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Chapter 4. Research and Development: National Trends and International Linkages

Location of R&D Performance

More than half of all U.S. R&D is performed in only a few states.[6] Nonetheless, patterns of expenditures for R&D activities vary among the top R&D-performing states. (For a broader range of indicators on state-level S&E activities, see chapter 8.)

Distribution of R&D Expenditures Among States

In 2007, the 10 states with the greatest R&D expenditure levels accounted for about 64% of U.S. R&D expenditures that can be allocated to the states. The top 20 states accounted for nearly 85% of the R&D total; the 20 lowest-ranking states, around 5%. California alone represented 22% of U.S. R&D, exceeding the next-highest state, Massachusetts, by more than three times. Appendix table 4-15 provides 2007 statistics on R&D performers and funders for all the states.

To some degree, state variations in the level of R&D expenditures reflect differences in economic scale. Reporting a state's R&D expenditures as a fraction of its GDP adjusts for these differences and is an indicator of R&D intensity at the state level.

States with the highest R&D/GDP ratios in 2007 included New Mexico, Massachusetts, and Maryland (table 4-3 ). New Mexico is the location of several major government research facilities. Massachusetts benefits from both leading research universities and thriving high-technology industries. Maryland is the site of many government research facilities and growing research universities. California ranks seventh in R&D intensity. See appendix table 4-16 for a complete list of states and their corresponding R&D intensities.

Sector Distribution of R&D Performance by State

The proportion of R&D performed in each of the major R&D-performing sectors (business, universities and colleges, federal intramural facilities and FFRDCs) varies across states. States that lead in total R&D tend to be well represented in each of these sectors (table 4-3 ).

In 2007, business-sector R&D accounted for about 74% of the U.S. R&D total that could be allocated to specific states. Of the top 10 states in total R&D performance, 9 are also in the top 10 in industry R&D. Connecticut, 10th in business-sector R&D and home to substantial pharmaceutical R&D activity, surpasses Maryland in the business R&D ranking.

University-performed R&D accounts for 14% of the U.S. total, and it also closely follows state total R&D performance. Among the top 10 states in total R&D, only Michigan, New Jersey, and Washington are not also among the university R&D top 10, being replaced by North Carolina, Ohio, and Florida.

Representing about 11% of the state-distributed U.S. total, federal R&D performance (both intramural and FFRDC) is more concentrated geographically than performance in other sectors—and the relationship between its geographical distribution and that of total R&D is less significant. The top four states (Maryland, California, New Mexico, and Virginia) and the District of Columbia represent 64% of all federal R&D performance.[7] This figure rises to 78% when the other five top 10 states (Massachusetts, Tennessee, Washington, Illinois, and Florida) are included.

Federal R&D accounts for 82% of all R&D in New Mexico, home of the nation's two largest FFRDCs (Los Alamos and Sandia National Laboratories). The high figures for Maryland (54%), Virginia (38%), and the District of Columbia (74%) reflect the concentration of federal facilities and administrative offices in the national capital area. The share for Tennessee (32%) reflects the presence of a large federal facility, Oak Ridge National Laboratory.

In California, Massachusetts, Washington, and Illinois, federal R&D performance accounts for no more than 6% to 7% of the state R&D totals, even though each state is among the top 10 in federal performance. The federal R&D share in Florida was 13% in 2007.

Business R&D in Top States

During 2007, companies in the 10 states with the highest business R&D performance reported aggregate R&D expenditures of $186.0 billion and accounted for 69% of the business R&D performed in the United States. Companies in California alone accounted for 24% of the nation's business R&D. The types of companies that carry out R&D vary considerably among these 10 leading states (table 4-4 ), reflecting regional specialization or clusters of business activity. For example, the automotive manufacturing industry accounted for 75% of Michigan's business R&D in 2007, although it accounted for only 6% of the nation's total business R&D.

The computer and electronic product manufacturing industries performed 22% of the nation's total business R&D, but the shares of this performance were larger in Massachusetts (45%), Illinois (33%), California (33%), and Texas (32%). These states have clearly defined regional centers of high-technology research and manufacturing, including Cambridge and Route 128 in Massachusetts; Champaign County, Illinois; Silicon Valley, California; and the Silicon Hills of Austin. About two-thirds of R&D performed in the United States by computer and electronic product companies in 2007 was located in these four states and accounted for 14% of all business R&D nationwide (table 4-4 ; appendix table 4-11 ).

R&D performed by chemical manufacturing companies remains prominent in New Jersey, Connecticut, and Pennsylvania, all home to the pharmaceuticals and the chemicals industries. According to the American Chemistry Council (ACC 2009), together these states are host to more than 2,000 chemical manufacturing establishments, an increase of about 500 since 2005, and rank among the top 18 in chemicals industry employment. In 2007, chemical manufacturers accounted for 63% of New Jersey's business R&D, 59% of Connecticut's, and 55% of Pennsylvania's (table 4-4 ). These three states represented more than 41% of the nation's R&D in this sector.

The R&D and related-services sector, which consists largely of biotechnology companies, contract research organizations, and early-stage technology firms, is also geographically concentrated, with California, Massachusetts, and New Jersey accounting for more than 42% of R&D. The companies in this sector maintain strong ties to the academic sector and are often located near large research universities (Stuart and Sorenson 2003).

Nationally, small companies (those that have from 5 to 499 employees[8]) performed 19% of total U.S. business R&D in 2007 (appendix table 4-11 ). Among the top 10 business R&D-performing states, New York and California had the highest totals of small companies performing business R&D, with 23% and 20%, respectively, in each state. Small companies in these two states performed 6% of the nation's total business R&D in 2007 (table 4-4 ).


[6] The latest data available on the distribution of U.S. R&D performance by state are for 2007. All U.S. R&D expenditures that year were estimated at $372.5 billion. Of this total, $359.7 billion could be attributed to expenditures in the 50 states and the District of Columbia. The state-attributed totals differ from the U.S. total for a number of reasons: some industry R&D expenditures cannot be allocated to any of the 50 states or the District of Columbia because respondents did not answer the question related to location; nonfederal sources of nonprofit R&D expenditures (an estimated $8.4 billion in 2007) could not be allocated by state; state-level university R&D data have not been adjusted for double-counting of R&D passed from one academic institution to another; state agency intramural R&D (collected by NSF starting in 2006 [see NSF/SRS 2008a]) are not included in the U.S. total; and state-level university and federal R&D performance data are not converted from fiscal to calendar years.
[7] 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 for the District of Columbia.
[8] For most manufacturing industries, the Small Business Administration has established a size threshold of 500 employees to define small companies. The NSF Survey of Industrial Research and Development does not sample companies with fewer than five employees because of concerns about respondent burden.

Science and Engineering Indicators 2010   Arlington, VA (NSB 10-01) | January 2010