By current projections, total annual research and development (R&D) expenditures in the United States will be $220.6 billion in 1998, of which 65 percent will be provided by industry (figure 1). This level of R&D expenditure represents a 5.3-percent increase, after adjusting for inflation, over the $205.6 billion estimated for 1997. In turn, the 1997 estimate represents a 2.8-percent increase over 1996, and the 1996 level a 4.7-percent increase over 1995, after adjusting for inflation in each case.
The entire economy of the United States, as measured by gross domestic product (GDP) is estimated to reach $8,456 billion in 1998. Adjusted for inflation, GDP increased an estimated 2.7 percent in 1998, after a 3.8-percent increase in 1997, and a 2.8-percent increase in 1996. Consequently, R&D as a share of GDP will reach 2.61 percent in 1998, up from 2.54 percent in 1997, and 2.57 percent in 1996. This 1998 share is the highest since 1992's 2.64 percent, and reflects a continuation of a general upturn that began in 1994 after a three-year decline from 1991--94.
Growth in total U.S. R&D expenditures was relatively slow in 1985--95, but is now accelerating. In the past, annual R&D growth had been much higher-e.g., from 1975--85 it averaged 5.6 percent in real terms. That rate then slowed to 1.6 percent in 1985--95. However, annual real R&D growth in 1995--98 is expected to average 4.3 percent. Almost all of the recent growth in national R&D expenditures is the result of a resurgence of industrial R&D.
Despite this recent increase, the R&D share is still below levels reached in the early 1990s (2.64 percent in 1992). The historic high since 1957 for the Nation's R&D/GDP ratio was reached in 1964 at 2.87 percent; the low was 2.12 percent in 1978.
Since 1980, industry has provided the largest share of financial support for R&D, projected to reach $143.7 billion in 1998, or 65.1 percent of the total. This funding represents a 7.7-percent increase in real terms over the preliminary 1997 level. Of these funds, nearly all ($140.8 billion) will be devoted to R&D performed by industry itself, with the remainder directed toward academic R&D ($1.8 billion) and R&D performed by other nonprofit organizations ($1.0 billion).
Industry-including industry-administered federally funded research and development centers (FFRDCs)-is expected to perform 75.1 percent of the Nation's total R&D in 1998. The projected $165.7 billion in R&D performance by industry represents an 8.5-percent increase in real terms over the preliminary 1997 level. Of this industrial R&D performance in 1998, 85.0 percent will be supported by industry's own funds; Federal funding will account for the remaining 15.0 percent. The Federal share of industry's performance total has fallen considerably from its all-time high of 32 percent in 1987.
Federal R&D support in 1998 is expected to be $66.6 billion, a 0.8-percent increase in real terms over 1997. The Federal share of support for the Nation's R&D first fell below 50 percent in 1978, and it remained between 45 and 50 percent until 1988. It then fell steadily, dropping from 42.6 percent in 1988 to a current all-time low of 30.2 percent projected for 1998.
The Federal Government is expected to perform $16.9 billion of R&D in 1998, a real increase of 0.2 percent from 1997. Federal agencies are estimated to account for 7.7 percent of national R&D performance in 1998, reflecting, again, a continual decline in the Federal performance share that began in the mid-1970s.
Participation of Universities, Nonprofit Organizations, and State Governments
Other R&D funds, provided by universities and colleges, state and local governments, and other nonprofit institutions, in combination, are expected to reach $10.3 billion in 1998, reflecting a 3.4-percent real increase over their 1997 level.
Universities and colleges, excluding academically administered FFRDCs, are expected to account for 11.6 percent ($25.7 billion) of national R&D performance in 1998; this is a moderate real increase (3.1 percent) over 1997.
R&D Separated into Basic Research, Applied Research, and Development
Of the projected $220.6 billion spent on R&D in 1998, $34.4 billion (or 15.6 percent) is expected to be for basic research, $49.8 billion (22.6 percent) for applied research, and $136.4 billion (61.8 percent) for development. In comparison with 1997, R&D performance in 1998 reflects a 2.4-percent real increase in basic research, a 6.2-percent real increase in applied research, and a 5.8-percent real increase in development.
