Economists and policy makers have long considered research and development (R&D) to be a key component of economic growth. The contribution of R&D activities to local economies has been a topic of particular interest to State policymakers. This report, State Science and Engineering Profiles and R&D Patterns: 1997-98, provides statistics on the geographic distribution of R&D within the United States. R&D data for 52 areaseach of the 50 States, the District of Columbia and Puerto Ricoare derived from the several performer-based surveys of the National Science Foundation’s (NSF’s) R&D Statistics Program. For each State (or geographic area), table 1 categorizes these data by major source of funds (industry, Federal Government, and academia), and by type of performer (industry, Federal Government, academia, Federally Funded Research and Development Centers (FFRDCs), and other nonprofit institutions).
In 1997, total R&D expenditures in the United States were $211 billion, of which $199 billion could be attributed to expenditures within individual States, with the remainder falling under an undistributed, “other/unknown” category. The statistics and discussion below refer to State R&D levels in relation to the distributed total of $199 billion.
The “other/unknown” category includes R&D performed within the 50 States or the District of Columbia, for which survey respondents did not provide the specific location of such performance. It also includes R&D conducted by organizations within the United States that did not perform the actual R&D in a particular State or the District of Columbia, e.g., research conducted on marine vessels, and research in Puerto Rico.
In addition, this report includes science and engineering profiles for the 50 States, the District of Columbia, and Puerto Rico. These profiles were compiled from 15 sources, including NSF statistical reports and statistical reports from other Federal agencies, namely, the Department of Commerce (DOC), the Department of Labor (DOL), the Department of Education (ED), the U.S. Patent and Trademark Office, and the U.S. Small Business Administration (SBA). A complete listing of these sources is provided at the end of this overview.
R&D activities are highly concentrated in a small number of States. Thus, in 1997, California had the highest level of R&D expendituresnearly $42 billionrepresenting approximately one-fifth of the $199 billion U.S. total. The six States with the highest levels of R&D expendituresCalifornia, Michigan, New York, New Jersey, Massachusetts, and Texas (in decreasing order of magnitude)accounted for almost one-half of the entire national expenditure. The top 10 Statesadding, in descending order, Pennsylvania, Illinois, Washington, and Marylandaccounted for nearly two-thirds of the national expenditure (table 1). Among these 10 States, California’s R&D effort exceeded, by nearly a factor of three, the next-highest State, Michigan, with $14 billion in R&D expenditures. After Michigan, R&D levels declined relatively smoothly to approximately $7 billion for Maryland (table 2). The 20 highest-ranking States in R&D expenditures accounted for about 81 percent of the U.S. total; the lowest 20 States accounted for only 4 percent (table 3).
States that are national leaders in total R&D performance are usually ranked among the leading sites in industrial and academic R&D performance (table 2). For industrial R&D, nine of the top 10 States were among the top 10 for total R&D, with Ohio joining the top industrial R&D States replacing Maryland. For academic R&D, North Carolina and Georgia replaced New Jersey and Washington.
There was less commonality with the top 10 for total R&D among those States that performed the most Federal intramural research. Only 4 States were found in both top-10 lists: Maryland, California, Texas, and New Jersey. The six additions to the Federal intramural list, in descending order of Federal R&D performance, were the District of Columbia, Virginia, Ohio, Alabama, Florida, and New Mexico. Maryland ranked first among Federal R&D performers, followed by the District of Columbia, Virginia, and California.
The placement of Maryland, the District of Columbia, and Virginia as the top three in Federal R&D performance reflects the concentration of Federal facilities and administrative offices within the National Capital area. Alabama, Florida, and New Mexico rank among the highest in Federal R&D because of their relatively high shares of Federal space- and defense-related R&D.
States have varied widely in their rates of R&D growth in recent years. For example, the average annual change in real R&D (adjusted for inflation) between 1987 and 1997 ranged from a growth of 14 percent for New Hampshire to a decline of 6 percent for Alabama. Real R&D growth for the nation as a whole averaged two percent per year over the same period.
Because of the variability of estimates for many areas smaller than the U.S. total when data are acquired through survey sampling, the growth rates in R&D performance observed for some States are not precise enough for comparative use. Nevertheless, several useful observations can be made regarding cases in which there is sufficient statistical precision.
As shown in figure 1, among the 51 regions examined, eight States were found to have statistically significant, real annual growth rates of over 3 percent between 1987 and 1997: Idaho, Montana, Nevada, New Hampshire, Oregon, Rhode Island, South Dakota, and Washington. Twenty-five other States had rates of real R&D growth that were positive with statistical certainty, but could not be said to be above 3 percent with statistical certainty. Another 13 States had growth or declines in real R&D, but which were not statistically different from no change in real R&D. Finally, five States had statistically signficant declines in real R&D: Alabama, Missouri, New Mexico, North Dakota, and Vermont.
