GERD indicates a country’s investment in R&D, in both the public and the private sectors. Expenditure on R&D is believed to be related to a country’s future capability to innovate and generate economic growth, particularly when the investment is conducted by firms. "Research and experimental development (R&D) comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society and the use of this stock of knowledge to devise new applications"" (Frascati Manual, 2002 edition, § 63 ).”

GERD includes expenditure by business enterprises, government, higher education and private non-profit expenditure on R&D. GERD includes total intramural expenditure on R&D performed within a country, funded nationally and from abroad but excludes payments for R&D performed abroad. GERD tends to be under-represented in countries with a high % of SMEs and or with innovation in non-manufacturing sectors. In a minor number of countries, micro enterprises with less than 10 employees where R&D activity is expected to be negligible are excluded from the R&D surveys. However, this has only a minor impact on the aggregated data.