COVID-19 Triggered R&D Freeze: "Cutting Back on Investment and Hiring First"

Office workers are heading to work on foot along Sejong-daero in Jung-gu, Seoul, with snow piled up on the sidewalks. Photo by Kang Jin-hyung aymsdream@ (unrelated to this article)

[Asia Economy Reporter Junho Hwang] As the impact of the novel coronavirus infection (COVID-19) continues for a prolonged period, there is a forecast that a severe cold wave will hit private R&D. It is expected that the number of companies planning to reduce R&D investment or research personnel recruitment due to deteriorating performance caused by COVID-19 will increase.

R&D Cold Wave Due to COVID-19

According to the "Survey on Corporate R&D Activities Due to COVID-19" conducted by the Korea Industrial Technology Association from the 22nd to 25th of last month targeting 1,221 companies with research institutes, R&D investment and researcher recruitment are gradually shrinking.

58% of companies responded that they would reduce R&D investment. This is an increase of 10.3 percentage points compared to the first survey in March. The response indicating a reduction in researcher recruitment also increased by 10.2 percentage points to 51.5%. As the deterioration of performance due to COVID-19 intensifies, the number of companies negative about R&D investment is expanding.

In particular, large and medium-sized enterprises are expected to reduce R&D. More than half (50.9%) of the responding companies answered this way, an increase of 16.5% compared to the first survey. Half (49.1%) of the responding companies also expected a decrease in new researcher recruitment. Negative sentiment has expanded by about 12.9 percentage points compared to the previous survey.

The situation is similar for small and medium-sized enterprises. In the first survey, 48.2% expressed an intention to reduce, but this expanded to 58.2% in this survey. Regarding research personnel recruitment, 51.5% responded that it would be reduced, about 10 percentage points higher than the 41.6% in the previous survey.

Entering Recession-Type R&D Such as Short-Term R&D

Companies are reducing long-term projects or seeking external funding in response to the R&D cold wave. 34.6% of responding companies are considering restructuring their business towards short-term performance-oriented projects or even suspending R&D projects themselves (14.2%). Especially, companies lacking R&D funds reported using financial institution loans (49.4%) or utilizing government R&D programs (48.9%).

They pointed out that immediate support for maintaining employment of research personnel is most needed (76.5%), and that expansion of government R&D programs that companies can participate in is necessary (51.8%). By company size, small and medium-sized enterprises said support for maintaining research personnel employment (77.2%) and expansion of government R&D programs (52.4%) are needed. Large and medium-sized enterprises prioritized expansion of R&D tax support (61.8%) as the key issue to resolve.

Changhwan Ma, Executive Vice President of the Korea Industrial Technology Association, stated, "Recently, corporate R&D has become increasingly dependent on government support and is being promoted as recession-type R&D centered on short-term projects," adding, "To enhance the competitiveness of our industry in the post-COVID-19 era, more radical R&D support measures are necessary."

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