Determining research and development expenditure targets based on an affordability index

Gross domestic expenditure on research and development (GERD), usually expressed as a percentage of gross domestic product (GDP), is a widely used indicator to reflect the research intensity within a national economy, and hence its capacity to develop new and innovative products or services. It is also used as a key target in the management of national innovation systems. For instance, the South African National Research and Development Strategy set a target of raising GERD/GDP to ´somewhat over 1%´, and in 2002 the Barcelona European Council set an EU target of 3%. Despite its widespread usage, there is little discussion or agreement on how this target should be derived within a broad range of economic contexts and levels of affordability. In this paper, a composite indicator based on GERD/GDP, normalised for GDP per capita, is developed and its use in a number of countries explored and explained. As a result, a set of GERD/GDP targets for various categories of developing countries is proposed.