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The National Science Foundation's (NSF's) 1997 Survey of Industrial Research and Development shows that firms[1]  spent $157.5 billion on research and development (R&D) in the United States, 9 percent more than the amount spent during 1996.[2]  Company funding[3]  continued to increase, as it has each year since 1953, rising from $121.0 billion in 1996 to $133.6 billion in 1997, a 10 percent increase. Federal funding of industrial R&D in 1997 was $23.9 billion-basically unchanged from the 1996 total of $23.6 billion. After adjusting for inflation, total R&D rose 7 percent, company-funded industrial R&D rose 8 percent, and federally-funded industrial R&D fell 1 percent. Summary statistics from the 1997 and 1996 surveys are presented and compared in table 1.

Table 1. Funds for industrial R&D, by source, industrial sector, character of work, and size of company, in current and constant dollars: 96 and 97

Increased company funding accounted for most of the growth in the performance of R&D by both manufacturers and firms in nonmanufacturing industries during the period 1988-97. Manufacturing companies increased performance of R&D funded from their own resources by an average of 6 percent per year-from $59.4 billion in 1988 to $101.2 billion in 1997-and nonmanufacturing firms increased their funding by an average of 18 percent per year-from $7.3 billion to $32.4 billion. Statistics on company-funded R&D performed during 1996 and 1997 are compared in table 2.

Table 2. Company and toher funds for industrial R&D, by manufacturing and nonmanufacturing industry, in current and constant dollars: 96 and 97

Highlighted in the remainder of this report is the continuing strong support of industrial R&D funded from companies' own resources and the increases in sales and employment reported by R&D-performing firms.

Manufacturing R&D: Funding Sources top

As noted above, company funding of industrial R&D continued to rise in 1997 as it has since 1953, when the first annual statistics were compiled by NSF's Survey of Industrial Research and Development. Even after adjusting for inflation, current-year investment exceeded the prior year's investment during 40 of the 45 survey years. Company funding of industrial R&D also continued to far exceed Federal support, which declined by 40 percent in constant dollars since its peak level in 1987. The relationship between the sources of industrial R&D funding is illustrated in figure 1.

Figure 1. Company and Federal funding of industrial R&D, in constant dollars: 1960-97

Manufacturers dominate in the performance of industrial R&D. They account for about three-quarters of all industrial R&D performed in the United States, a share they have maintained since the early 1990s. Chief among the manufacturers that performed industrial R&D during 1997 using company funds were makers of

Focusing on recent trends, 1993-97 survey statistics indicate that Federal funding of industrial R&D performed by manufacturers remained in the $17 to 20 billion range, or $16 to 19 billion after adjusting for inflation. The manufacturers that performed the largest amounts of federally funded industrial R&D during 1997 were makers of

Nonmanufacturing R&D: Funding Sources top

The nonmanufacturing industries that performed the largest amount of R&D paid for with company funds (both their own and those obtained under contract from other firms) during 1997 were

The Federal Government provided $4.1 billion in support for R&D performed by firms in the nonmanufacturing industries; large portions of this support were expended by the following industries:

Employment and Sales top

In 1990, R&D-performing firms employed 16.9 million people, 0.7 million of whom were full-time equivalent (FTE) R&D scientists and engineers,[4]  and posted domestic net sales of $2.7 trillion.[5]  For 1990-94, the annual rates of increase for employment were 0.8 percent; for the number of R&D scientists and engineers, 1.3 percent; and for sales, 7.9 percent. For 1995-97, the annual rates were 1.0, 9.0, and 8.0 percent, respectively. In 1997, employment for R&D-performing companies was 20.2 million, the number of FTE R&D scientists and engineers employed by these firms was 0.9 million, and domestic net sales totaled $4.6 trillion. These and other employment and sales-related statistics are compared with those from the 1996 survey in table 3.

Table 3. Employment and sales of R&D-performing firms: 1996-97

Definition of R&D top

As used here, R&D is the pursuit of a planned search for new knowledge or understanding of the subject under study. This search may have reference to a specific application (basic research); the acquisition of knowledge or understanding to meet a specific, recognized need (applied research); or the application of existing knowledge or understanding toward the improvement of a present product or process (development). In industry, basic research is the pursuit of new scientific knowledge or understanding that does not have specific immediate commercial objectives, although it may be in fields of present or potential commercial interest; applied research is investigation toward discovering new scientific knowledge that has specific commercial objectives with respect to products, processes, or services; and development is the systematic use of the knowledge or understanding gained from research directed toward the production of useful materials, devices, systems, or methods, including the design and development of prototypes and processes. The Survey of Industrial Research and Development covers industrial R&D performed by people trained-either formally or by experience-in engineering or in the physical, biological, mathematical, or computer sciences and employed by a publicly or privately owned firm engaged in for-profit activity in the United States.

