S&T: The Global Picture

For S&T, it is a changed world.

Since the early 1990s, the globalization of S&T has proceeded apace. The demise of the Cold War political order precipitated more open borders just as the Internet became a tool for unfettered worldwide information dissemination and communication. Dense and relatively inexpensive airline links developed in response to a growing demand for both business and leisure travel. A more integrated trade regimen stimulated a vast expansion of international trade in goods and services. Governments increasingly looked to the development of knowledge-intensive economies—those in which research, its commercial exploitation, and other intellectual work have a major role—for economic competitiveness and growth. Companies seeking new markets set up operations in new locations, bringing with them technological know-how and management expertise. Governments anticipated and stimulated such moves with incentives, decreased regulatory barriers, development of infrastructure, and expanded access to higher education.

Asian countries outside Japan are increasingly important in the global S&T community.

The major development since the mid-1990s was the rapid emergence of Asian economies outside of Japan as increasingly strong players in the world's S&T system. South Korea and Taiwan were already well established in particular markets, and Singapore, Malaysia, Thailand, and others boosted their market strength and showed potential for further increases in competitiveness. China is growing at the most rapid pace, and its government has declared education and S&T to be the strategic engines of sustainable economic development. China has already become an important player in high-technology markets, has attracted the world's major corporations, and in 2004 was the world's largest recipient of foreign direct investment. In the area of scientific research, China does not yet approach parity with major science-producing nations, but its scientists and engineers are collaborating broadly with their counterparts in Asia and across the globe. In addition, China's international patenting and publishing activities, although still modest, are fast increasing. Fragmentary data on India suggest that it is also seeking rapid technological development focusing on knowledge-intensive service sectors and biotechnology.

Ubiquitous growth is coupled with share losses for traditional S&T locations.

The developments stated above are recasting the international S&T scene. In an absolute sense, growth is ubiquitous in both funding and personnel devoted to S&T activities and in outputs from these activities, including scientific articles, patents, and high-technology products. In a relative sense, the major European nations and the EU countries as a group are losing ground, as is Japan, whereas the United States is maintaining its position across a variety of measures. China is making large relative gains as are, to a lesser degree, other Asian economies. Other areas of the world such as Eastern Europe, central Asia, the Middle East, Latin America, and Africa, are slowly and selectively entering the international S&T scene but do not yet play a major role in the world's S&T system.

International R&D Performance

International R&D spending has seen robust increases.

Rising R&D expenditures are no longer limited to the member countries of the Organisation for Economic Co-operation and Development (OECD).[3] Based on OECD and nonmember economies,[4] the (underestimated) worldwide R&D expenditures, unadjusted for inflation, rose from $377 billion in 1990 to $810 billion in 2003, the last year of available data. The OECD countries' share dropped from an estimated 93% to 84% of the total over the period, based on the reported R&D expenditures of eight non-OECD members whose 1995–2003 average annual growth rate of 17.1% compared with 5.6% annual growth for OECD members (figure O-1 figure.).

Industrial R&D investments outpace those of governments.

Governments around the world are increasing their R&D funding in support of the development of high-technology industries. However, industry R&D support has often expanded more rapidly, leading to a declining share of government support in total R&D in many countries. The relative decline in the United States had been very steep—the federal government share fell from 48% in 1990 to a low of 26% in 2001. Changes after September 11, 2001, largely in defense and national security R&D, brought it back up to 31% in 2004. In the EU, the government share diminished from 41% in 1990 to 34% in 2001 (more current data are unavailable). Germany's 32% rate in 2003 was close to its 1990 level of 34%, after rising as high as 38%. Japan's rate, by far the lowest among OECD countries, has fluctuated between 18% and 23% over the period (figure O-2 figure.).

Firms' cross-border R&D investments are increasing, as are cross-border alliances.

Industry is increasingly looking beyond national borders in the location of R&D activities, and the United States remains an attractive venue for foreign companies seeking to conduct R&D. From 1990 to 2002, R&D expenditures in the United States by majority-owned affiliates of foreign-based multi-nationals rose from 8% to 14% of total U.S. industrial R&D performance. R&D expenditures by U.S.-owned companies abroad rose from about $12 billion in 1994 to $21 billion in 2002 (figure O-3 figure.). In the United Kingdom, more than a quarter of its industrial R&D was supported by foreign sources in 2002, while Canada's foreign support rose to 21% and the EU-15's rose to 10%, including within-EU funds flows.

