Israeli subsidiaries of multinational corporations drastically reduced research and development (R&D) spending in the middle of the global financial crisis, the Central Bureau of Statistics revealed Wednesday.

The Israeli foreign-controlled affiliates, including the local branches of Intel, Microsoft and IBM, spent $4.7 billion dollars on R&D activities in 2009, an 8 percent decrease from the previous year, but 36% increase from 2006. They contributed 62% of the Israeli business sector’s total R&D expenditure in 2009.

R&D data is published with a lag as the CBS gives companies time to complete their financial reports before surveying them.

“IN” companies, as the Israeli foreign- controlled affiliates are known, directed just 14% of overall spending toward R&D in 2009, a 1% drop from 2008. Similarly to previous years, 64% of their R&D expenditure went toward paying wages and other employment costs, and 23% of their workforce was involved in R&D activities.

They continued to dominate exportation, making $3.4b. in R&D-related sales abroad, which constituted 92% of total Israeli R&D exports. Naturally, they had an advantage: 90% of their exports went directly to their foreign parent companies, and 72% of their exports were directed to the United States.

The study also surveyed Israeli parent companies with foreign subsidiaries, also known as “OUT” companies, and found that they spent $3.5b. on R&D in 2009. Unlike the IN companies, which concentrated most of their R&D spending in the area of computing services, the OUT companies focused mainly on industry.

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