Location of R&D Performance

R&D performance is geographically concentrated in the United States. More than 50% of U.S. R&D is performed in only seven states.[4] Although R&D expenditures are concentrated in relatively few states, patterns of R&D activity vary considerably among the top R&D-performing locations (appendix table 4-23Excel.). (For a broader range of indicators of state-level S&E activities, see chapter 8.)

Distribution of R&D Expenditures Among States

In 2004, the 20 highest-ranking states in R&D expenditures accounted for 85% of U.S. R&D expenditures, whereas the 20 lowest-ranking states accounted for 5%. (A complete list of state rankings is provided in appendix table 4-24Excel..) The top 10 states accounted for more than three-fifths of U.S. R&D expenditures in 2004 (table 4-2table.). California alone accounted for approximately one-fifth of the $300 billion U.S. R&D total, exceeding the next highest state (Michigan) by more than a factor of three.[5] States vary significantly in the size of their economies because of differences in population, land area, infrastructure, natural resources, and history. Consequently, state variations in R&D expenditure levels may simply reflect differences in economic size or the nature of R&D efforts. One way to control for the size of each state's economy is to measure each state's R&D level as a percentage of its share of GDP. Like the ratio of national R&D to GDP discussed later in this chapter, the proportion of a state's GDP devoted to R&D is an indicator of R&D intensity. Some of the states with the highest R&D to GDP ratios include New Mexico and Maryland, home to major government research facilities; Massachusetts, home to a number of large research universities and a thriving high-technology industry; and Michigan, home to the major auto manufacturers. A list of states and corresponding R&D intensities can be found in appendix table 4-24Excel..

Sector Distribution of R&D Performance by State

Although leading states in total R&D tend to be well represented in each of the major R&D-performing sectors, the proportion of R&D performed in each of these sectors varies across states. Because business sector R&D accounts for 71% of the U.S. R&D total that can be distributed among states, it is not surprising that 9 of the top 10 states in terms of total R&D performance are also in the top 10 in terms of industry R&D (table 4-2table.). Connecticut, 10th in terms of business sector R&D, replaced Maryland among the leading 10 states for total R&D. University-performed R&D accounts for only 15% of the U.S. total, but it is also highly correlated with the total R&D performance in a state. Only New Jersey and Washington, among the top 10 total R&D state locations, were not among the top 10 locations for university R&D performance. North Carolina and Ohio rounded out the academic R&D top 10.

There is less of a relationship between federal R&D performance (both intramural and FFRDC) and total R&D, as federal R&D is more geographically concentrated than the R&D performed by other sectors.[6] The top four states in terms of federal R&D (Maryland, California, New Mexico, and Virginia), along with the District of Columbia, account for two-thirds of all federal R&D performance. Federal R&D accounts for 85% of all R&D in New Mexico, the location of the two largest FFRDCs in terms of R&D performance, Los Alamos National Laboratory and Sandia National Laboratories. Federal R&D accounts for about 50% of all R&D performed in Maryland, Virginia, and the District of Columbia, reflecting the concentration of federal facilities and administrative offices within the national capital area. Federal R&D also represents 33% of the R&D performed in Alabama and West Virginia. The Departments of Energy (DOE) and Agriculture (USDA) account for the largest shares of federal intramural R&D performance in West Virginia, whereas DOD's Redstone Arsenal laboratories and the National Aeronautics and Space Administration's (NASA) George C. Marshall Space Flight Center, both in Huntsville, account for most of Alabama's federal R&D activity. Looking across all states, federal R&D represents 12% of the distributed U.S. total.

Industrial R&D in Top States

The types of companies that carry out R&D vary considerably among the 10 leading states in industry-performed R&D (table 4-3table.). This reflects regional specialization or clusters of industrial activity. For example, in Michigan, the motor vehicles industry accounted for 74% of industrial R&D in 2005, whereas it accounted for only 7% of the nation's total industrial R&D.

The computer and electronic products manufacturing industries perform 19% of the nation's total industrial R&D, but they perform a larger share of the industrial R&D in Massachusetts (41%), Texas (38%), Illinois (38%), and California (33%). These states have clearly defined regional centers of high-technology research and manufacturing: Cambridge and Route 128 in Massachusetts; the Silicon Hills of Austin, Texas; Champaign County in Illinois; and Silicon Valley in California. More than 70% of R&D performed in the United States by computer and electronic products companies in 2005 was located in these four states, representing 14% of all business R&D nationwide.

The R&D of chemicals manufacturing companies is particularly prominent in New Jersey, Pennsylvania, and Connecticut, all of which host robust pharmaceutical and chemical industries. According to the American Chemistry Council, together these states host more than 1,600 chemical manufacturing establishments and rank among the top 20 in chemical industry employment (American Chemistry 2007). These companies accounted for 66% of New Jersey's, 54% of Pennsylvania's, and 50% of Connecticut's business R&D in 2005. Together these three states represented more than 40% of the nation's R&D in this sector.

The R&D services sector, which consists largely of biotechnology companies, contract research organizations, and early-stage technology firms, is even more concentrated geographically, with California and Massachusetts accounting for more than 40% of R&D in this sector. The companies in this sector maintain strong ties to the academic sector and often are located near large research universities (Stuart and Sorenson 2003).

The R&D performance of small companies (defined as having from 5 to 499 employees) is also concentrated geographically.[7] Nationally, small companies perform 18% of the nation's total business R&D, but in California, Massachusetts, and New York these companies perform between 19% and 22% of the states' business R&D. About 39% of the R&D performed in the United States by companies in this category is performed in these three states. Overall, these companies performed 7% of the nation's R&D in 2005.


[4] The latest data available on the state distribution of R&D performance are for 2004. In 2004, $283.4 billion of the $300.1 billion total U.S. R&D could be attributed to expenditures within individual states, with the remainder falling under an undistributed "other/unknown" category. Approximately equal shares of the R&D that could not be associated with a particular state were R&D performed by the nonprofit sector and by industry. State totals differ from U.S. totals reported elsewhere for four reasons: some R&D expenditures cannot be allocated to any of the 50 states or the District of Columbia; nonfederal sources of nonprofit R&D expenditures, totaling an estimated $7.1 billion in 2004, could not be allocated by state; state-level university R&D data have not been adjusted for double-counting of R&D passed through from one academic institution to another; and state R&D data are not converted from fiscal years to calendar years.

[5] Rankings do not take into account the margin of error of estimates from sample surveys.

[6] Federal intramural R&D includes costs associated with the administration of intramural and extramural programs by federal personnel as well as actual intramural R&D performance. This explains the large amount of federal intramural R&D reported within the District of Columbia.

[7] For most manufacturing industries, the Small Business Association has established a size standard of 500 employees. The NSF Survey of Industrial Research and Development does not sample companies with fewer than five employees because of concerns about respondent burden.

Right-click on image to save.