The global nature of S&T markets is also reflected in the rising number of companies' international alliances devoted to joint R&D or technology development. Industrial innovation increasingly involves external partners to complement internal capabilities, share costs, spread market risk, expedite projects, and increase sensitivities to geographic variations in product markets. To accomplish these ends, companies have resorted to a variety of technology alliances, often crossing national boundaries. The number of new international alliances rose from under 100 in 1980 to 183 in 1990 and 342 early in the new century. Historically, U.S. companies have been involved in 75% to 86% of these alliances (figure O-4 figure.).

Overseas, R&D spending by U.S.-based multinationals is increasing in Asia. Although Europe remains the single largest location of these R&D expenditures, accounting for just over 60% of the total, its share has slipped by about 10 percentage points since 1994. Over the period, the combined share of Europe, Canada, and Japan declined from 90% to 80% of the total. The share of other Asian economies rose from 5% to 12% as R&D expenditures by U.S.-based multinationals more than doubled in the region starting in 1999, to about $3.5 billion, compared with $1.5 billion during the 1994–98 period. This increase was fueled primarily by steep investment growth in China (more than $1 billion in 2002 and rising) and the Asia-8 economies. U.S. R&D expenditures in Japan increased only moderately (figure O-5 figure.).

China has become the world's third-largest R&D performer.

According to data compiled by OECD, Chinese R&D spending reached $84.6 billion in 2003, up from $12.4 billion in 1991. Although a question remains about the precise international comparability of the data, this would put China in third place, behind only the United States and Japan and ahead of Germany. Average annual increases in R&D investment over the 12-year period ranged from 4% to 5% for the United States, EU-25,[5] and Japan. These contrasted sharply with the 17% average annual growth for China, which is accelerating: for the past 5 years, China's R&D expenditures have registered 24% average annual increases. Over the period, China's R&D/gross domestic product ratio, indicative of the relative prominence of R&D in China's rapidly growing economy, rose from 0.6% to 1.3%, compared with about 1.8% for the EU-15 and 2.6% for the United States (figure O-6 figure.).

China 's R&D expenditures are rapidly approaching those of Japan, the second largest R&D-performing nation. OECD data show China's investment at 17% of Japan's in 1991 but at 74% of Japan's in 2003. Relative to the EU-25, the comparable Chinese figures were 10% and 40%, and relative to the United States the increase was from 8% to 30% (figure O-7 figure.). Even if more fully comparable Chinese figures reduced the growth statistics somewhat, such a rapid advance on the leading R&D-performing countries and regions would still be unprecedented in recent history. It is underscored by the growth of China's industrial research workforce, which expanded from 16% of the size of its U.S. counterpart in 1991 to 42% in little more than a decade.

Growth in industrial R&D creates rising numbers of researchers around the world.

The number of industrial researchers has grown along with rapidly increasing industrial R&D expenditures. Across OECD member nations, employment of researchers by industry has grown at about twice the rate of total industrial employment. For the OECD as a whole, the full-time equivalent number of researchers more than doubled, from just below 1 million in 1981 to almost 2.3 million in 2002. Over the same period, the number of researchers in the United States rose from 0.5 million to nearly 1.1 million. Non-OECD members also show increasing researcher employment (figure O-8 figure.).

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High-Technology Markets

Europe and Japan are losing market share in high-technology manufacturing

High-technology manufacturing industries embody the fruits of innovation. High-technology industry output has grown rapidly since 1990 and now comprises about one-fifth of the world's total manufacturing output. The United States, China, and other Asian economies have shifted into high-technology manufacturing sectors more rapidly than the EU-15 or Japan.

