Geopolitical uncertainty drives R&D growth, study shows

By Divya Shah

Geopolitical instability is emerging as a key catalyst for innovation, with businesses increasingly turning to research and development (R&D) to strengthen resilience and safeguard future growth, according to the eighth annual International Innovation Barometer study. 

Competition for advanced technologies and regulatory divergence were both identified by 33% of businesses as major challenges. 

Despite these pressures, organisations are responding by increasing their focus on innovation. Nearly two-thirds (64%) of businesses said geopolitical and economic uncertainty has strengthened their commitment to innovation.  The trend is most pronounced in China, where 79% reported increased innovation investment, compared with 70% in the UK and 66% in the US. 

The study also highlights a growing recognition that failure to innovate poses business risk. More than four in five respondents (82%) warned that falling behind in areas such as artificial intelligence and energy technologies could undermine competitiveness in today’s geopolitical environment. 

Meanwhile, 86% believe innovation can create a competitive advantage, while one-third see global disruption as an opportunity to develop new products and services. 

Businesses are increasingly viewing innovation as a strategic response to uncertainty. Around 24% of respondents said their innovation programmes have already improved their resilience to disruption. 

When asked about the benefits of innovation, operational efficiency topped the list at 35%, followed by revenue growth (32%) and enhanced competitive positioning (28%). These outcomes suggest that many organisations are using innovation to reduce vulnerabilities, improve decision-making and strengthen their ability to navigate external shocks. 

The focus is shifting from reactive problem-solving towards proactively building resilience through technology, supply-chain diversification and operational flexibility. 

Energy-related concerns are playing a major role in shaping innovation strategies. While 21% of businesses reported that energy availability constraints have delayed or limited innovation activities, many are investing in solutions to reduce exposure to energy market volatility. 

Nearly four in five organisations said they are using innovation to decrease dependence on traditional energy sources. In addition, 32% are implementing measures to improve energy efficiency, while 27% are investing in green and renewable energy initiatives. 

The study also points to a growing localisation trend in innovation activities. The proportion of businesses conducting innovation within their home country has risen sharply from 50% to 73% as organisations seek greater control over strategically important capabilities. 

At the same time, domestic funding programmes are gaining prominence. Nearly three-quarters (72%) of businesses are using national innovation grants, while 40% access regional funding schemes. In contrast, reliance on international grants has fallen from 44% to 31%. 

The findings suggest that amid heightened geopolitical uncertainty, businesses are increasingly prioritising innovation not only as a growth driver but also as a critical strategy for resilience, competitiveness and long-term sustainability.