National R&D Performance Patternsby Sector National R&D Performance Patternsby State
National R&D Performance Patternsby Sector
The sectoral shares of U.S. R&D performance, measured in terms of expenditures, have shifted slightly during the past decade. In 1980, industry performed 71 percent of the Nation's R&D; the academic sectorincluding FFRDCs administered by universitiesaccounted for 13 percent; the Federal Government, 12 percent; and the nonprofit sector, 3 percent. As industry's defense-related R&D efforts accelerated in the early 1980s, its share of the performance total rose to a 1985 peak of 74 percent. Based on preliminary estimates for 1996, academic R&D performance now represents 12.2 percent of the U.S. total, Federal intramural R&D performance 8.8 percent, other nonprofit organizations 3.3 percent, and private industry 72.8 percent, leaving university-administered FFRDCs with 2.9 percent of the total (table 5). 17
From 1985 to 1996, R&D performance, in real-dollar expenditures, grew by 1.4 percent per year for all sectors combined, based on preliminary calculations for 1996. This growth was not evenly balanced across sectors: R&D performance at universities and colleges (excluding FFRDCs) grew by 4.8 percent per year in real terms, compared with growth of 2.3 percent per year for nonprofit organizations, 1.3 percent growth for industry, growth of 0.9 percent per year for academic FFRDCs, and a decline of 0.9 percent per year for Federal intramural performance.
R&D performance by private industry will reach a projected $134.2 billion in 1996, which includes $2.1 billion spent by FFRDCs administered by industrial firms. This total represents a 2.0 percent real increase over the 1995 preliminary total (chart 11). That 1995 total of $128.7 billion in current dollars reflects a much larger real gain of 5.9 percent over the previous yearthe largest percentage gain in real industrial R&D performance since 1985.
See appendix table C-4.
In 1996, R&D performed by industry that was not federally supported but financed almost entirely by companies themselves is 3.5 percent higher in real terms than its 1995 level, according to preliminary data. Overall, these data imply that private companies will fund approximately 83 percent ($111.0 billion) of their 1996 R&D performance, with the Federal Government funding nearly all the rest ($23 billion, or 17 percent of total). Preliminary figures also indicate a 4.2 percent fall, in real terms, in Federal funds for industrial R&D activities between 1995 and 1996. As recently as 1987, the Federal funding share of industry's performance total was 33 percent; however, this Federal share has been steadily declining since its 1959 peak of 59 percent.
Individual industries show very different R&D performance trends and shares of the industry R&D total since the early 1980s. R&D performance by manufacturers of aircraft and spacecraft/guided missiles manufacturers (Standard Industrial ClassificationSICcodes 372 and 376, respectively) has been the most volatile, representing, for example, 25 percent of total industry R&D performance in 1988, but only 12 percent in 1994 (table 6). These movements can be partially explained by parallel shifts in Federal defense-related funding during the period. Overall, the greatest rates of annual growth in real R&D performance observed recently occurred in SIC code 283, drugs and medicines (9 percent), SIC codes 381-382, scientific and mechanical measuring instruments (20 percent), and "nonmanufacturing industries" (16 percent).18 In this latter catch-all category, R&D activity is concentrated in nonmanufacturing firms whose primary activity involves communications services and computer-related and engineering services.
See appendix table C-26.
A new sample had been selected in 1992 for the underlying industry R&D survey, the first since 1987. As a result, data for 1991 and subsequent years reflect more recent information about the distribution of R&D expenditures across industry groups, the R&D performance of smaller firms, and the R&D performance of firms classified in the nonmanufacturing sector. Shifts in non-federal R&D expenditures reported for 1994 in table 3 reflect the revised information obtained using this new sample. (See appendix A for a more complete discussion of the sample selection.)
Federal financing for specific industries varies considerably. The Federal Government provided $22.5 billion for all industry R&D performance in 1994, the most recent year for which detailed industry-specific data are available by all sources of funds. Aerospace companies, alone, received 39 percent of all Government funds provided to industry. Consequently, 62 percent of the aerospace industry's R&D dollars came from Federal sources, with the remaining 38 percent coming from companies' own funds (chart 12). In comparison, the electrical equipment industry financed 88 percent of its own R&D in 1994; the machinery industry funded 99 percent of its R&D in 1994; and chemical companiesincluding pharmaceutical firmsfunded 98 percent of their R&D in 1992. 19
See appendix tables C-30 and C-31.
The Federal Government will perform $16.2 billion of the 1996 U.S. R&D total, based on preliminary estimates. This figure is slightly lower than the level estimated for 1995, $16.4 billion, which reflects a real decline of 3.3 percent. Federal agencies account for 8.8 percent of the projected 1996 national R&D performance effort; this continues a gradual decline of Federal funding as a percentage of total R&D, that began in the mid-1970s.
