R&D Performance by Industry
In high-wage countries such as the United States, industries stay competitive in a global marketplace through innovation (Council on Competitiveness 2001). Innovation leads to better production processes and higher quality products, thereby providing the competitive advantage high-wage countries need when competing against low-wage nations.
R&D activities serve as incubators for the new ideas that can lead to new products, processes, and industries. Although they are not the only source of new innovations, R&D activities conducted in industry-run laboratories and facilities are the source of many important new ideas that have shaped modern technology.
U.S. industries that traditionally conduct large amounts of R&D have met with greater success in foreign markets than those that are less R&D intensive, and they have been more supportive of higher wages for their employees. (See "U.S. Technology in the Marketplace" section for a presentation of recent trends in U.S. competitiveness in foreign and domestic product markets.) Moreover, trends in industrial R&D performance are leading indicators of future technological performance. The following section examines these R&D trends, focusing particularly on growth in industrial R&D activity in the top R&D-performing industries in the United States, Japan, and the EU.
R&D Performance by Industry
The United States, the EU, and Japan represent the three largest economies in the industrialized world and are competitors in the international marketplace. An analysis of R&D data can explain past successes in certain product markets, provide insights into future product development, and highlight shifts in national technology priorities.
R&D performance by the U.S. service-sector industries underwent explosive growth between 1987 and 1991, driven primarily by computer software firms and firms performing R&D on a contract basis. In 1987, service-sector industries performed less than 9 percent of all R&D performed by industry in the United States. During the next several years, R&D performed in the service sector raced ahead of that performed by U.S. manufacturing industries, and by 1989, the service sector performed nearly 19 percent of total U.S. industrial R&D, more than double the share held just two years earlier. By 1991, service-sector R&D had grown to represent nearly one-fourth of all U.S. industrial R&D. Since then, R&D performance in U.S. manufacturing industries increased and began growing faster than in the burgeoning service sector. Manufacturers' share inched back up to 80 percent of total U.S. industry R&D by 1996, the latest year for which internationally comparable data are available. Industries making computer hardware, electronics equipment, and motor vehicles led this resurgence in manufacturing-sector R&D. (See figure 6-19 and appendix table 6-9.)
From 1987 to 1992, the U.S. aerospace industry performed the largest amount of R&D, accounting for 14 to 26 percent of total R&D performed by industry. The industry manufacturing electronics equipment (including communications equipment) and the U.S. chemical industry (including pharmaceuticals) followed, each accounting for between 9 and 16 percent of total U.S. R&D. During the mid-1990s, however, the nation's R&D emphasis shifted; the aerospace industry's share declined, and the share for the industry manufacturing communications equipment increased. In 1996 and 1997, the industry manufacturing communications and other electronics equipment was the top R&D performer in the United States.
Unlike the United States, Japan has yet to see a dramatic growth in service-sector R&D. Although R&D in Japan's service-sector industries reached 4.2 percent of the total R&D performed by Japanese industry in 1996 and 4.5 percent in 1997, Japan's industrial R&D performance continues to be dominated by its manufacturing sector. From 1987 to 1995, Japan's manufacturing sector consistently accounted for nearly 98 percent of all R&D performed by Japanese industry. (See
figure 6-20 and appendix table 6-10.)
The top industrial R&D performers in Japan during the 198797 period reflect that country's long-standing emphases on electronics technology (including consumer electronics and audiovisual equipment), motor vehicles, and electrical machinery. Japan's electronics equipment industry was the leading performer of R&D throughout the period, accounting for nearly 17 percent of all Japanese industrial R&D in 1997. Japan's motor vehicle industry was the second-best R&D performer and has retained that position nearly every year through 1997. Producers of electrical machinery became Japan's second-best R&D-performing industry in 1994 before falling back to the third position, which they have held for several years. In 1997, manufacturers of electrical machinery accounted for nearly 11 percent of all industrial R&D performed in Japan. By comparison, since the early 1970s, U.S. producers of electrical machinery have steadily dropped in rank among the country's top R&D performers.
As in Japan and the United States, manufacturing industries perform the bulk of industrial R&D in the 15-nation EU. The EU's industrial R&D appears to be somewhat less concentrated than that in the United States but more so than that in Japan. Manufacturers of electronics equipment, motor vehicles, and industrial chemicals have consistently been among the top five performers of industrial R&D in the EU. (See figure 6-21 and appendix table 6-11.) In 1997, Germany led the EU in the performance of motor vehicle and industrial chemical R&D, France led in industrial R&D performed by electronics equipment manufacturers, and the United Kingdom led in pharmaceuticals R&D.
R&D within the EU's service sector has doubled since the mid-1980s, accounting for about 11 percent of total industrial R&D by 1997. Large increases in service-sector R&D are apparent in many EU countries, but especially in the United Kingdom (19.6 percent of its industrial R&D in 1997), Italy (15.3 percent), and France (10.0 percent).