Global Innovation Funding Slows to Lowest Rate Since 2010, UN Reports

Growth in global innovation funding has slowed to its lowest level since 2010, according to United Nations projections released on Tuesday. The decline is attributed to high inflation, which is eroding research and development (R&D) budgets, and a slump in venture capital (VC) deals.

In its annual ranking of the world’s most innovative economies, the World Intellectual Property Organization (WIPO) placed Switzerland at the top for the 15th consecutive year.

• Sweden and the United States retained their second and third positions for the third year running.
• China moved into the top 10, reflecting its gradual climb in global innovation standing.

Despite the familiar ranking order, WIPO cautioned that funding growth for global innovation had slowed markedly.

“The fuel powering the engine of innovation, which is capital, which is financing, is not as abundant as before,” said WIPO Chief Daren Tang.
“After a decade of rapid expansion in R&D spending and venture capital investment, we are witnessing a shift.”

R&D Spending Trends

The report highlighted a sharp slowdown in global R&D spending growth:

• Business R&D, which accounts for over 70% of total global R&D, is projected to grow just 1.4% in 2024 and 2025 outside China and the US.
• This is significantly lower than the 4.6% average growth of the past decade.
• WIPO noted that if these estimates hold, they would represent the lowest growth rates on record since 2010, immediately after the global financial crisis.
• Business R&D growth is projected to match total R&D growth, a pattern not seen since the early 2000s.

Global venture capital (VC) funding for innovative products and services increased 7.7% last year, but this was largely driven by:

• US-based megadeals
• Surging investment in generative AI

Excluding these factors, VC funding would have contracted, and the number of VC deals fell by 4.4% globally for the third consecutive year.

“This signals persistent investor caution outside a narrow set of sectors and geographies,” WIPO said.

Tang warned: “The global innovation engine is not firing on all cylinders. Slower growth in R&D investments and declining VC activity reminds us that innovation requires sustained upstream and financial commitment.”

Optimistic Outlook

Despite the slowdown, there is a potential upside:

• Expected interest-rate cuts by central banks may reduce inflation.
• Lower inflation could boost innovation spending in the coming years.

Sacha Wunsch-Vincent, head of WIPO’s Economics and Data Analytics Department, stated: “That’s good news, I think, for the future of innovation.”

The report underscores that while innovation rankings remain stable, the financial support that fuels global R&D and venture capital is under pressure, signalling caution for policymakers and investors alike.