Notes on Survey Methodology and Future Surveys top

Research is continually undertaken to improve the validity, strengthen the coverage, and increase the overall relevance of the Survey of Industrial Research and Development, while minimizing the reporting burden on companies selected for the survey. Statistics resulting from the 1997 survey benefit from recent efforts to strengthen statistics for industries that perform the greatest amounts of R&D while lessening coverage of industries that perform little or no R&D. Specifically, a new sampling approach was used for firms in industries that do not conduct significant amounts of R&D. These firms were sampled at much lower rates than in previous surveys. This has shifted more emphasis toward those industries crucial in developing strong, representative estimates of R&D spending. This new sampling approach and its effect on the resulting statistics will be discussed in detail in the annual report, Research and Development in Industry: 1997 scheduled for publication later this year.

Preparation is under way for conversion to the new North American Industrial Classification System (NAICS) from the Standard Industrial Classification (SIC) system currently used for most establishment-based economic statistics produced by the Federal Government. Statistics in this report as well as all of the statistics produced from the Survey of Industrial Research and Development, a company-based rather than an establishment-based survey, are classified using SIC codes. Plans are being made to publish survey statistics using NAICS beginning with the results from the 1999 survey. For that year, NSF intends to publish some statistics classified by both the SIC and NAICS industry codes. Beginning with the 2000 survey, statistics will be published only with NAICS classifications.

Also under way is research to study the nature of R&D and reporting patterns of firms in the nonmanufacturing industries. This research is being undertaken in an effort to better describe and represent R&D activity in this increasingly important sector.

Statistical Reports top

This report is the first paper publication of statistics and information from the 1997 Survey of Industrial Research and Development. The annual report, Research and Development in Industry: 1997, will contain the full set of 68 tables available from the survey. To provide users with the most timely statistics possible during preparation of the paper publications, a set of early release tables is available from the Internet at http://www.nsf.gov/statistics/ or from the mailing address below. Both the early release tables and the annual report present R&D statistics by industry, size of company, source of funds, and character of R&D. They also provide historical trends in R&D, R&D as a percentage of net sales, R&D contracted to outside organizations and performed outside the United States, sales and total employment of R&D-performing companies, employment and cost of R&D scientists and engineers, and statistics by state. The annual report presents technical information on the survey sample and processing.


Footnotes

[1] In this report, and in NSF industrial R&D statistics, the terms "firm," "company," and "enterprise" are used interchangeably. "Industry" refers to the activity or group of activities included in the 2- or 3-digit standard industrial classifications (SIC) or groups of SICs used to array statistics resulting from the Survey of Industrial Research and Development. For a list of and more information about these industries and industry groups, see the latest annual report in the survey series, Research and Development in Industry: 1995-96, or the forthcoming Research and Development in Industry: 1997.

[2] The survey sample is designed to produce coefficients of variation of 2 percent for industries in which there is a large amount of R&D expenditures and 5 percent for many of the smaller industries. It is unlikely that year-to-year percentage changes larger than the targets are produced by sampling error, but sampling error can exaggerate them somewhat.

[3] Companies obtain funds for industrial R&D from various sources. In the NSF statistics and for the purposes of this report, these sources are grouped into two categories: company funds and Federal funds. Company-funded R&D, also referred to as "company and other nonfederal" and "company and other" funding, includes funds for industrial R&D performed within company facilities from all sources except the Federal Government. The funds are predominantly the company's own, but also include funds from such outside organizations as other companies, research institutions, universities and colleges, nonprofit organizations, and state governments. Funds given to other companies, research institutions, universities and colleges, nonprofit organizations, and state governments for R&D not performed within company facilities are measured separately by other NSF surveys.

[4] "Scientists and engineers" are those employees engaged in scientific or engineering work at a level that requires knowledge, gained either formally or by experience, of engineering or of the physical, biological, mathematical, statistical, or computer sciences equivalent to at least that acquired through completion of a 4-year college program with a major in one of those fields. The statistics in this report show FTE employment of persons employed by the company during the January following the survey year who are assigned full time to R&D, plus a prorated number of employees working part time on R&D.

[5] This figure reflects dollar values for goods sold or services rendered by R&D-performing companies to customers outside the company, including the Federal Government, less such items as returns, allowances, freight, charges, and excise taxes. Domestic intracompany transfers and sales by foreign subsidiaries are excluded, but transfers to foreign subsidiaries and export sales to foreign companies are included.
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