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Location of R&D Performance
Distribution of R&D Expenditures Among States- Sector Distribution of R&D Performance by State
- Industrial R&D in Top States
R&D performance is geographically concentrated in the United States. Over 50% of U.S. R&D is performed in only seven states.[8] Although R&D expenditures are concentrated in relatively few states, patterns of R&D activity vary considerably among the top R&D-performing locations (appendix tables 
and ). (For a broader range of indicators of state-level S&E activities, see chapter 8.)
Distribution of R&D Expenditures Among States
In 2003 the 20 highest-ranking states in R&D expenditures accounted for 84% of U.S. R&D expenditures, whereas the 20 lowest-ranking states accounted for 6%. The top 10 states accounted for almost two-thirds of U.S. R&D expenditures in 2003 (table 
). California alone accounted for more than one-fifth of the $278 billion U.S. R&D total, exceeding the next highest state by a factor of three.[9] Figure 
, a cartogram of the United States with states sized in proportion to the amount of R&D performed within them, illustrates the geographic concentration of U.S. R&D along both coasts and in the Great Lakes region.
States vary significantly in the size of their economies because of differences in population, land area, infrastructure, natural resources, and history. Consequently, state variations in R&D expenditure levels may simply reflect differences in economic size or the nature of R&D efforts. One way to control for the size of each state's economy is to measure each state's R&D level as a percentage of its gross state product (GSP).[10] Like the ratio of national R&D to GDP discussed later in this chapter, the proportion of a state's GSP devoted to R&D is an indicator of R&D intensity. Some of the states with the highest R&D to GSP ratios include Michigan, home to the major auto manufacturers; Massachusetts, home to a number of large research universities and a thriving high-technology industry; and Maryland, home to the National Institutes of Health (NIH). A list of states and corresponding R&D intensities can be found in appendix table .
Sector Distribution of R&D Performance by State
Although leading states in total R&D tend to be well represented in each of the major R&D-performing sectors, the proportion of R&D performed in each of these sectors varies across states. Because business sector R&D accounts for 71% of the distributed U.S. total, it is not surprising that 9 of the top 10 states in terms of total R&D performance are also in the top 10 in terms of industry R&D (table ). University-performed R&D accounts for only 14% of the U.S. total, but it is also highly correlated with the total R&D performance in a state.
There is less of a relationship between federal R&D performance (both intramural and FFRDC) and total R&D, as federal R&D is more geographically concentrated than the R&D performed by other sectors.[11] Figure , a cartogram of the United States with states sized in proportion to federal R&D performance in the state, illustrates that the top four states in terms of federal R&D (California, New Mexico, Maryland, and Virginia), along with the District of Columbia, account for over half (56%) of all federal R&D performance. Federal R&D accounts for 86% of all R&D in New Mexico, the location of the two largest FFRDCs in terms of R&D performance, Los Alamos National Laboratory and Sandia National Laboratories. Federal R&D accounts for 41% of all R&D performed in Maryland, Virginia, and the District of Columbia, reflecting the concentration of federal facilities and administrative offices within the national capital area. Federal R&D also represents 37% of the R&D performed in Alabama, due largely to DOD's Redstone Arsenal laboratories and the National Aeronautics and Space Administration's (NASA's) George C. Marshall Space Flight Center, both in Huntsville. Looking across all states, federal R&D represents only 12% of the distributed U.S. total.
Industrial R&D in Top States
The types of companies that carry out R&D vary considerably among the 10 leading states in industry-performed R&D (table ). This reflects regional specialization or clusters of industrial activity. For example, in Michigan the motor vehicles industry accounted for 70% of industrial R&D in 2003, whereas it accounted for only 8% of the nation's total industrial R&D. In Washington, companies performing computer-related services (such as software development) dominate, accounting for over 50% of the state's business-sector R&D. These companies accounted for 13% of the nation's business R&D in 2003.
The computer and electronic products manufacturing industries account for 24% of the nation's total industrial R&D, but they account for a larger share of the industrial R&D in California (33%), Massachusetts (47%), and Texas (46%). These three states have clearly defined regional centers of high-technology research and manufacturing: Silicon Valley in California, Route 128 in Massachusetts, and the Silicon Hills of Austin, Texas. Over half of all R&D performed in the United States by computer and electronic products companies is located in these three states.
The R&D of chemicals manufacturing companies is particularly prominent in New Jersey and Pennsylvania, both of which host robust pharmaceutical and chemical industries. These companies account for 61% of New Jersey's and 49% of Pennsylvania's business R&D. Together these two states represent almost one-third of the nation's R&D in this sector.
The R&D services sector is even more concentrated geographically, with California, Massachusetts, and Ohio accounting for nearly half of the nation's R&D in this sector. Companies in this sector, consisting largely of biotechnology companies, contract research organizations, and early-stage technology firms, maintain strong ties to the academic sector and often are located near large research universities. (See the section entitled "Technology Linkages: Contract R&D, Public-Private Partnerships, and Industrial Alliances" appearing later in this chapter.) The state of Ohio has been particularly aggressive in pursuing policies that support this sector. Ohio's $1.1 billion Third Frontier Project, initiated in 2002, commits $500 million over 10 years to fund new technology, biomedical research, and technology transfer, and more than $500 million to enhance research facilities.[12]
The R&D performance of small companies (defined as having from 5 to 499 employees) is also concentrated geographically.[13] Nationally, small companies perform 18% of the nation's total business R&D, but in California, Massachusetts, and New York these companies perform between 21% and 23% of the states' business R&D. About 40% of the R&D performed in the United States by companies in this category is performed in these three states.
[8] The latest data available on the state distribution of R&D performance are for 2003. In 2003, $277.5 billion of the $291.9 billion total U.S. R&D could be attributed to expenditures within individual states, with the remainder falling under an undistributed "other/unknown" category. Approximately two-thirds of the R&D that could not be associated with a particular state was R&D performed by the nonprofit sector.
[9] Rankings do not take into account the margin of error of estimates from sample surveys. NSF, Division of Science Resources Statistics, Survey of Industrial Research and Development, 2005. Available at http://www.nsf.gov/sbe/srs/indus/start.htm.
[10] GSP is often considered the state counterpart of the nation's GDP. GSP is estimated by summing the value added of each industry in a state. Value added for an industry is equivalent to its gross output (sales or receipts and other operating income, commodity taxes, and inventory change) minus its intermediate inputs (consumption of goods and services purchased from other U.S. industries or imported). U.S. Bureau of Economic Analysis, Gross State Product (Washington, DC, 2003). (See http://www.bea.gov/bea/regional/docs/Regional_GSP.pdf)
[11] Federal intramural R&D includes costs associated with the administration of intramural and extramural programs by federal personnel as well as actual intramural R&D performance. This explains the large amount of federal intramural R&D reported within the District of Columbia.
[12] http://www.thirdfrontier.com/overview.asp
[13] For most manufacturing industries, the U.S. Small Business Association has established a size standard of 500 employees. The NSF Survey of Research and Development in Industry does not sample companies with fewer than five employees because of concerns over respondent burden.