Among the top 10 States in R&D expenditures in 1997, Washington had the highest growth rate5 percent. The next highest growth rate among the top 10 was 3 percent for New Jersey; California’s R&D grew at a rate of 2 percent during the 1987-97 periodthe same rate as that of the Nation as a whole.
In most cases, these differences in rates reflect the sharp decline in Federal R&D support and the simultaneous dramatic rise in industrial R&D support that occurred during the period. For example, much of Alabama’s decline in R&D could be attributed to a drop in Federal support for industrial R&D: over the decade, this support dwindled from $900 million (in current dollars) to $189 million. In New Hampshire, on the other hand, the sharp rise in R&D is due primarily to an increase in industrial R&D performance (which is funded predominantly by industry) from $94 million to $652 million.
For States that have relatively small levels of R&D expenditures (e.g., States that are not among the top 10 in R&D), these growth rates tend to be influenced significantly by particular events, such as an individual company or government agency expanding or contracting its R&D activities. Therefore, caution should be used in interpreting differences among States. Variations in rates may not reflect differences among States in their policies toward R&D; specific circumstances (other than State policy) may have been more responsible for the observed differences. Likewise, one should not assume that the rates observed between 1987 and 1997 will necessarily continue in later years.
Table 4 provides the same data as table 1 on State-level R&D by performer and source, but for all odd-numbered years between 1987 and 1995. Only odd-numbered years are included because the industry survey did not acquire State-level data in even-numbered years. These data may be useful for detailed analysis of changes in the composition of R&D within a State over time, but the user should use caution in recognizing that small changes may be due to sampling error. Only current dollars are provided, so that these numbers would not need to be adjusted with each new revision in the values of GDP deflators. However, because these values are in current dollars, any observed change in R&D on the basis of these values alone would also include the effect of inflation. In the analysis of ten-year growth trends, provided above, these levels of R&D expenditures had been converted to constant dollars, which allowed for measures of real growth in R&D between 1987 and 1997.
States vary widely in the size of their economies, owing to differences in population, land area, infrastructure, natural resources, and history. Consequently, variations in the R&D expenditure levels of States may simply reflect differences in economic size or the nature of their R&D efforts. A simple way of controlling for the size effect is to measure each State’s R&D level as a proportion of its gross State product (GSP). That proportion is referred to as R&D “intensity” or “concentration.”
The Nation’s total R&D to gross domestic product ratio was 2.6 percent in 1997. The top 10 States for R&D intensity in 1997 werein descending orderNew Mexico (6.7 percent), the District of Columbia, Michigan, Massachusetts, Maryland, Washington, Idaho, New Jersey, California, and Rhode Island (the last with an intensity of 3.7 percent). New Mexico’s high R&D intensity is largely attributable to Federal (specifically Department of Energy) support of FFRDCs in the State.
Figure 2 illustrates the geographical distribution of States by R&D as a percentage of GSP. As shown, R&D concentration is relatively high in the Northeast and East North Central regions, with the exceptions of Maine, New York, and Wisconsin, which had R&D/GSP ratios below 1.9 percent. R&D concentration is relatively low in the West North Central and Southern regions, with the exceptions of Minnesota, North Carolina, and Virginia, which have R&D/GSP ratios above 1.9.
The Mountain and Pacific regions are quite mixed in R&D concentration. In the former region, New Mexico and Idaho have the highest R&D/GSP ratios, which are above 4.0; Wyoming and Nevada have estimated ratios below 1.0. Similarly, in the Pacific, California and Washington’s ratios are 4.0 or higher, while the ratios for Alaska and Hawaii fall below 1.0.
States have always varied in terms of the levels and types of industrial operations they contain. Thus, they vary as well in the levels of R&D they contain by industrial sector. One measure of such variation among States is the extent to which their industrial R&D is in the nonmanufacturing sector, as opposed to the manufacturing sector. Among the top 10 States in 1997 industrial R&D performance, California, New Jersey, New York, Massachusetts, and Washington all had relatively high levels of R&D in the nonmanufacturing sector (25 percent or more of the total) (figure 3). Lower levels of R&D in nonmanufacturing, as a percentage of the total, were observed for Michigan, Texas, Pennsylvania, Illinois, and Ohio. The particular areas of nonmanufacturing with the highest levels of R&D were trade, business services, and engineering and management services.
