R&D spending is a badly understood black box. we incentivise miss measuring it with weird tax breaks and complex rules. From an economic point of view, it's not clear that existing firms should be engaging in it: many industries follow model where specialists create new products which are then available to industry via a mix of buying out small firms, licensing their products or imitating them (that seems to be how big chunks of silicon Valley work and also drug discovery and fashion for instance, three quite innovative sectors).
The result is the number being inflated up by firms dodging taxes, down by people working in their garages, sideways by including things and excluding other things based on weird regulations.
Share buybacks are similarly in a weird place: tax rules favour them twice, once when buying back and again when borrrowing to fund that. Plus interest rates are at a record low so that encourages them too.
People have a 1950s model that assumes research is something AT&T do and that the amount they spend is an honest reliable value. But they don't and its not. Some where someone is building WhatsApp 2.0 or 6G comms equipment in their basement in weekends. Their time and energy is counted for nothing in these numbers. And when they sell their company ro Facebook who issues shares to buy it and then buy those shares back (as that's the tax efficient way to buy things), they value they created will be a "buy back" not an "invention"...
I suppose some amount of this line of reasoning (R&D is hidden under acquisitions) would be observable if changes in R&D spending were compensated by changes in total acquisitions (of smaller firms)
The result is the number being inflated up by firms dodging taxes, down by people working in their garages, sideways by including things and excluding other things based on weird regulations.
Share buybacks are similarly in a weird place: tax rules favour them twice, once when buying back and again when borrrowing to fund that. Plus interest rates are at a record low so that encourages them too.
People have a 1950s model that assumes research is something AT&T do and that the amount they spend is an honest reliable value. But they don't and its not. Some where someone is building WhatsApp 2.0 or 6G comms equipment in their basement in weekends. Their time and energy is counted for nothing in these numbers. And when they sell their company ro Facebook who issues shares to buy it and then buy those shares back (as that's the tax efficient way to buy things), they value they created will be a "buy back" not an "invention"...