Overall world manufacturing output grew from $13.9 trillion in 1990 to $19.6 trillion in 2003 after adjusting for inflation. However, the manufacturing output of five high-technology industries (aerospace, pharmaceuticals, office and computing equipment, communications equipment, and scientific instruments) grew faster, from $1.5 trillion to $3.5 trillion. The United States and developing Asian economies largely drove the worldwide growth in high-technology manufacturing. The resulting shifts in its geographical distribution were pronounced. Shares for the United States, the EU-15, and Japan were about 25% each in 1990, but by 2003 the U.S. share had risen to nearly 40%, while those of the EU-15 and Japan had declined to 18% and 11%, respectively. In 2003, China had surpassed Japan as a producer of high-technology goods and accounted for 12% of the world market share, about the same as that of the Asia-8 (figure O-9 figure.).

The United States has rapidly developed the most high-technology-intensive manufacturing sector among major nations. Since 1990, U.S. high-technology manufacturing output has risen from 12% to 30% of total domestic manufacturing. The EU-15 shift was less pronounced, from 9% to 12%, and Japan's was minimal, from 14% to 15% (automobiles are excluded from the high-technology definition used here). China's fast-growing manufacturing sector (about the same size as Japan's by 2003) shifted rapidly toward high-technology production, boosting this component from 6% in 1990 to 18% in 2003. For the Asia-8, the high-technology manufacturing component expanded from 13% to 23% (figure O-10 figure.).

High-technology shares of Asian exporters are expanding.

Exports of all manufactured goods more than doubled from 1990 to 2003, but high-technology exports had greater increases and reached $1.9 trillion in 2003. The single largest volume was that of the EU-15, at almost one-third of the total since the mid-1990s; the combined Asia-8 exports were the second highest (figure O-11 figure.). The shares of China and the Asia-8 economies rose at the expense of the United States and Japan. U.S. high-technology exports stood at $305 billion in 2003, essentially the same level as in 2000, and the U.S. share declined from 23% to 16% during this period. The Japanese share dropped from 17% to 9%. China's rise from a mere $23 billion in 1990 to $224 billion in 2003, remarkable both for its speed and consistency, moved its share of world high-technology exports to 12%, beyond Japan's share.

The U.S. high-technology trade balance is negative.

The U.S. high-technology trade balance, which broadly reflects relative economic strengths and foreign exchange rate movements, has been closely watched as an indication of the international competitiveness of the nation's high-technology industries. For the first time in recent memory, the U.S. high-technology trade balance turned negative in the past several years (figure O-12 figure.). Trade data for five high-technology manufacturing industries (aerospace, pharmaceuticals, office and computing equipment, communications equipment, and scientific instruments) show that, beginning in 1998, U.S. high-technology industries' imports exceed exports.

U.S. trade in goods with high-technology content yields a similar picture. For 10 high-technology product categories (biotechnology, life sciences, optoelectronics, information and communications equipment, electronics, flexible manufacturing, advanced materials, aerospace, weapons, and nuclear technology), U.S. trade turned negative in 2002 and stayed that way through 2004, the latest year for which data are available (figure O-13 figure.). A negative balance with the Asian region is partially offset by positive balances with the EU-15 and the rest of the world.

Increasing Asian patent filings show growing technological sophistication.

Strong growth in the number of applications for U.S. patents by foreign-resident inventors, particularly from Asia, attests to the increase in technological sophistication in other parts of the world. The number of such filings has historically been just under half of the growing number of U.S. Patent and Trademark Office filings. Applications from Japanese inventors, traditionally the largest group of foreign filers, rose by about 75%, as did those from filers in Europe and other areas. However, as with many economic statistics, other Asian economies are an exception. Applications from China and the Asia-8 rose by 800% and, by 2003, constituted nearly one-fifth of all foreign-resident inventor filings (figure O-14 figure.). South Korea and Taiwan have now joined Japan among the top five inventor locations.

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Scientific Research

Academic R&D has grown robustly but remains less prominent in Asia.

Academic R&D has seen robust growth in many countries as governments try to stimulate basic research capability and to connect universities with industry for the efficient exploitation of research results. The United States and the EU-25 (including 10 new member countries) have been spending similar amounts for academic R&D, $41 to $44 billion in 2003, about double their expenditures in 1990. OECD nations other than the United States spent $74 billion, an increase of 120% over 1990. However, China has experienced the most rapid growth in its spending for academic R&D, from $1.1 billion in 1991 to $7.3 billion in 2002, with double-digit growth rates since 1999 (figure O-15 figure.).

