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 / Winter 2008 /Issue 53(originally published by Booz & Company)


Beyond Borders: The Global Innovation 1000

Booz & Company Global Innovation 1000: Methodology

Booz & Company identified the 1,000 public companies around the world that spent the most on research and development in 2007. To be included, companies had to make data on their R&D spending public; all data is based on the last full-year data reported by June 30, 2008. Subsidiaries that were more than 50 percent owned by a single corporate parent were excluded because their financial results were included in the parent company’s reporting. This is the same core approach to identifying the Global Innovation 1000 that we have used in the previous three years of the study.

For each of the top 1,000 companies, we obtained key financial metrics for 2001 through 2007: sales, gross profit, operating profit, net profit, R&D expenditures, and market capitalization. All foreign currency sales and R&D expenditure figures prior to 2007 were translated into U.S. dollars according to the average exchange rate for the year. In addition, total shareholder return was gathered and adjusted for each company’s corresponding local market total shareholder return.

Each company was coded into one of nine industry sectors (or “other”) according to Bloomberg’s industry designations, and into one of five regional designations as determined by each company’s re­ported headquarters location. To enable meaningful comparisons across industries, we indexed the R&D spending levels and financial performance metrics of each company against its industry group’s median values.

To understand the global distribution of R&D spend, the drivers of that distribution, and how the distribution affects the performance of individual companies, we researched the global R&D footprint of the top 100 companies in terms of R&D spend, plus the top 50 companies in the three largest industries in terms of R&D spend (auto, health care, and computing and electronics). A total of 184 companies — reflecting overlaps in the top 100 and the three selected industry lists — were evaluated in detail. This subset of the Global Innovation 1000 was responsible for US$351 billion of 2007 global R&D spending, representing 71 percent of the spending done by all companies in the study and 57 percent of all global private-sector R&D activity.

The distribution of R&D spending across countries was assessed for these 184 companies. When geographic breakdowns were not publicly available, we collected data on the location of R&D facilities, the product segments each supports, the year each facility was established, and the number of employees by facility, sales by product segment, and global distribution of sales. This data was used to allocate total R&D dollars to the countries where facilities were located. Supple­mental interviews were conducted with a subset of respondents among innovation leaders in the selected industries. The detailed research on these 184 companies covered activities at 3,407 R&D sites spanning 47 countries.

Reprint No. 08405

Author Profiles:

Barry Jaruzelski is a partner with Booz & Company in Florham Park, N.J., who leads the firm’s work for high-technology and industrial clients. He has spent more than 21 years working with clients, special­izing in corporate and product strategy, product development efficiency and effectiveness, and the transformation of core innovation processes.

Kevin Dehoff, a partner with Booz & Company in Florham Park, N.J., is the global leader of the firm’s innovation business. He has spent more than 16 years helping clients drive growth and improve performance through innovation, including research and development, technology management, product planning, and new product development.

Also contributing to this article were Booz & Company Associate Kunal Vaed, Senior Consultant Aditya Ramamurthy, and s+b Contributing Editor Edward H. Baker.
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  1. Vinay Couto and Arie Y. Lewin, Next Generation Offshoring: The Globalization of Innovation (Duke Center for International Business Education and Research, 2007): Examines trends in global offshoring practices and analyzes why and how companies go about globalizing innovation and seeking talent globally, and what challenges they face.
  2. Vinay Couto, Arie Lewin, Mahadeva Mani, and Vikas Sehgal, “Offshoring the Brains as Well as the Brawn,” Booz & Company/Duke Center for International Business Education and Research, July 2008: Shows how providers of outsourcing services are increasingly performing innovation work, such as new product development and R&D.
  3. Kevin Dehoff and Vikas Sehgal, “Innovators without Borders,” s+b, Autumn 2006: Provides comprehensive insight into the market for offshored engineering and technical services.
  4. Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-First Century (Farrar, Straus and Giroux, 2005): Bestseller analyzing the progress of globalization with an emphasis on geo-economic trends.
  5. Thomas Goldbrunner, Yves Doz, Keeley Wilson, and Steven Veldhoen, “The Well-Designed Global R&D Network,” s+b Resilience Report, 05/15/06: A study of cross-boundary innovation networks worldwide showing low-cost, high-value ways they can be designed.
  6. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: The 2007 study, identifying two primary success factors in innovation strategy: aligning the innovation model to corporate strategy and listening to customers every step of the way.
  7. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Smart Spenders: The Global Innovation 1000,” s+b, Winter 2006: The 2006 study, uncovering a small group of high-leverage innovators who outperform their industries.
  8. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Money Isn’t Everything: The Global Innovation 1000,” s+b, Winter 2005: The 2005 study, revealing the value of an innovation dollar — and the basics of a better strategy.
  9. For more articles on innovation, sign up for s+b’s RSS feed.
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