[Image: Nick Youngson/Alpha Stock Images; CC BY-SA 3.0]
A recent U.S. government release highlights continued growth in research and development (R&D) spending by U.S. businesses, as well as the uneven regional and sectoral distribution of that spending.
The report found that U.S. companies spent some US$375 billion on R&D activities in 2016. That number represented an uptick of some 5.3 percent from the US$356 billion spent in 2015. As in previous years, the 2016 expenditures were concentrated in only a few U.S. states, with one state, California, accounting for a whopping one-third of the total. And the spending also featured a significant bias toward information technology.
The NSF information release was a digest drawn from a larger study, the Business R&D and Innovation Survey, conducted each year by National Center for Science and Engineering Statistics (NCSES), the statistical branch of the U.S. National Science Foundation (NSF).
More spending sourced by companies
Of the US$375 billion of R&D spending logged in 2016, the lion’s share, US$289 billion (77 percent), was for development, with roughly US$25 billion (7 percent) on basic research and US$61 billion (16 percent) on applied research. The distribution was similar to the distribution of spending in 2015.
One key takeaway was that businesses appear to be funding a slightly larger share of their R&D activities from their own pocket. The report notes that funding from companies’ own sources expanded 7.1 percent year to year in 2016, from US$297 billion to US$318 billion, outstripping the 5.3 percent rise in overall spending. By contrast, expenditures funded from “other sources”—including the U.S. federal government, state and local governments, universities and academic researchers, and a variety of other private companies and organizations both inside and outside the United States—narrowed from US$59.1 billion in 2015 to US$56.9 billion in 2016.
That decline was driven entirely by a reduction in corporate R&D spending funded by U.S. federal sources, which shrank from US$27.0 billion in 2015 to US$23.8 billion in 2016. (The bulk of the 2016 federal funding for corporate R&D came from the Department of Defense, which accounted for US$16 billion.) On the other hand, the contribution to U.S. R&D paid for by foreign companies, the largest nonfederal component of the “other” sources, expanded by nearly US$1.4 billion year to year, to US$17.7 billion in 2016.
Big spending by information tech—and California
The data tables with the report also suggested the heavy hammer swung by computing and information technology in U.S. R&D spending. Four industry categories ostensibly tied to these areas—“computer and electronic products” (under manufacturing industries), “information” (under nonmanufacturing industries, and including software and other areas), and “computer system design and related services” (a subcategory of “professional, scientific and technical services”)—amounted to 44 percent of total U.S. R&D spending for 2016.
Business R&D spending also takes place mostly in a small minority of U.S. states, according to the NCSES data. Of the US$318 billion of domestic R&D spending paid for by companies (rather than other sources), some 33 percent happens in one state: California. The states of Washington and Massachusetts, each with around 6 percent of the national total, were a distant second and third, and two others, Michigan and Texas, accounted for around 5 percent each. Other states contributed no more than 4 percent each (and generally much less) to the total.
Small firms: Punching above their weight
Finally—and, perhaps, not surprisingly—a sizable majority of business R&D spending in the United States, 89 percent, is conducted by large companies, defined by NCSES as those employing more than 250 employees. The biggest companies, those with 25,000 employees or more, accounted for a full 36 percent of total business R&D expenditures. “Micro,” small, and medium-sized companies—those with between five and 249 employees—performed only 11 percent of total U.S. business R&D in 2016.
Yet the smaller companies showed a considerably higher “R&D intensity” (defined as the ratio of R&D to sales) than did the larger firms. R&D intensity for micro, small and medium-sized firms amounted to 7.8 percent, versus 4.4 percent for companies with 250 to 24,999 employes and only 3.3 percent for companies with more than 25,000 employees. And the micro, small and medium-sized companies employed 20 percent of the 1.5 million workers engaged in U.S. business R&D, according to the NCSES data.
For more on the data, visit www.nsf.gov/statistics/2018/nsf18312/.