Nevertheless, the academic sector, where basic research is conducted in many countries, plays a relatively small role (about 10%) in China's R&D system. This is also the case in some other Asian countries, where R&D tends to focus more on applied research and especially on development. In other major OECD nations, the share of academic R&D was at least 14% (figure O-16 figure.).

Scientific expertise is expanding, which diminishes the U.S. quality advantage.

Scientific expertise is developing rapidly outside the established scientific centers of the United States, the EU, and Japan, as shown by research articles published in the world's major peer-reviewed scientific and technical journals. The total number of articles rose from 466,000 in 1988 to 699,000 in 2003. Over the period, the combined share of the United States, Japan, and the EU-15 declined from 75% to 70% of the total, with flat U.S. article output from 1992 to 2002, leading to a drop of the U.S. share from 38% to 30%. Meanwhile, EU-15 output rose steadily to surpass that of the United States in 1998, and Japan's output also continued to rise. Output from China and the Asia-8 expanded rapidly over the period, by 530% and 235%, respectively, boosting their combined share of the world total from less than 4% in 1988 to 10% in 2003. By 2003, South Korea ranked 6th and China ranked 12th in world article output. Increases in other parts of the world tended to be more modest (figure O-17 figure.).

Scientists acknowledge their colleagues' relevant work by citing it, and the aggregate of these citations provides an approximate measure of quality. Relative to its publications volume, U.S. scientific literature continues to receive a disproportionate share of all international citations. However, a closer look reveals that the quality of scientific output produced outside the United States is rising. An examination of articles published in the most prestigious journals included in the Science Citation Index[6] reveals that, in almost every field, the U.S. share of citations, while high, has declined significantly since 1990. The U.S. share of citations in the highest-cited articles has declined as well (figure O-18 figure.). In both cases, the declines are broadly proportional to the progressively lower share of U.S. articles.

International collaboration is commonplace.

The manner in which science and engineering is conducted is becoming increasingly international in response to the growing complexity of science, ease of face-to-face contact, the Internet, and government incentives. Overall, about 20% of the world's scientific and technical articles in 2003 had authors from two or more countries, compared with 8% in 1988. One-quarter of articles with U.S. authors have one or more international coauthors, which is similar to the percentages for Japan, China, and the Asia-8 (figure O-19 figure.). The higher EU level partially reflects the EU's emphasis on collaboration among the member countries as well as the relatively small science establishments of some members. Other countries' high levels of collaboration reflect science establishments that may be small (e.g., in developing nations) or that may be in the process of rebuilding (e.g., in Eastern European countries). Generally, international collaboration is lower in the social sciences than in other fields.

By choice or by legacy, international science portfolios vary greatly.

The scientific portfolios of the emerging Asian countries suggest a relatively greater specialization in the physical sciences and engineering than that of the traditional scientific centers. In 2003, more than half of China's publications concentrated on the physical sciences and nearly another fifth concentrated on engineering; in comparison with the rest of the world, the life sciences and social sciences constituted a very small share. The sum of eight other Asian portfolios showed a similar pattern. In contrast, the literature from both the United States and the EU-15 showed a fairly heavy emphasis on the life sciences (45%–54%) and a relatively lighter share in engineering (10%–13%) and the physical sciences (22%–39%) (figure O-20 figure.). The literature from Japan falls in between these two ranges. These portfolio patterns have changed little since the mid-1990s.

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International Labor Forces, Students, and Degrees

International S&E labor force data can only be estimated.

International S&E labor force data are unavailable; however, the number of people with a postsecondary education can serve as an approximate measure of a highly educated S&E workforce. It shows enormous growth over two decades, from about 73 million in 1980 to 194 million in 2000. This broad measure of those who are highly skilled includes persons with at least a technical school or associate's degree and all advanced degrees (including doctorates and professional degrees). Over the period, the U.S. share of the total, which was the largest share, fell from 31% to 27%. China's and India's shares doubled to 10% and 8%, respectively, while Russia's share decreased by nearly half but remained the fourth largest. None of these three large countries are OECD members. A number of developing nations increased their share, indicating a broader provision of higher education (figure O-21 figure.).

International degree production is rising and is focused on S&E.

