by Francisco Moris[1]

Newly developed information from the Research and Development Data Link Project—a joint project of the National Science Foundation (NSF), U.S. Census Bureau (Census), and Bureau of Economic Analysis (BEA)—reveals new insights on the U.S. R&D activities of multinational companies (MNCs), such as the character of R&D work performed by these companies (basic research, applied research, and development). Additional new details on the R&D performed by MNCs, such as state location and technology focus, will be available in detailed statistical tables available in the forthcoming report International Investment and R&D Data Link: 2004–07 (see "Data Availability" for more information).

The project matched records of U.S.-located companies that performed R&D, from the NSF–Census Survey of Industrial Research and Development (SIRD), to records of U.S. affiliates of foreign MNCs, from BEA's Foreign Direct Investment in the United States (FDIUS) survey. Separately, it matched these SIRD data to records of parent companies of U.S. MNCs from BEA's U.S. Direct Investment Abroad (USDIA) survey for a given data year. The project covered 2004 to 2007, the last year SIRD was conducted.[2] (See "Definitions" for explanation of terms and "Data Notes" for the methodology).

SIRD provided details on R&D activities by U.S.-located nonfarm, for-profit companies with five or more employees, including character of R&D work and the U.S. state location of R&D performance (NSF/NCSES 2011), but it did not collect any information on foreign ownership or overseas investments. The BEA FDIUS survey provides information on U.S. affiliates of foreign MNCs (U.S.-located foreign-owned companies); the BEA USDIA survey covers domestic activities of parent companies of U.S. MNCs and their affiliates abroad. Thus companies in the SIRD-FDIUS match are the subset of SIRD companies that are also U.S. affiliates of foreign MNCs. Companies in the SIRD-USDIA match are the subset of SIRD companies that are parent companies of U.S. MNCs. The set of matched companies is not the complete universe of all R&D-performing U.S. MNC parent companies or U.S. affiliates of foreign MNCs. However, matched companies account for over 90% of the U.S. R&D performed by these companies as measured in each of the BEA surveys.

Activities covered by the BEA surveys include total R&D performance, but they do not include information on character of R&D work or state location. By combining ownership and overseas activity information from the BEA surveys with R&D details from SIRD for a given data year, the R&D Data Link Project was able to produce information not independently available from the participating surveys.

Selected Information on R&D Performance by MNCs Located in the United States

Matching company records showed that U.S. MNC parent companies funded 88% of their U.S. R&D from their own (and other nonfederal) sources in 2007; 12% was federally funded (table 1). U.S. affiliates of foreign MNCs funded 96% of their R&D from nonfederal sources (table 2). In terms of the character of R&D work, both U.S. MNC parent companies and U.S. affiliates of foreign MNCs devote about three-fourths of their R&D expenditures to development activities (tables 1 and 2).

By aggregating data for U.S. MNC parent companies and for U.S. affiliates of foreign MNCs, it is possible to obtain an overall measure of R&D performance for all MNCs located in the United States. However, the aggregation across all MNCs cannot be performed without taking into account that a single company may be both an affiliate of a foreign parent company and a U.S. parent company, and therefore, its data would appear in both tables 1 and table 2. Table 3 provides selected aggregated 2007 data that have been adjusted to avoid double counting of these overlapping companies. Data in table 3 show R&D and employment for all U.S. R&D performing companies, all MNCs with U.S. facilities (identified via the link), and other (non-MNC) U.S.-located companies.

MNCs with U.S. facilities employed 810,000 R&D employees (80% of U.S. industrial R&D employment), and they performed $210.7 billion in R&D in 2007.[3] R&D performance by MNCs accounted for 82% of total industrial R&D in the United States in 2007 and 86% of industrial basic research in the same year. Non-MNC firms accounted for 18% of total U.S. industrial R&D and 14% of basic industrial research in the same year (third panel in table 3). The last panel in table 3 shows the distribution of R&D by character of work within each of the three aggregates (all companies, MNCs, and non-MNCs).

Data Notes

Sources and Limitations

Information from the R&D Data Link Project resulted from matching company records from the NSF/U.S. Census Bureau SIRD separately to two BEA surveys: the FDIUS survey and the USDIA survey (Census, BEA, NSF/SRS 2005). The three surveys included in the R&D Data Link Project cover for-profit companies and use comparable definitions and accounting guidance for R&D expenditures. Certain measurement differences in other variables do not significantly impair the comparability of the data.

SIRD classified companies by industry based on industry distribution of payroll, whereas BEA classification is based on sales by industry. Tables in this InfoBrief used SIRD industry classification. Tabulations in the full set of detailed statistical tables will present information from a given survey source (SIRD or BEA surveys).

SIRD covers for-profit companies with five or more employees, publicly or privately held, that performed R&D within the 50 United States and the District of Columbia. SIRD estimates are subject to sampling and nonsampling errors. For more information see http://www.nsf.gov/statistics/industry/. SIRD information includes domestic sales, employment, R&D by character of work, technology areas, state location of R&D performance, and industry and firm size detail. The BEA surveys collect financial and operating statistics, including employment, sales, trade in goods, balance sheets, income statements, and total R&D expenditures. For more information see http://www.bea.gov/international/index.htm#omc.

