U.S. Business R&D Expenditures Increase in 2007; Small Companies Performed 19% of Nation's Business R&D

by Raymond M. Wolfe[1]

Companies spent $269 billion in current-year dollars on research and development (R&D) performed in the United States during 2007 (table 1), according to estimates from the Survey of Industrial Research and Development.[2] In inflation-adjusted (2000) dollars, 2007 R&D expenditures increased $12.5 billion, or 5.9%, from 2006 levels. Funding from both the companies' own and other nonfederal sources (hereafter, company or company and other funding) and from federal sources for R&D was higher in 2007 than in 2006. Company funding during 2007 amounted to $243 billion in current-year dollars compared with $223 billion during 2006, a 5.8% change after adjusting for inflation. Federal funding amounted to $27 billion during 2007 compared with $24 billion during 2006, a 6.5% change after adjusting for inflation.

  Table 1 Source Data: Excel file

R&D Performance by Industrial Sector

In 2007, companies in manufacturing industries performed $187 billion of R&D, which accounted for 70% of all business R&D[3] performed in the United States; companies in nonmanufacturing industries performed $82 billion of R&D (table 2). Manufacturers performed $169 billion of company-funded R&D and $18 billion of federally funded business R&D; companies in the nonmanufacturing industries performed $73 billion and $8 billion, respectively. Other company and federally funded R&D costs by detailed industry are given in table 2.

  Table 2 Source Data: Excel file

Sales and Employment of R&D Performers

Net sales[4] of companies that performed R&D in the United States were $6.6 trillion in 2006 and $7.0 trillion in 2007. The R&D-to-sales ratio was 3.8% in 2007; it was 3.7% in the two previous years. Domestic employment in R&D-performing companies during 2007 was 16.7 million (table 3), compared with 16.3 million reported in 2006 (Wolfe 2008a). The number of full-time equivalent scientists and engineers who performed business R&D remained 1.1 million, as it had been each year since 2004. Other sales and employment estimates by detailed industry are given in table 3.

  Table 3 Source Data: Excel file

R&D Performance by State

During 2007, businesses in the 10 states with the most business R&D performance reported aggregate R&D expenditures of $186 billion and accounted for 69% of the business R&D performed in the United States. Businesses in California alone accounted for 23.8% of the nation's business R&D; Massachusetts, 7.2%; New Jersey, 6.6%; Michigan, 5.8%; Texas, 5.2%; Washington, 4.7%; Illinois, 4.2%; New York, 4.1%; Pennsylvania, 3.9%; and Connecticut, 3.5% (table 4).

  Table 4 Source Data: Excel file

The types of companies that carry out R&D vary considerably among the 10 leading states.[5] This variation reflects regional specialization or clusters of business activity. For example, in Michigan, the motor vehicles industry accounted for 75% of business R&D in 2007, whereas it accounted for only 6% of the nation's total business R&D. The computer and electronic products manufacturing industries performed 22% of the nation's total business R&D, but they performed a larger share of the business R&D in Massachusetts (45%), Illinois (33%), California (33%), and Texas (32%). About two-thirds of R&D performed in the United States by computer and electronic products companies in 2007 was located in these four states. The R&D of chemicals manufacturing companies was considerable in New Jersey, Connecticut, and Pennsylvania, all of which are home to prominent pharmaceutical and chemical industries. Together these three states represented more than 41% of the nation's R&D in this sector. The R&D services sector, which consists largely of biotechnology companies, contract research organizations, and early-stage technology firms, is also somewhat geographically concentrated, with California, Massachusetts, and New Jersey accounting for more than 42% of R&D in this sector.

R&D Performance by Size of Company

R&D performance, sales, and employment statistics by size of company are given in table 5. In 2007, small companies[6] performed 19% of the nation's total business R&D, accounted for 8% of the sales of R&D-performing companies, and employed 13% of those who worked for R&D-performing companies. Of the 1.1 million R&D scientists and engineers employed by companies in the United States, 24% worked for small companies during 2007. Among the top 10 business R&D-performing states, small companies in California and New York accounted for 20% and 23%, respectively, of the business R&D performance state totals.[7]

  Table 5 Source Data: Excel file

Data Notes

Estimates in this InfoBrief were derived from the annual Survey of Industrial Research and Development. The survey is cosponsored by the National Science Foundation and the U.S. Census Bureau, and Census is the collection and tabulation agent for the survey. The survey is a nationally representative sample of all for-profit companies, publicly or privately held and with five or more employees that performed R&D within the 50 United States and the District of Columbia. For 2007, 31,766 companies were surveyed and the overall response rate was 80.8%.[8] The primary focus of the survey is U.S. industry as a performer of research and development rather than as a source of funds.

Beginning in 1989, the amount of federally funded R&D reported by performers began to diverge from the amount reported by federal agencies. For 2007, federal agencies reported obligations of $112.8 billion and outlays of $106.3 billion in total R&D to all R&D performers and obligations of $46.5 billion to business R&D performers (NSF/SRS 2008a). These totals compare with $98.3 billion in federal funding reported by all performers of R&D (NSF/SRS 2008b) and with $26.6 billion reported by business R&D performers. Although NSF has not found a definitive explanation for this divergence, the National Research Council notes that comparing federal outlays (as opposed to obligations) for R&D to performer expenditures results in a smaller discrepancy (National Research Council 2006).

