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Science and Engineering Indicators 2004
  Table of Contents     Figures     Tables     Appendix Tables     Presentation Slides  
Chapter 6:
Highlights
Introduction
U.S. Technology in the Marketplace
New High-Technology Exporters
International Trends in Industrial R&D
Patented Inventions
Venture Capital and High-Technology Enterprise
Characteristics of Innovative U.S. Firms
Conclusion
References
 
 
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Figure 6-16


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Figure 6-17


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Figure 6-18

Industry, Technology, and the Global Marketplace

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International Trends in Industrial R&D

R&D 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.[11] 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.[12]

R&D Performance by Industry top of page

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.[13]

United States

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 (figure 6-16 figure and appendix table 6-7 Microsoft Excel icon).

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.[14]

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.[15] 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.[16]

Japan

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 94–97 percent of all R&D performed by Japanese industry (figure 6-17 figure and appendix table 6-8 Microsoft Excel icon). 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 R&D performance.

The top industrial R&D performers in Japan during 1987–2000 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.

European Union

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 6-18 figure and appendix table 6-9 Microsoft Excel icon). 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.[17]

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.


Footnotes

[11]  For a discussion of trends in foreign direct investment in R&D facilities, see chapter 4.

[12]  This section uses data from OECD's Analytical Business Enterprise R&D database (July 2002) to examine trends in national industrial R&D performance. This database tracks all R&D expenditures (both defense-and nondefense-related) carried out in the industrial sector, regardless of funding source. Expenditures are expressed in purchasing power parity dollars ($PPP). For an examination of U.S. industrial R&D by funding source and an explanation of $PPP, see chapter 4.

[13]  Industry-level data are occasionally estimated to provide a complete time series for the 1987–2000 period.

[14]  Part of the apparent growth is due to the reclassification of some firms that were previously identified as manufacturers under the SIC. Those firms have been reclassified as service industries under the NAICs.

[15]  Some of the trends reported here differ from those reported in chapter 4 due to the reclassification of U.S. data to conform with the international industry classification system used by OECD.

[16]  One of the recommendations made in a recent report to the President and the Congress of the United States by the Commission on the Future of the United States Aerospace Industry calls for a renewed focus on long-term research (Presidential Commission 2002).

[17]  The latest calendar-year data were 2001 for Italy, 2000 for Germany and the United Kingdom, and 1999 for France.


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