The amount of basic research conducted as a proportion of total R&D varies enormously
by sector. From 1970--98, basic research was between 62 and 67 percent of all university and college R&D (including university and college-administered FFRDCs). For industry R&D (excluding industry-administered FFRDCs) it has ranged between only 3 and 6 percent, and for Federal intramural R&D it has ranged between 13 and 17 percent. This maximum of 17 percent for basic research as a percentage of Federal R&D is expected for 1998, reflecting an upward trend that has been occurring since 1988.
Industry and industry-administered FFRDCs, combined, are expected to account for 25.0 percent ($8.6 billion) of the Nation's basic research performance in 1998. Universities and colleges are expected to account for 51.1 percent ($17.6 billion), and their FFRDCs for another 7.8 percent ($2.7 billion). The remaining basic research performance will be carried out by the Federal Government, comprising 8.3 percent ($2.9 billion) of the total, and by other nonprofit organizations and their affiliated FFRDCs-7.8 percent ($2.7 billion). While Federal Government performance of all R&D is expected to rise only 0.2 percent in real terms, Federal performance of basic research is expected to rise 4.2 percent.
R&D Performance by State
R&D is substantially concentrated in a small number of states. In 1995, California had the highest level of R&D expenditures-over $36 billion-representing approximately one-fifth of the $177 billion U.S. total. The six states with the highest levels of R&D expenditures-California, Michigan, New York, Massachusetts, New Jersey, and Texas (in decreasing order of magnitude)-accounted for approximately one-half of the entire national effort.
The 10 states with the highest R&D intensity (ratio of R&D to Gross State Product) in 1995 were, in descending order, New Mexico (8.1 percent), the District of Columbia, Michigan, Massachusetts, Maryland, Delaware, California, Connecticut, Rhode Island, and Washington (the latter with an intensity of 3.5 percent)
Due to the size of its economy, the United States spends more on R&D than any other country, though it does not spend as high a proportion of its economy on R&D as some other countries. In 1996, the most recent year for which comparable international data are available, the U.S. spent 2.57 percent of its GDP on R&D, compared to 2.77 percent spent by Japan in 1995 (the latest year's data available for that country), 2.32 by France, 2.28 by Germany, 1.94 by the United Kingdom, 1.66 by Canada, and 1.03 by Italy.
Nondefense R&D as a percent of GDP was 2.11 for the United States in 1996, which was lower than for Germany (2.20), and Japan (2.73 in 1995), but higher than for France (2.04 in 1995), the United Kingdom (1.71), Canada (1.63), and Italy (0.98 in 1995).
R&D Scientists and Engineers
The estimated number of scientists and engineers employed in 1995 on R&D activities in the United States is approximately 987,700. This figure reflects a 1.3-percent average annual increase from the 1993 level of 962,700. It reflects only a 2.1-percent annual increase over the 1985 figure of 801,900, the first year for which revised national tabulations are available.
In 1996, industry employed approximately 859,300 full-time equivalent (FTE) R&D scientists and engineers (S&Es). The industrial sector with the most R&D S&Es was transportation equipment, with 18.5 percent of the FTE total, mostly involving R&D on aircraft and missiles. Electrical equipment was the second-largest employer of R&D S&Es, with 15.2 percent, mostly involving R&D on electronic components such as computer chips. Chemical and allied products accounted for another 10.7 percent, and machinery, including office computers, accounted for another 10.2 percent. The next largest R&D S&E employment sector was in services, rather than manufacturing-computer and data processing services accounted for 9.4 percent of all industrial R&D S&Es.
In 1995, approximately 484,780 doctoral scientists and engineers were employed in the United States; 41.0 percent reported R&D as their primary work activity; teaching as a primary activity accounted for 22.1 percent; management/sales/administration, 16.4 percent; computer applications, 4.4 percent; and other professional services and activities, 16.2 percent.