U.S. spending on R&D reached an estimated $397.6 billion in 2008, a 6.7% increase (or 4.5% in inflation-adjusted dollars) from the 2007 total. This 2008 figure is preliminary, however, and may not fully reflect the effects of the downturn in U.S. and worldwide economic conditions that took place in the latter half of the year.
In 2008, businesses performed an estimated $289.1 billion (current dollars), or 73%, of the total U.S. R&D. The academic sector is the second-largest performer of U.S. R&D, with estimated expenditures of $51.2 billion, or just below 13% of the U.S. total. Federal agencies, their laboratories, and FFRDCs accounted for an estimated $41.7 billion, or about 11% of the total. Nonprofit organizations performed the remainder, $15.6 billion, or about 4%.
Business and the federal government are the two largest sources of R&D funding. The business sector provided an estimated $267.8 billion (current dollars) of funding for R&D in 2008, 67% of the U.S. total. The federal government funded an estimated $103.7 billion of R&D, or 26% of the total. Over the past 5 years, expanded business spending on R&D has accounted for much of the growth (in both current and real-dollar terms) in total U.S. R&D spending. Federal funding overall has been flat or declining on a real-dollar basis. At the time of this writing, the impact of the current economic slowdown in U.S. R&D expenditures remains uncertain.
Historically, the federal government has been the prime source of funding for basic research, accounting for an estimated 57% of the nation's total in 2008. Moreover, in the same year, the federal government funded 61% of the basic research performed by universities and colleges, the nation's largest performers of basic research.
The budget appropriations for federal spending on R&D in FY 2009 totaled $147.1 billion, an increase of $3.3 billion, or 2.4%, over the FY 2008 spending level. The president's proposed budget for FY 2010 requests federal R&D spending of $147.6 billion, an increase of $0.6 billion, or 0.4%, over the appropriated FY 2009 level. Furthermore, the American Recovery and Reinvestment Act, enacted in early 2009, provided a one-time increase in funding for federal R&D and R&D infrastructure, estimated to total $18.3 billion in FY 2009.
Globally, R&D expenditures totaled an estimated $1,107 billion in 2007, the most recent year for which internationally comparable data are available. R&D is concentrated regionally in North America (35%), Asia (31%), and Europe (28%) and is further concentrated within a relatively few countries. According to OECD statistics, the United States (with 33% of the world total) and Japan (13%) account for almost half of global R&D. That figure increases to two-thirds by adding the next three countries on the list, China (9%), Germany (6%), and France (4%). Adding South Korea, the United Kingdom, the Russian Federation, Canada, and Italy completes the top 10 countries, accounting for about 80% of global R&D.
China, which ranks third globally in R&D spending, continues to exhibit the most dramatic growth pattern. Its real R&D growth over the past decade has averaged just over 19% annually. Both India and Brazil also are among the world's larger and faster-growing R&D performers, according to UNESCO statistics. India performed about $15 billion of R&D in 2004, and Brazil about $13 billion in 2005 (both figures are the most recent available data). The totals reported for both countries are about double the levels of R&D performance each reported in the mid-1990s. Comparability of these figures to the OECD statistics is unclear, but such levels of R&D expenditures would rank both India and Brazil among the world's top 15 R&D-performing nations.
Another dimension of the international character of R&D performance is the activities by U.S. MNCs overseas. More than 85% of annual global R&D expenditures by U.S. MNCs are made in the United States ($187.8 billion of $216.3 billion in 2006); however, the geographic distribution of R&D expenditures outside the United States by the overseas affiliates of U.S. MNCs ($28.5 billion in 2006) is gradually shifting to reflect the role of emerging markets. In particular, major developed economies or regions (Canada, Japan, and Europe) account for a decreasing share of the overseas R&D investments of U.S. MNCs, declining from 90% in 1994 to 80% in 2006. Over the same period, the share of the Asia region (excluding Japan) more than doubled, from 5.4% to 13.5%, driven by the R&D spending of U.S.-owned affiliates in China, Singapore, and South Korea. Among individual countries, R&D performed by U.S.-owned affiliates in China and India increased from less than $10 million in each country in 1994 to $804 million and $310 million, respectively, in 2006. The 2006 levels for China and India represented about 3% and 1%, respectively, of total overseas R&D by U.S. MNCs.
The increasing role of services and international collaboration in R&D and innovation is reflected in statistics on trade in R&D services. In 2007, total U.S. exports of research, development, and testing services reached a record $14.7 billion, compared with record imports of $11.4 billion, resulting in a trade surplus of $3.3 billion. Trade within MNCs dominates these statistics—which is not surprising, given the significant role of MNCs in R&D performance.
Rapid changes in the collaborative and global nature of R&D and the increasing role of services and nontechnological innovation call for continuous enhancements in the indicators of these activities and their impact. U.S. federal statistical agencies continue to collaborate domestically and internationally to facilitate improved and comparable data. Ongoing U.S. data development projects featured in this chapter include the new Business R&D and Innovation Survey, the R&D NIPA satellite account, exploratory work on intangibles and innovation accounts, and efforts in the area of research data infrastructure by NSF's Science of Science and Innovation Policy Program.