place, as the decrease was brought about by saving and cutting of the labour costs.

Compared to 2008, in non-profit institutional sectors the number of R&D personnel increased from 6,598 to 6,782 and the working time spent on R&D from 3,241 man-years to 3,507. At the same time the labour costs remained almost on the same level implying 6% fall of those costs per working year. That fall was even higher than 5% decrease measured for the whole Estonia. As a total the expenditure in those sectors slumped by 140 million kroons evenly at the expense of current expenses and investments.

The R&D expenditure in business enterprise sector remained practically at the level of 2008. A couple of circumstances can explain that. Firstly, 75% of the R&D expenditure can be attributed to only 58 enterprises (the total number of enterprises declaring such expenditures was limited to a few hundreds). Mostly the main activity of mentioned 58 belonged to the list of activities of high-tech manufacturing or knowledge intensive services less affected by economic crisis. Secondly, quite some enterprises remembered the words of wisdom declaring that the innovativeness (including product development) is the best remedy to deal with economic recession.

There was also a rise in the business enterprise sector in the number of R&D personnel (from 3,023 to 3,122) and in man-years devoted to R&D (from 1,845 to 1,924). Unlike from non-profit sectors the labour costs per working year even grew by 2%.

Trends in R&D
Year R&D expenditure
ratio to GDP, %
The share of
R&D personnel
among employed
persons, %
R&D expenditure per
working year,
thousand kroons
2000 0.60 0.11 156
2004 0.85 0.13 273
2008 1.29 0.15 640
2009 1.42 0.17 569

No substantial changes happened in the structure of R&D financing: still half of the expenditure is financed by government, two fifths by enterprises and one tenth by foreign sources. Nevertheless the government financing decreased in 2009 compared to 2008 by 7% descending to 1.5 billion kroons and that of enterprises 8% to 1.2 billion kroons level. Hereby is important to mention that the European Union funds mediated by state budget are counted as government sourced.

For further information:

Aavo Heinlo
Principal Analyst
Annual Statistics of Entrepreneurship Service
Statistics Estonia
Tel +372 625 9217

More detailed data have been published in the Statistical Database (R&D in business enterprise sector and general data R&D ).