by Raymond M. Wolfe[1]

Companies located in the United States that have research and development activities—both U.S.-owned businesses and U.S. affiliates of foreign parents—reported worldwide sales of $11 trillion in calendar year 2008 and worldwide R&D expenses of $330 billion (table 1). Most ($234 billion) of that R&D expense was for R&D conducted in companies' own facilities in the United States.

  Table 1 Source Data: Excel file

These figures are from the first Business R&D and Innovation Survey (BRDIS), developed jointly by the National Science Foundation (NSF) and the U.S. Census Bureau (Census).[2] This first survey was conducted as a full-scale pilot, mailed to a representative sample of about 40,000 companies in January 2009. These data are preliminary; final statistics from the pilot will be available in early 2011. Two additional reports scheduled for release in 2010 will present preliminary 2008 statistics on worldwide and domestic employment, including R&D employment, and on innovation, respectively.

BRDIS collects a wealth of data on business R&D and innovation activities performed in the United States that were not collected by its predecessor, the Survey of Industrial Research and Development. Among its major features, the new survey collects data for companies' worldwide activities, including separate data for their domestic and foreign operations; sales and R&D data by business activity; and R&D expense data, in addition to the R&D performance data NSF traditionally has collected. Some terms used to report BRDIS data were not used or differ from terms used to report data from its predecessor, and the two surveys use different methods to assign industry classifications. See "Definitions" and "Survey Information and Data Availability," at the end of this report, for further information.

Sales and R&D Expense

Sales

A significant feature of BRDIS is an increased focus on the worldwide activities of businesses operating in the United States. Overall, companies with R&D activity reported that 68% of their worldwide sales came from domestic business operations. Businesses classified in the pharmaceuticals and medicines industry reported that 67% of their worldwide sales came from domestic operations. Other industries reported similarly high domestic-to-worldwide sales ratios: scientific R&D services (85%), computer system design and related services (79%), aerospace products and parts (74%), motor vehicles, trailers, and parts (62%), software publishers (58%), and semiconductor and electronic components (53%). (Comparisons in this report are made among the most detailed [4-digit] industry classifications; see table 1.)

R&D Expense

R&D expense is the amount a company pays from its own funds for R&D that is done for the company's benefit (for example, R&D leading to new products or processes that may increase income). It includes company-performed R&D in both its domestic and foreign locations plus R&D the company pays others to perform.

Of the $330 billion worldwide R&D expense in 2008, $292 billion (88%) was for company-performed R&D ($234 billion performed at their domestic facilities and $58 billion at their foreign facilities). R&D expense does not include company-performed R&D paid for by others. Companies paid the remaining $38 billion of worldwide R&D expense to others (inside and outside of the United States) for the performance of R&D. The industry that paid the most to others for R&D was the pharmaceuticals and medicines industry. Of its worldwide $70 billion R&D expense, $17 billion (25%) was paid to others for R&D. Other industries that paid $1 billion or more to others for R&D were scientific R&D services ($4 billion), motor vehicles, trailers, and parts ($4 billion), software publishers ($1 billion), and aerospace products ($1 billion).

Companies classified among the manufacturing industries reported 71% ($233 billion) of total worldwide R&D expense. Among manufacturers, the industries with the most R&D expense were pharmaceuticals and medicines ($70 billion), semiconductor and electronic components ($29 billion), motor vehicles, trailers, and parts ($24 billion), communications equipment ($15 billion), aerospace products and parts ($13 billion), and computers and peripheral equipment ($13 billion). Nonmanufacturing industries accounted for the remaining $96 billion (29%) of worldwide R&D expense, with the top contributors being software publishers ($35 billion) and scientific R&D services ($15 billion).

R&D Performance

Historically, NSF has collected and published statistics primarily on the R&D that companies performed in the United States. This domestic R&D performance was the basis for most statistics collected by the predecessor survey and, for both surveys, conforms to international guidelines on collecting R&D expenditures. A company's domestic R&D performance is the total of the amount the company paid for the R&D performed in its own domestic locations for its own benefit (the fourth data column in table 1; e.g., $234 billion for all industries) plus the amount paid for by others for R&D performed in the company's domestic locations for others' benefit (the eighth data column in table 1; e.g., $49 billion for all industries). These combined domestic R&D performance expenditures totaled $283 billion for 2008 (components summed in table 2). This compares with the 2007 domestic R&D performance expenditure total of $269 billion published from the predecessor survey.[3]

  Table 2 Source Data: Excel file

Companies in manufacturing industries performed $190 billion of R&D domestically, $160 billion from their own funds (R&D expense) and $30 billion paid for by others, which accounted for 67% of all business R&D performed in the United States in 2008. Companies in nonmanufacturing industries performed $93 billion of R&D domestically, $74 billion from their own funds and $19 billion paid for by others.

The cost of the R&D companies performed outside of the United States amounted to $62 billion, $58 billion from companies' own funds and $5 billion paid for by others. By far, the 4-digit NAICS (North American Industry Classification System) industry that performed the most R&D outside of the United States was the pharmaceuticals and medicines industry ($11 billion). Other industries with high levels of R&D performed abroad were motor vehicles, trailers, and parts ($8 billion), semiconductor and other electronic components ($7 billion), and software publishers ($6 billion).

