Performance by Industry
In high-wage countries such as the United States, one of the ways
industries stay competitive in the global marketplace is through
innovation (Council on Competitiveness 2001). Innovation provides
firms with a comparative advantage through improved products, more
efficient production processes, and new product development. This
allows high-wage countries to better compete with low-wage nations.
R&D activities are incubators for 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.
Traditionally, U.S. industries that conduct large amounts of R&D
meet with greater success in foreign markets than less R&D-intensive
industries, and they are more willing to pay their employees higher
wages. (See "U.S. Technology in the Marketplace"
for discussion 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. For example, the
most recent data show a resurgence in service-sector research and
development in the United States and several other advanced nations.
The service sector share of U.S. R&D, which was less than 19
percent in 1996, rose to 34 percent in 2000. U.S. manufacturing
industries collectively continue to perform nearly two-thirds of
the nation's industrial R&D, but cutbacks in R&D by the
U.S. aerospace and computer hardware industries mean those sectors'
shares of overall R&D have declined, especially in recent years.
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 are the three largest economies
in the industrialized world, and their industries have been leaders
of innovation in the international marketplace. An analysis of each
nation or region's R&D trends can explain past success, provide
insight into future product development, and highlight shifts in
national technology priorities.
In 1999 and 2000, R&D in U.S. service-sector industries grew
at a faster rate than R&D in U.S. manufacturing industries.
This surge was similar to the rapid growth experienced between 1987
and 1991 and was again led primarily by computer software firms
and firms performing R&D on a contract basis. In 1987, service-sector
industries accounted for less than 9 percent of all U.S. industrial
R&D. During the next several years, the amount of R&D performed
in the service sector raced ahead of that performed by other U.S.
manufacturing industries until 1991, when the service sector accounted
for nearly one-fourth of all U.S. industrial R&D. Manufacturers
regained their position; however, their share inched back to 81
percent of total U.S. industrial R&D by 1996, led by industries
making computer hardware, electronics equipment, and motor vehicles
table 6-7 ).
The most recent data for the late 1990s and 2000 show a reemergence
of the U.S. service sector as a key performer of industrial R&D.
A turnaround that began slowly in 1997 was followed by large increases
each year thereafter. The service sector's share of total R&D
was less than 19 percent in 1996 but 34 percent by 2000.
U.S. manufacturing industries collectively perform nearly two-thirds
of the nation's industrial R&D and include most of the nation's
top R&D-performing industries. In 2000, the latest year for
which internationally comparable data are available, the industry
manufacturing radio, TV, and communication equipment led the nation
in industrial R&D.
This industry historically has been among the top five performers,
but its rise to the top coincided with rapid growth in the telecommunication
industry during the late 1990s. Producers of chemical products (primarily
pharmaceuticals), scientific instruments, and motor vehicles were
also top R&D performers in 2000, as were the industries providing
computer services. Computer and office hardware manufacturers fell
out of the top five. R&D performance in the U.S. aerospace industry
also grew more slowly during the 1990s than in other U.S. industries.
The aerospace industry accounted for 19 percent of total U.S. R&D
in 1990, but its share dropped nearly every year throughout the
decade. By 2000, the U.S. aerospace industry accounted for just
5 percent of total R&D.
The manufacturing sector continues to dominate Japan's industrial
R&D performance, as it has throughout the period examined. From
1987 to 2000, the sector consistently accounted for 9497 percent
of all R&D performed by Japanese industry (figure
table 6-8 ).
A small expansion in service-sector R&D first seen in the mid-1990s
appears to have retreated and, in fact, has declined in recent years.
In the early 1990s, Japan's service-sector industries doubled their
share of total R&D, reaching 4 percent in both 1996 and 1997.
However, R&D performed by Japan's service sector has declined
each year since, returning to early-1990s levels. Service-sector
R&D in 2000 accounted for just 2.1 percent of Japan's industrial
The top industrial R&D performers in Japan during 19872000
reflect the 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 R&D performer throughout most of the
period, accounting for nearly 19 percent of all Japanese industrial
R&D in 2000. Japan's chemical industry, also a leading performer
in 2000, accounted for 15 percent of the country's industrial R&D,
second only to the electronics equipment industry. Producers of
motor vehicles, computer hardware, and electrical machinery round
out the remaining top R&D performers. In contrast, U.S. machinery
producers consistently dropped in rank among the top U.S. R&D
performers since the early 1970s.
As in the United States and Japan, manufacturing industries perform
the bulk of industrial R&D in the 15-nation EU. The EU's industrial
R&D appears to be less concentrated in specific industries than
R&D in the United States, but more so than in Japan. Manufacturers
of chemicals and chemical products, electronics equipment, and motor
vehicles consistently were among the top five industrial R&D
performers in the EU (figure
table 6-9 ).
The aerospace industry (other transportation) and the service sector
round out the group. According to the latest data available for
the EU, Germany led the EU in R&D in many of the major manufacturing
industries, including chemical products, motor vehicles, communication
equipment, and computer hardware. The United Kingdom led in pharmaceutical
and service-sector R&D.
Service-sector R&D has steadily increased each year and accounted
for 13 percent of total EU industrial R&D in 1999, nearly equal
to that of the EU's electronic equipment industry and almost double
that of the EU's aerospace industry. Large increases in service-sector
R&D are apparent in many EU countries, especially Italy, where
service-sector R&D made up about 24 percent of industrial R&D
from 1999 to 2001, and the United Kingdom, where it accounted for
21 percent of R&D in 1999.