8 out of 10 Companies Suffer R&D Activity Impact Due to COVID-19

Urgent Need for Active and Swift Support Policies to Prevent Disruption of Growth Engines

[Asia Economy Reporter Kwangho Lee] Due to the COVID-19 pandemic, 80% of companies are experiencing disruptions in their research and development (R&D) activities, and more than 40% of companies are considering reducing R&D investments and hiring of research personnel. Accordingly, companies are requesting prompt support such as increased R&D funding and tax incentives.

The Korea Industrial Technology Association announced on the 19th that it conducted a "Survey on Corporate R&D Activities in Response to the COVID-19 Crisis" from the 11th to the 16th, targeting 1,490 companies with research institutes (58 large and medium-sized companies, 1,432 small and venture companies), revealing these results.

In this survey, when asked about the impact of the COVID-19 pandemic on R&D, 79.8% (1,189 companies) of respondents answered that they were negatively affected. Only 17.9% responded that there was no impact, and 2.4% said it had a positive effect.

R&D investment and hiring of researchers by companies also appeared somewhat restrained. 47.7% of responding companies said they plan to reduce R&D investment compared to the beginning of this year. 41.3% said they would also reduce hiring of researchers.

By company size, 63.8% and 62.1% of large and medium-sized companies responded that they would proceed with investment and researcher hiring as originally planned, indicating that despite the economic downturn caused by COVID-19, they intend to maintain their R&D investment and hiring plans. However, 34.4% and 36.2% respectively said they would reduce R&D investment and research personnel hiring.

On the other hand, nearly half (48.2%) of small companies responded that they would reduce R&D investment. Notably, 13.1% said it would decrease significantly, indicating a high likelihood of overall contraction in R&D activities due to COVID-19. Regarding research personnel, 41.6% of small companies said they would reduce hiring.

The damage to corporate R&D caused by COVID-19 was mainly due to disruptions in domestic and international collaborative activities. 58.9% of respondents said that restrictions on domestic business trips caused disruptions in R&D activities, and 39.1% experienced difficulties due to restrictions on overseas activities such as technical seminars.

Additionally, 42.7% revealed that they had to suspend or reduce R&D projects due to worsening business conditions and lack of funds. Other difficulties included disruptions caused by shortages of materials and components used in research and development (35.8%), and gaps in research personnel due to self-quarantine or infection of affiliated researchers (26%).

Despite these damages, companies appear to have no significant countermeasures in place. 65.2% of respondents said their response to COVID-19 was "reducing business trips and face-to-face meetings," while 19.7% said they had no special response.

Companies unanimously agreed that active government support policies are necessary to reduce the damage to R&D caused by COVID-19.

Regarding government R&D projects, companies requested temporary measures to ease their burdens. They called for a reduction in the cash burden rate for companies participating in national research and development support projects (72.8%), temporary extension of project periods (64.6%), and allowance for changes in research plans (4.0%).

Furthermore, as investment capacity has decreased due to management difficulties such as reduced sales, companies requested short-term support measures such as R&D funding support (67.8%) and an increase in the tax credit rate for R&D expenses (58.9%).

Individual opinions also suggested the need for prompt clinical trial approvals for new drug candidates and other materials to respond to the spread of infectious diseases.

Machanghwan, Executive Vice Chairman of the Korea Industrial Technology Association, stated, "This survey confirmed that due to the damage caused by COVID-19, R&D activities preparing for the future of companies are also being restricted," and emphasized, "It is necessary for the government to take active and swift measures, such as reflecting support measures that companies can feel in the second supplementary budget, to prevent the disruption of growth engines."

He added, "We should start discussing ways to build digital-based R&D collaboration platforms so that R&D can operate even in situations like this."

This content was produced with the assistance of AI translation services.