The number of first university degrees awarded around the world is rising rapidly, from about 6.4 million in 1997 to 8.7 million in 2002. Particularly strong increases occurred in Asia and Europe, with large numbers and strong gains in engineering and the natural sciences. In 2002, engineering degrees awarded in Asia were more than four times the amount of those awarded in North America, and the number of natural science degrees was nearly double. Europe graduated three times as many engineers as North America in 2002 (figure O-22 figure.).

The share of S&E degrees among first university degrees in the United States is lower than in other countries, as is the share of U.S. degrees in natural sciences and engineering (NS&E) (i.e., S&E degrees without the social sciences and psychology). Just under one-third of all U.S. degrees are awarded in S&E. This statistic has held steady over the years, along with the 19% share of NS&E degrees. However, world trends seem to be converging. In 1997, an average of 44% of all degrees awarded in other countries were in S&E, but that number fell to 38% in 2002. Similarly, the share of NS&E degrees declined from 30% to 27%, indicating that the worldwide expansion of higher education degrees was stronger in the non-S&E fields than in S&E (figure O-23 figure.). In light of these statistics, OECD ministers have expressed concern that young people lack interest in S&E.

Europe and Asia have made great strides in natural science and engineering degree production.

In the context of building knowledge-intensive economies, the education of young people in NS&E has become increasingly important for many governments. Results vary widely for first university degrees in the NS&E from about 16 per 100 24-year-olds in Taiwan to 12–13 in Australia and South Korea, and 10 in the United Kingdom. The United States ranks 32nd out of 90 countries for which such data are available at just under 6 per 100. China and India have low ratios (1.6 and 1.0, respectively), reflecting low overall rates of access to higher education in those countries (figure O-24 figure.). However, this trend appears to be changing: S&E degree production in China doubled and engineering degrees tripled over the past two decades.

The international production of S&E doctorate holders has also accelerated; in recent years most of these degrees (78% in 2002) have been granted outside the United States. The EU graduated one-third of the new S&E doctorates and also one-third of those with doctorates in the natural sciences. One-third of the engineering doctorates were awarded in Asia, where numbers are understated because of incomplete reporting. The United States produced 15% of the world's engineering doctorates in 2002 (figure O-25 figure.); students on temporary visas earned more than half of these degrees.

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International Mobility

Large numbers of highly educated persons live outside their home countries.

In 2002,[7] close to 2 million students were enrolled in higher education institutions outside their home country, nearly one-third of them in the United States. A few countries continue to dominate the international student market. In 2002, the United States, United Kingdom, and Germany accounted for 54% of the total; three-quarters of all foreign students were enrolled in these three countries plus Australia, France, and Japan (figure O-26 figure.). However, this pattern shows signs of changing. The U.S. share has declined for several years, while those of the United Kingdom, Australia, and Japan have increased. Recently, a number of countries have expanded their efforts to attract foreign students.

The number of individuals with higher education degrees who lived outside their home countries grew by 9.5 million from 1990 to 2000. Individuals from Eastern Europe, Central and South America, and smaller Asian countries account for most of the increase, followed by Western Europe, China, India, and Africa. The number of expatriates from China, India, and Africa more than doubled. However, by 2000, home countries were absorbing relatively more of their highly educated citizens than in the past. In 1990, 1 in 6 resided abroad; by 2000 that number had dropped to 1 in 9, indicating that much of the world had developed an infrastructure capable of using these highly educated people productively (figure O-27 figure.). Among developed countries, the United Kingdom has the largest group of citizens with formal education beyond high school residing abroad, with Germany in second place. China, India, and the Philippines each have 1.0–1.2 million highly educated expatriates.

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[3] Organisation for Economic Co-operation and Development (OECD) includes Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

[4] Eight OECD nonmembers are Argentina, China, Israel, Romania, the Russian Federation, Singapore, Slovenia, and Taiwan.

[5] EU-25 includes the EU-15 plus recent new members Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.

[6] The database is the combined ISI Thompson's Science Citation Index and Social Sciences Citation Index. The top journals are those within the top 1%, 5%, and 10% of journals with the highest ratios of citations to articles. Top articles are similarly defined as those with the top 1%, 5%, and 10% of citations in a given field.

[7] Or closest year for which data are available.

National Science Board.