With regard to R&D in manufacturing, States varied widely in terms of which types of industries performed the most R&D (table 5). In California, particularly high levels of R&D performance in 1997 are observed in the following sectors: machinery ($5.8 billion), electrical equipment ($7.5 billion), transportation equipment ($4.2 billion), and professional and scientific instruments ($3.8 billion). In Michigan, as would be expected, the vast majority of R&D in manufacturing occurred in the transportation equipment sector ($9.6 billion of the State’s total of $12.5 billion devoted to R&D in manufacturing). In New Jersey, chemicals accounted for the State’s highest level of R&D performance ($3.5 billion), followed by electrical equipment ($1.5 billion) and professional and scientific instruments ($1.2 billion). In New York, machinery accounted for the highest amount of R&D performed ($1.5 billion); in Massachusetts it was professional and scientific instruments ($1.8 billion); and in Texas it was electrical equipment ($2.8 billion). In Pennsylvania, chemicals had the largest R&D performance ($2.4 billion), while electrical equipment had the highest levels in Illinois and Ohio.
The top 10 Federal agencies that fund R&D reported a total of $68 billion in Federal R&D obligations to all types of performers in 1997 (table 6). The Department of Defense (DoD) and the Department of Health and Human Services (HHS) together provided 69 percent of this total.
California and Maryland were the two largest recipients of these Federal R&D funds. Performers in California, primarily industrial firms, received 24 percent of DoD’s R&D support. Maryland received 24 percent of HHS’s funding, largely supporting intramural activities undertaken at biomedical research facilities at the National Institutes of Health (NIH). California received more R&D funds from both National Aeronautics and Space Administration (NASA) and NSF than any other State. The main recipients in California of NASA R&D funding were FFRDCs (most notably, its Jet Propulsion Laboratory) and industrial firms. The main recipients of NSF funding were universities and colleges. Maryland had the largest share of any one Federal agency’s total R&D support, with 34 percent of the Department of Commerce’s (DOC) R&D funds. Intramural research activities accounted for most of this funding, associated primarily with DOC’s National Institute of Standards and Technology (NIST).
The NSF collects, and this report contains, two separate estimates on total Federal funding of R&D. Survey data are obtained from both Federal funding agencies and performers of the work (Federal labs, industry, universities, and other nonprofit organizations). National totals, however, are based on data reported by performers because they are in the best position to indicate how much they spent in the actual conduct of R&D in a given year, and to identify the sources of their funds. Performer reporting also reduces the possibility of double-counting and conforms to international standards and guidance.
At certain points in history the two survey systems of sources and performers tracked fairly closely. For example, in calendar year 1980, performers reported using $30.0 billion in Federal R&D funding; Federal agencies reported total R&D obligations for fiscal year 1980 of $29.8 billion. In recent years, the two series have diverged considerably: For calendar year 1997, performers report $65.0 billion in Federal R&D support, compared with the $69.8 billion in obligations reported by Federal agencies for fiscal year 1997 (table 7). The difference in the Federal R&D data totals appears to be concentrated in funding of industry. Overall, in each year since 1989, industrial firms have reported less in Federal R&D support than the amounts that Federal agencies have reported in supporting industrial R&D, even though in some of the earlier years industrial firms had reported more in Federal support than what Federal agencies reported. The difference has been as large as $9.3 billion, observed in 1994. For 1997, Federal agencies reported $31.4 billion in total R&D obligations provided to industrial performers, compared with $23.9 billion in Federal R&D funding reported by industrial performers (table 8). Consequently, data users are cautioned to exercise considerable care in comparing the R&D performance data in table 2 (and detailed in the upper half of the state profiles) with the funding data reported by Federal agencies in table 6 (and detailed in the lower half of the profiles). NSF has been investigating the causes of these divergent trends.
 In any discussion of R&D expenditures, an important distinction must be made between R&D “performance” (the situation in which R&D is actually carried out) and R&D funding “sources” (where the money for R&D originates). For example, a term such as “Federal R&D” is ambiguous in that it does not specify whether it is referring to performance or funding. The Federal Government is a much larger source of R&D funding (termed “Federal Funding of R&D”) than a performer of R&D itself (termed “Federal Intramural R&D”). In the reporting of R&D by State, much more attention has been paid to R&D performance within States than R&D funding originating from states. Since R&D performance is an important component of the economic activity of the State, and the geographic location of funding organizations may have little bearing on economic activity within the same State, this report will focus on R&D performance.
 At present, data on R&D performed by nonprofit institutions within individual States include only R&D derived from Federal funding.
 Some data elements in this report come from sample surveys. All statements in the text based on sample survey data are statistically significant to the 0.05 level, unless otherwise noticed.
 These ranks do not account for sampling errors in the level of industrial R&D performance in each State.
 These Federal R&D totals are based on reports by the performers of R&D and not by the Federal funding agencies. For detailed historical data on R&D expenditures by State and performer from 1987-95, see table 4.
 Data in this section and in table 6 are based on Federal agency reports. See “Technical Note: Differences in performer-reported and source-reported Federal R&D.”
 Note that the $68.4 billion in table 6 and in the U.S. total in the State profiles differs from the $69.8 billion amount because State-specific data are collected from just 10 Federal agencies.