Until 1980, the Federal Government had been the second largest R&D performer in the Nation. Its share of the national R&D performance total, however, fell from 16 percent in 1970 to 12 percent in 1980. This reduction was due primarily to cutbacks in space R&D programs. NASA funds for intramural R&D performance decreased by more than one-half in real terms during this period. As a result, in 1980, the academic sectorincluding associated FFRDCssurpassed the Federal Government in terms of share of national R&D performance.
Preliminary estimates of Federal obligations for intramural research for 1996 are slightly higher than preliminary estimates of intramural performance$16.29 billion versus $16.20 billion, respectively, in current dollars. Intramural R&D obligations by DOD will decrease in real terms between 1995 and 1996 by 11.8 percent to its projected 1996 level of $7.85 billion (in current dollars). NASA's intramural R&D obligations will decrease as well, by 7.25 percent in real terms, to $2.03 billion (in current dollars); while HHSwhose intramural R&D is mostly obligated to NIHwill rise by approximately 1.1 percent, to $2.35 billion.20 Together, these three agencies account for 75.0 percent of Federal intramural R&D obligations for 1996 (table 3).
Universities and Colleges
Universities and colleges (excluding academically administered FFRDCs) are expected to account for 12.2 percent ($22.4 billion) of the 1996 national R&D performance effort. This total implies that there has been virtually no change (less than 0.1 percent increase) between 1995 and 1996 in the amount of real R&D performance carried out at universities and colleges.
Unlike the industry and Federal sectors, overall R&D performance by the academic sector increased rapidly throughout the mid-1980s and continued to grow, though less rapidly, in the early 1990s (chart 11). 21 From 1980 to 1985, real growth averaged under 4 percent annually. While real increases in the R&D performance of other sectors slowed considerably after 1985, universities and colleges experienced a preliminary 4.8 percent real annual growth rate over the 1985-96 period.
The Federal Government provides the major share of the R&D funds used by universities and colleges. In the early 1980s, Federal funds accounted for two-thirds of the academic total. By 1991, however, this share had dropped to a low of 58 percent; and it has not changed noticeably since thene.g., the share for 1996 is 60 percent, according to preliminary calculations. Consequently, much of the recent growth in academic R&D performance is attributable to increased funding from non-Federal sources (chart 13).
See appendix table C-2.
Between 1985 and 1996, total R&D performance by universities and colleges (excluding FFRDCs) increased by 66.6 percent in real terms, while the academic share of total U.S. R&D performance grew from 8.5 percent to 12.2 percent, by preliminary calculations. Federally financed academic R&D, expected to reach $13.4 billion in current dollars in 1996, is up 59.2 percent in real terms from 1985; university and college R&D performance using non-Federal funds, $9.0 billion, is up by 79.0 percent in real terms. The links between academic institutions and industry expanded considerably. Industry's academic R&D funding is expected to increase by 105.9 percent in real terms from 1985 to 1996, although it accounts for just 7.1 percent ($1.6 billion) of academia's expected 1996 R&D total. Universities' own institutional fundsthe largest non-Federal sourceare, by preliminary calculations, 87.2 percent higher in real terms in 1996 than in 1985 and account for 18.8 percent ($4.2 billion) of their separately budgeted R&D expenditures. Real R&D funds from State and local governments are expected to increase by 53.3 percent over this 11-year period, and constitute 7.1 percent ($1.6 billion) of universities' projected 1996 R&D total.
Academically Administered FFRDCs
R&D performance in 1996 by university-administered FFRDCs is estimated at $5.4 billion, or approximately 2.9 percent of the national R&D performance effort. These FFRDCs account for 19.4 percent of the total 1996 academic (universities and colleges plus academically administered FFRDCs) R&D performance.
The most recent year for data on university R&D expenditures by field of study is 1994 (table C-39). In this year, engineering accounted for 32.1 percent of R&D expenditures at university-administered FFRDCs; the physical sciences (astronomy, chemistry, physics, and related subfields) accounted for 41.5 percent. Within universities and colleges, engineering and the physical sciences represented 15.8 percent and 10.3 percent, respectively, of R&D performance in 1994. Life sciences accounted for 54.7 percent of R&D total at universities and colleges but a considerably smaller share (3.6 percent) of R&D at academically-administered FFRDCs (tables C-37 and C-39).
From 1974 to 1980, academically administered FFRDCs increased their R&D performance by 62.6 percent in real terms. This increase largely mirrored the Federal emphasis on energy programs. Since 1980, the Federal shift from energy to defense has resulted in much slower growth in academically administered FFRDC R&D performancea 31.6 percent increase in real terms from 1980 to 1996 based on preliminary calculations, or about one-half the growth in more than twice the time.