For a given survey year, SIRD companies were matched (1) to majority-owned U.S. affiliates of foreign MNCs from the FDIUS survey and (2) to parent companies of U.S. MNCs from the USDIA survey. Overseas activities by majority-owned foreign affiliates of matched U.S. MNCs parent companies in selected host countries are not covered in this InfoBrief, but data on that topic will be available in the detailed statistical tables in the forthcoming report International Investment and R&D Data Link: 2004–07. Matched SIRD estimates presented here and in forthcoming Detailed Statistical Tables are based on the subset of companies in SIRD that are part of an MNC and are thus not equivalent to estimates presented in SIRD.

The link between the SIRD and each of the two BEA surveys was performed in two basic steps. The first step was a computer match of company identification codes from BEA files to the corresponding companies in the U.S. Census Bureau's Business Register, a database covering all U.S. businesses with paid employees. The second step was to link BEA identification codes that matched the Business Register to the SIRD using U.S. Census Bureau identification codes. Additional steps were required to verify company matches and related cross-survey data.

In tables that present data for multiple years, year-to-year changes in the measures of activity for matched U.S. MNC parent companies or matched U.S. affiliates of foreign MNCs may reflect a combination of factors: changes in the multinational status of companies (e.g., acquisition or divestiture by a foreign parent company), changes in R&D-active status (e.g., a company may be an R&D performer in one year but not the next), or changes in the matched set of companies from year to year (e.g., a company out of scope in one year because of size thresholds or other reasons [hence not matched] but within scope in both surveys and matched the next year).

For the survey years included in the R&D Data Link Project (2004–07), SIRD-reported R&D performed by matched parent companies (table 1) accounted for 93% to 97% of the total R&D by parent companies of U.S. MNCs published by the USDIA survey. SIRD-reported R&D performed by matched U.S. affiliates (table 2) accounted for 91% to 96% of the total R&D performance by U.S. affiliates published by the FDIUS survey. A time series of MNCs R&D expenditures gathered from BEA surveys is available in Science and Engineering Indicators 2012 (NSB 2012).

Definitions

Affiliate: A business unit located in one country but owned or controlled by a company in another country.

Full-time-equivalent (FTE) employees: Employees who were assigned full time to R&D, plus a prorated number of employees who worked on R&D only part of the time.

Majority-owned affiliate: Company owned or controlled to the extent of more than 50% of the voting securities (or equivalent) by its parent company.

Multinational company (MNC): A parent company and its foreign affiliates.

Parent company: A company that has a 10% or higher ownership share in a business located outside its home country.

U.S. affiliate: Company located in the United States but owned by a foreign parent company.

Data Availability

For each link year in the R&D Data Link Project, a set of detailed statistical tables will provide data for matched parent companies of U.S. MNCs and separate set of tables will provide data for matched U.S. affiliates of foreign MNCs. Information from the R&D Data Link Project includes total employment; R&D employment; total R&D performed, by state location and technology focus; industry-specific sales; and industry-specific R&D, by character of work and funding source. Selected information is available by investing country for U.S. affiliates and by host country for foreign affiliates of matched U.S. MNC parent companies. The full set of detailed tables from this survey and technical notes will be available in the report International Investment and R&D Data Link: 2004–07 at http://www.nsf.gov/statistics/industry/. Individual detailed tables may be available in advance of the full report. For further information, contact the author.

References

National Science Board (NSB). 2012. Science and Engineering Indicators 2012. NSB 12-01. Arlington, VA: National Science Foundation. Available at http://www.nsf.gov/statistics/seind12/.

National Science Foundation/National Center for Science and Engineering Statistics (NSF/NCSES). 2011. Research and Development in Industry: 2006–07. Detailed Statistical Tables NSF 11-301. Arlington, VA. Available at http://www.nsf.gov/statistics/nsf11301/.

U.S. Census Bureau, Bureau of Economic Analysis, and National Science Foundation/Division of Science Resources Statistics (Census, BEA, NSF/SRS). 2005. Research and Development Data Link Project Final Report. Washington, DC. Available at http://www.bea.gov/international/pdf/FinalReportpublic.pdf.

Notes

[1]  Francisco Moris, Research and Development Statistics Program, National Center for Science and Engineering Statistics, National Science Foundation, 4201 Wilson Boulevard, Suite 965, Arlington, VA 22230 (fmoris@nsf.gov; 703-292-4678).

[2]  The Business R&D and Innovation Survey (BRDIS) is the successor to SIRD and will provide additional data on the international focus of these activities. The BRDIS launch collected 2008 data. For statistics and other information see http://www.nsf.gov/statistics/industry/.

[3]  To derive a total for MNCs located in the United States, an adjustment must be made to remove the double counting that arises from U.S. parent companies that are also U.S. affiliates. For example, for R&D performance based on matched 2007 SIRD information, $19.0 billion of U.S. R&D was performed by companies that were both U.S. MNC parent companies and majority-owned U.S. affiliates of foreign MNCs. To avoid double counting, this amount was subtracted from the sum of $192.4 billion (table 1) and $37.3 billion (table 2) to obtain total U.S. R&D performed by U.S.-located units of MNCs ($210.7 billion in table 3). Similar adjustments were made for other rows under the MNC column. The category "other companies" is the residual. Shares in the last two panels of table 3 are based on adjusted levels.