Tiina Pärson, lead analyst at Statistics Estonia, noted that while expenditures did not grow as rapidly as the previous year, their total volume is the highest on record.

Over half of the expenditures, amounting to €406 million, were made in the business sector. The higher education sector accounted for €230 million, the government sector for €60 million and the non-profit private sector for €6 million.

In 2023, the state budget allocated €337 million for research and development, an increase of €77 million compared to the previous year. Nearly half of this allocation was directed toward the development of general knowledge without a clearly defined application area. Compared to previous years, the state significantly increased funding for industrial production and technology development, allocating €91 million.

R&D funding up more than a quarter

Spending on experimental development saw the largest increase last year, rising by 28 percent compared to the previous year.

"This is primarily driven by the business sector, as 58 percent of all research and development expenditures in 2023 were made within businesses," explained Pärson.

In the business sector, the primary focus is on experimental development, although applied research is also conducted.

The volume of applied research slightly declined last year, amounting to €164 million. Basic research, predominantly conducted by universities and government-sector institutions, totaled €138 million, a 7 percent increase from 2022.

In 2023, 468 businesses were involved in research and development, a significant increase from 399 businesses in 2022.

Small businesses with fewer than 50 employees accounted for €101 million in R&D expenditures, representing one-fifth of the total spent in the business sector. However, the largest contribution came from large companies with 250 or more employees, which accounted for 47 percent of the business sector's R&D spending.

R&D staff growing

The largest share – 60 percent – of research and development (R&D) expenditures in 2023 was allocated to labor costs, amounting to €423 million. Labor costs increased by 7 percent compared to the previous year, primarily due to a rise in the number of employees in the sector.

Investment volumes reached €85 million, accounting for more than 10 percent of R&D expenditures. Current expenses totaled €194 million, covering costs such as small equipment, instruments, materials, other circulating assets, infrastructure maintenance and research and development work or services purchased for in-house projects.

In 2023, over 13,000 individuals were involved in R&D activities. When adjusted to full-time equivalent (FTE) positions, the number of employees was 8,772, representing a 9 percent increase from 2022. The higher education sector saw the largest growth in R&D personnel, with an 11 percent rise compared to the previous year.

The ratio of Estonia's R&D expenditures to GDP in 2023 was 1.84 percent, one of the highest in history, up from 1.78 percent in 2022.

The European Union's average R&D expenditure-to-GDP ratio stood at 2.25 percent in 2023, unchanged from the previous year.

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