National R&D Performance Patternsby State
The latest data available on the State distribution of R&D expenditures are for 1993.22 These data cover R&D performance by industry, academia, and Federal agencies, and the federally funded R&D activities of nonprofit institutions.23 The State data on R&D contains 52 records: the 50 States; the District of Columbia; and "other/unknown," which accounts for R&D in Puerto Rico and other non-State U.S. regions, as well as R&D for which the particular State in question was not known. Approximately two-thirds of the R&D that could not be associated with a particular state is R&D performed by the nonprofit sector. Consequently, the distribution of R&D by State indicates primarily where R&D is undertaken in Federal, industrial, and university facilities.
The State distribution of R&D performance is highly concentrated (chart 14). The top 25 areas for R&D performanceincluding the District of Columbia, but excluding "other/unknown," which would be ranked 12th if it were countedaccounted for approximately 91 percent ($150 billion in current dollars) of total U.S. R&D performance in 1993.
Of the total U.S. R&D dollars, approximately one-half (49.9 percent) was spent in six States: California, New York, Michigan, Massachusetts, New Jersey, and Pennsylvania. Such concentration reflects two factors: the size of State economies as measured by GSP, and the intensity of their R&D as a proportion of GSP. For example, New York is ranked second in both R&D performance and in GSP, while it is 19th among all States in intensity of R&D (table C-17). Consequently, New York's high level of R&D can be attributed primarily to its economic size. In contrast, Massachusetts is ranked 11th in GSP, but fourth in total R&D because of a high R&D intensity. New Mexico has the highest R&D intensity, 8.1 percent, which is attributable to the presence of several FFRDCs in the State; however, because of its relatively small economy, the State is ranked 17th in total R&D performance.
See appendix table C-17.
Approximately 67 percent of the national R&D effort was performed in 10 Statesthe preceding list of six together with Maryland, Texas, Illinois, and Ohio. California, the largest R&D performer, accounted for $33.7 billion (in current dollars) in 1993. In each of the other leading States, R&D expenditures ranged between $6 and $11 billion (in current dollars).
The 10 States that ranked highest in 1993 R&D performance were the same States in the top 10 in 1975, although their ranking has shifted somewhat. The highest three (California, New York, and Michigan) have retained their top ranks since 1975. Pennsylvania, fourth in 1975, was sixth in 1993. Texas moved from 10th place to 8th.
As expected, most of the States that are national leaders in total R&D performance are also leading R&D performers in one or more economic sectors (table 7). For example, of the 10 States that led in total 1993 R&D performance:
- Nine also ranked among the top 10 industrial performers, with Maryland absent from the top 10 industrial performers and Washington added.
- Nine also ranked among the top 10 academic performers, which, absent New Jersey, included North Carolina.
- Six also ranked among the top 10 Federal performersCalifornia, Massachusetts, New Jersey, Maryland, Texas, and Ohio; the other four were Virginia, Alabama, Florida and the District of Columbia.
See appendix table C-17.
The inclusion of Virginia and the District of Columbia reflects the concentration of Federal facilities and administrative offices within the Washington, D.C., metropolitan area. Major defense- and space-related research activity explains the inclusion of Alabama and Florida in the list of top 10 Federal performers.
17The industry and nonprofit sectors' performance totals reported here include R&D performed by FFRDCs administered by organizations in their respective sectors. However, in table C-2, R&D expenditures for these FFRDCs are reported separately.
18These rates are based on growth between 1984 and 1994, or between years within that interval for which data were available. The growth rate of R&D performance for drugs and medicines was based on a comparison of 1986 and 1994 real levels, since data were not available for 1984-85. Similarly, the growth calculation for scientific and mechanical measuring instruments used 1988 and 1994 data. Growth for nonmanufacturing industries was based on 1984 and 1994 levels. (See table C-29 for R&D performance in current dollars, and C-1 for deflators.)
19The most recent year for which total R&D performance data were available for the industry chemicals and allied products (SIC code 28) was 1992. (See table C-29.)
20This increase represents the overall effect on intramural R&D obligations for the agency, which takes into account the Social Security Administration (SSA) becoming a separate agency from HHS during FY 1995. That is, the percentage increase reported would be largerthough negligiblyif HHS in 1995 were defined as not including SSA, as it is in 1996.
21R&D data are for separately budgeted expenditures only. Consequently, they exclude that portion of salaries for research time or other research expenses financed by funds not specifically earmarked for R&D from State and local governments and other non-Federal sources, including endowments.
22Although annual data are available on the location of R&D performance by the academic and Federal sectors, NSF conducts surveys on the State distribution of industrial R&D performance only in odd-numbered years. At this writing, the 1995 industry R&D survey data have not been processed, making 1993 the most recent year for which the State-specific R&D totals can be reported.
23R&D performance data include the R&D activities in FFRDCs in each sector of the economy. For a more detailed description of these data, as well as comparisons of 1985 R&D expenditures with other economic measures (for example, population and gross state product), see NSF, Geographic Patterns: R&D in the United States, NSF 89-317 (Washington, DC, 1989).