Global innovation funding has experienced its slowest growth rate since 2010, according to projections from the United Nations. The World Intellectual Property Organization (WIPO) reported that research and development spending growth has declined due to high inflation and a slump in venture capital deals.
The WIPO’s annual ranking of the world’s most innovative economies placed Switzerland at the top for the 15th consecutive year, followed by Sweden and the United States. China also moved up the rankings, entering the top 10. However, despite the familiarity of the rankings, the UN patent agency cautioned that the growth of global innovation funding has slowed significantly.
WIPO chief Daren Tang noted that the financing that powers innovation is not as abundant as it once was. The report stated that R&D spending growth slowed to 2.9 percent last year, down from 4.4 percent the previous year, and is projected to slow further to 2.3 percent this year. Business R&D expenditures, which account for over 70 percent of total global R&D, are expected to grow just 1.4 percent in 2024 and 2025, excluding China and the United States.
The global value of venture capital funding for new ideas rose 7.7 percent last year, driven largely by US-based megadeals and investment in generative AI. However, excluding these investments, VC values would have contracted. The number of VC deals also fell 4.4 percent globally for the third consecutive year, indicating persistent investor caution.
Tang warned that the global innovation engine is not performing at full capacity, highlighting the need for sustained financial commitment to support innovation. However, Sacha Wunsch-Vincent, head of WIPO’s department for economics and data analytics, noted that expected interest-rate cuts by central banks could help reduce inflation and boost innovation spending.
The slowdown in innovation funding growth has significant implications for the global economy. As the world navigates economic uncertainty, the decline in R&D spending and venture capital activity could have long-term consequences for technological advancement and economic growth. The WIPO’s report serves as a reminder of the importance of sustained investment in innovation to drive progress and prosperity.