Title 13 of the United States Code and a pledge of confidentiality to respondents prohibit publication or release of data or statistics that may reveal information about individual companies. Therefore, the data in some table cells have been suppressed and replaced with D, which occurs when a small number of companies account for a large percentage of the estimate in a particular data cell. Although publication of certain cells may be withheld, the estimates in the cells are always included in totals.

Some surveyed firms do not choose to return the questionnaire or return it with one or more blank items. Missing data for major data items were estimated using mathematical algorithms developed from industry comparisons, data from previous cycles of the survey, and other information. Therefore, the statistics in some table cells may be accompanied by the notation i, which indicates that the imputation rate—the percentage of the statistic not reported by respondents and consequently estimated—exceeds 50% for that item. In such cases, the estimate may be statistically unreliable. Beginning with 2001, the methodology to produce statistics by state was modified to address the recurring problem of large year-to-year variation in many state estimates. This variability was caused by many factors including the potential inefficiency of the sample at state levels, the rarity of R&D expenditures, and the large weights often associated with companies that report R&D in the survey for the first time. Under the new methodology, a portion of the amount of R&D reported by some companies not selected for the sample with certainty is allocated (or raked) among all the states in which there was industrial activity. Cells are flagged with the notation e if more than 50% of the estimate was imputed because of raking.

This InfoBrief is the last to signal a data release from NSF's Survey of Industrial Research and Development. A new Business R&D and Innovation Survey (BRDIS) was launched in January 2009 that collects a broad range of R&D data from both manufacturing and service companies and that begins to collect innovation data with an eye toward increasing the number and breadth of innovation-related items in the future. From the first cycle NSF expects to release aggregate estimates for the traditional R&D items. In addition, depending on the quality of the data, NSF hopes to release a variety of statistics in new topical areas. For more information see Wolfe (2008b) and visit the BRDIS website at http://www.nsf.gov/statistics/srvyindustry/about/brdis/.

The full set of detailed tables from this survey will be available in the report Research and Development in Industry: 2007 at http://www.nsf.gov/statistics/industry/. Individual detailed tables from the 2007 survey are available in advance of publication of the full report. For further information, contact the author.

Notes

[1]  Raymond M. Wolfe, Research and Development Statistics Program, Division of Science Resources Statistics, National Science Foundation, 4201 Wilson Boulevard, Suite 965, Arlington, VA 22230 (rwolfe@nsf.gov, 703-292-7789).

[2]  Company is defined as a business organization of one or more establishments under common ownership or control. All estimates from the survey are subject to both sampling and nonsampling errors (see technical notes in the annual reports at http://www.nsf.gov/statistics/industry/).

[3]  Throughout the text and tables in this InfoBrief business R&D and industrial R&D are used synonymously.

[4]  Net sales is defined as dollar values for goods sold or services rendered by companies that perform R&D in the United States to customers outside the company, including the federal government, less such items as returns, allowances, freight charges, and excise taxes. Excludes intracompany transfers and sales by foreign subsidiaries but includes transfers to foreign subsidiaries and export sales to foreign companies.

[5]  Statistics by detailed industry will be available in the annual report Research and Development in Industry: 2007, forthcoming at http://www.nsf.gov/statistics/industry/. Prior to publication of the annual report, tables are available upon request from the author.

[6]  Defined as having from 5 to 499 employees; the NSF Survey of Industrial Research and Development does not include companies with fewer than 5 employees.

[7]  R&D statistics by state and industry are available upon request from the author.

[8]  For more detailed information about the survey sample and methodology, see survey description at www.nsf.gov/statistics/survey.cfm.

References

National Research Council. 2006. Measuring Research and Development Expenditures in the U.S. Economy. Panel on Research and Development Statistics at the National Science Foundation, Committee on National Statistics, Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press.

National Science Foundation, Division of Science Resources Statistics (NSF/SRS). 2008a. Federal Funds for Research and Development in Industry: Fiscal Years 2005–07. Detailed Statistical Tables NSF 09-300. Arlington, VA. Available at http:www.nsf.gov/statistics/nsf09300/.

National Science Foundation, Division of Science Resources Statistics (NSF/SRS). 2008b. National Patterns of R&D Resources: 2007 Data Update. Detailed Statistical Tables NSF 08-318. Arlington, VA. Available at http:www.nsf.gov/statistics/nsf08318/.

Wolfe RM. 2008a. U.S. Business R&D Expenditures Increase in 2006; Companies' Own and Federal Contributions Rise. InfoBrief NSF 08-313. Arlington, VA: National Science Foundation, Division of Science Resources Statistics. Available at http:www.nsf.gov/statistics/infbrief/nsf08313/.

Wolfe RM. 2008b. NSF Announces New U.S. Business R&D and Innovation Survey. InfoBrief NSF 09-304. Arlington, VA: National Science Foundation, Division of Science Resources Statistics. Available at http://www.nsf.gov/statistics/infbrief/nsf09304/.