Industryindent
NSF 95-304

Industry

R&D performance by industry-including $2 billion performed in FFRDCs administered by industrial firms-is estimated to have reached $124 billion in 1994. This total is a 1 percent increase over the estimated 1993 total. After adjusting for expected inflation, industry's performance of R&D is expected to decline 1 percent in 1994 (chart 10).

Chart 10

For all industries combined, non Federal primarily company financing of industrial R&D performance increased 2 percent in 1994 and is unchanged after adjusting for inflation. Overall, companies funded about 81 percent ($100 billion) of their R&D performance, with the Federal Government funding the rest ($24 billion, or 19 percent of total). Federal funds for industrial R&D activities are expected to be down 2 percent in inflation adjusted terms. As recently as 1987 the Federal funding share of industry's performance total was 33 percent; however, the Federal share of industry's performance has been steadily declining since its peak of 59 percent reached in 1959.

Individual industries show very different R&D performance trends and shares of the industry R&D total since the early eighties. R&D performance in aerospace firms has been the most volatile, rising from 21 percent of the industry performance total in 1980 to 26 percent in 1985 and then down to 13 percent of the 1992 R&D total (table 3). Not coincidentally, these movements parallel shifts in Federal defense related support during the period. Overall, the greatest rates of R&D performance growth in 1980-92 occurred in chemicals, drugs and medicines, scientific instruments, and nonmanufacturing industries. In this latter catch all category, the R&D activity is concentrated in nonmanufacturing firms whose primary activity involves communications services and computer related and engineering services.

A new sample was selected in 1992 for the underlying industry R&D survey, the first since 1987. As a result, data for 1991 and 1992 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 share of R&D reported for 1992 in table 3 reflect the revised information obtained using this new sample. (See appendix A for a more complete discussion of the sample selection.)

Given the new sample, the share gains for specific nonmanufacturing industries are the most difficult to determine though there is little doubt that R&D performance within this broad industrial group has increased considerably since 1980. Fully 80 percent of the increase in total industrial R&D resulting from the new sample was reported for firms classified in the nonmanufacturing sector. These changes served to increase the nonmanufacturing 1991 total from about $10 billion previously reported to $21 billion. An additional $7 billion of R&D also was reclassified from manufacturing categories to nonmanufacturing. Although some of this data shifting stemmed directly from the selection of a new sample, a significant amount is believed to accurately reflect changes in the output mix of firms formerly classified in manufacturing industries. Even if a new sample had not been selected, the share of industry's R&D performance total attributed to the nonmanufacturing sector would have risen from about 4 percent in 1980 to an estimated 10 to 16 percent in 1992.

Federal financing for specific industries varied considerably. The Federal Government provided $25 billion for all industry R&D performance in 1992, the most recent year for which detailed industry specific data are available by all sources of funds. Aerospace companies received 40 percent of all Government funds provided to industry. Consequently, 61 percent of the aerospace industry's R&D dollars came from Federal sources and only about two fifths came from companies' own funds (chart 11). In comparison, the electrical equipment industry financed 72 percent of its R&D from company funds; the machinery industry funded 93 percent; and chemical companies including pharmaceutical firms funded 98 percent of their R&D.

Chart 11

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