R&D Performance by Size of Company

Statistics on sales, worldwide R&D expense, and worldwide R&D costs funded by others by size of company are given in table 3. In 2008, small companies (5–499 employees) accounted for $1 trillion (11%) of total worldwide sales. They had worldwide R&D expense of $64 billion (19% of total worldwide R&D expense) and performed $63 billion (22%) of the business R&D performed in the United States and $5 billion (8%) performed abroad. They paid others $11 billion (24%) to perform R&D.

  Table 3 Source Data: Excel file

By contrast, the largest companies, those with 25,000 or more domestic employees, accounted for $5 trillion, or 42%, of the total worldwide sales of companies that had R&D activity. They had worldwide R&D expense of $110 billion (33% of total worldwide R&D expense) and performed $92 billion (33%) of the business R&D performed in the United States and $25 billion (40%) of the business R&D performed abroad. They paid others $12 billion (26%) to perform R&D.

Definitions

Company. A business organization of one or more establishments under common ownership or control. A company includes all subsidiaries and divisions in which there is more than 50% ownership, no matter where the subsidiary or division is located.

Domestic locations. The 50 states and the District of Columbia.

Foreign parent. An entity, other than a holding company, located outside of the United States that owns more than 50% of the company. In BRDIS, the foreign parent and the parent's affiliates are treated the same as is an unaffiliated customer or business partner.

Industry. Industry refers to 2-, 3-, or 4-digit NAICS codes or group of NAICS codes used to publish statistics resulting from the survey.

Innovation. In BRDIS, innovation relates to companies' responses to questions on the introduction of new or improved goods, services, manufacturing methods, logistics, or support activities. These questions serve as the foundation for expansion of innovation inquiry in future cycles of the survey.

Others. Other companies; U.S. federal, state, or foreign government agencies or laboratories; universities; colleges; or academic researchers. R&D performed by others is also referred to as contracted-out R&D, even though grants and instruments other than contracts are used, or outsourced R&D.

R&D expenditures. The cost of R&D the company performed, no matter who paid for it or who benefited from it. The predecessor to BRDIS focused on domestic R&D expenditures (i.e., R&D performed in the United States).

R&D expense. A company's costs paid from its own funds for R&D undertaken to benefit the company, regardless of performer. It is an accounting concept defined by the accounting standards used by the reporting company. It does not include R&D paid for by others for others' benefit. For more information, see Financial Accounting Standards Board (FASB) Statement of Accounting Standards No. 2 (Accounting for Research and Development Costs) at http://www.fasb.org/home.

R&D paid for or funded by others. R&D performed by the company that is paid for by other entities not owned by the company (i.e., entities in which there is a less than 50% ownership). These entities include, but are not limited to, other companies, U.S. federal or state government agencies or labs, and foreign government agencies or labs located within or outside of the United States.

Sales. Also net sales or operating revenue, the dollar value for goods sold or services rendered by companies to customers outside the company, including the federal government, less such items as returns, allowances, freight charges, and excise taxes. For BRDIS, sales include revenues from domestic operations and from foreign operations and subsidiaries. For foreign-owned companies, sales to the foreign parent and affiliates not owned by the company are included. Sales for businesses without any R&D activity are not included.

Small company. Companies having from 5 to 499 employees. The upper bound is based on the U.S. Small Business Administration's definition of a small business; the lower bound reflects that BRDIS does not include companies with fewer than five employees.

United States. The 50 states and the District of Columbia.

Survey Information and Data Availability

The sample for BRDIS was selected to represent all for-profit companies with five or more domestic employees, publicly or privately held, that perform or fund R&D or engage in innovative activities in the United States. Because the statistics from the survey are based on a sample, they are subject to both sampling and nonsampling errors.

For 2008, 39,553 companies were sampled representing 1,926,012 companies in the population. The estimated number of companies with worldwide R&D expense was 58,304 and the estimated number with R&D paid for by others was 11,453. The estimated number with both worldwide expense and R&D paid for by others was 7,679. The overall response rate was 77.4%; the response rate for the top 500 domestic R&D-performing companies was 92.6%. Industry classification was based on the dominant business activity for domestic R&D performance where available. For companies that did not report business activity codes for R&D, the classification used for sampling was assigned.

More detailed information about the survey sample and methodology will be available in the forthcoming survey description at http://www.nsf.gov/statistics/srvyindustry/. Copies of the BRDIS questionnaires and comparisons of BRDIS with the predecessor survey are available at http://www.nsf.gov/statistics/srvyindustry/about/brdis/. Coefficients of variation and imputation rates for the statistics in this report are available from the author.

Two additional reports, one on employment and one on innovation, are being prepared and will present additional preliminary BRDIS data for 2008. Detailed tables for 2008 will be available in the report R&D and Innovation in Business: 2008 at http://www.nsf.gov/statistics/industry/ in early 2011. Individual tables may be available in advance of publication of the full report. For further information, please 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]  For information about the planning and preparation of BRDIS, see SRS InfoBrief, NSF Announces New U.S. Business R&D and Innovation Survey (NSF 09-304) at http://www.nsf.gov/statistics/infbrief/nsf09304/.

[3]  Wolfe R.M. 2009. U.S. Business R&D Expenditures Increase in 2007; Small Companies Performed 19% of Nation's Business R&D. InfoBrief NSF 09-316. Arlington, VA: National Science Foundation, Division of Science Resources Statistics. Available at http://www.nsf.gov/statistics/infbrief/nsf09316/.