Total U.S. business R&D performance reached a record $294.1 billion in 2011, a 5% increase from 2010 according to statistics from the Business R&D and Innovation Survey (BRDIS). However, measured in inflation-adjusted dollars, the 2011 business R&D performance of $259.4 billion (up 3% from 2010) is still below the 2008 peak of $267.7 billion, at the beginning of the most recent recession. Over the past two decades, constant dollar U.S. business R&D performance follows peaks and troughs timed close to business cycle changes, short-term up-and-down movements in constant dollar GDP (figure
The company size distribution of U.S. business R&D performance has changed little since 2008. In 2011, large companies (those with 25,000 domestic employees or more) performed 35% of U.S. business R&D. Companies with 5 to 499 employees performed about 20% (appendix table
Business and other nonfederal funding sources increased 5.1% in constant dollars in 2011, the first such increase since 2008. On the other hand, federally funded business R&D as reported by performers dropped 10% in constant dollars in 2011 after a 15% decline in 2010, following increases in 2008 and 2009.
Trends in U.S. business R&D performance are driven by five industries (called “top industries” below) that together accounted for $239.0 billion, or 81%, of domestic business R&D performance in 2011: computer and electronic product manufacturing, chemicals manufacturing (including pharmaceuticals), transportation equipment (including aerospace), information (including software publishers), and professional, scientific, and technical (PST) services.
Manufacturing industries historically account for the largest share of U.S. business R&D performance (68% in 2011). However, between 2010 and 2011, nonmanufacturing industries’ R&D grew faster (12.7%) than manufacturing R&D (2.4%). Indeed, the largest growth in domestic R&D performance among the top five industries in 2011 occurred in information services (13.6%) and PST services (13.4%). Computer and electronic product manufacturing increased by 4.7%. The other two top industries posted drops in R&D expenditures: chemicals (4.7% decrease, including 7.0% decline in pharmaceuticals) and transportation equipment (4.7% decrease) (figure
Overall, domestic R&D performance bounced back by 5.4% from 2010 to 2011 after declining 2.9% during the recession years from 2008 to 2009. Company and other nonfederal funding sources increased 7.4% in 2010–11 after declining 4.5% in 2008–09. In contrast, federal sources decreased 8.5% in 2010–11.
At the same time, federal funding accounted for only 10.6% of domestic business R&D in 2011, down from 12.3% in 2010. This funding source is also highly concentrated in some industries, based on 2010 detailed statistics. The highest shares of federal funding for domestic business R&D are in transportation equipment manufacturing (47%), which includes aerospace (63%); in PST services (20.3%), which includes scientific R&D services and architectural, engineering, and related services; and in computer and electronic products manufacturing (9.9%) (figure
Apart from direct funding for R&D in the form of contracts and grants to businesses, the U.S. government offers indirect R&D support via fiscal incentives such as tax credits (see sidebar, “Federal R&E Tax Credit”).
Funding for domestic business R&D may be classified by the geographic location of funding sources, by ownership, and by a combination of these categories according to new details available from BRDIS. Most domestic R&D is funded from domestic sources (regardless of ownership) and by company-owned units (regardless of their location). In 2011, $238.8 billion (81.2% of $294.1 billion of domestic R&D performance) was funded internally (company-owned units regardless of location), including $3.3 billion by subsidiaries located abroad (table
More generally, the $294.1 billion in 2011 U.S. business R&D performance can be partitioned in four major funding and location sources (table
The remainder, $15.5 billion (5%), was funded by sources from abroad as shown in the right panels of figure
The top five industries received $12.4 billion, or 80%, of total funding from abroad in 2011, about the same share of these industries in total domestic performance (81%). However, chemicals (including its pharmaceuticals and medicines component) and PST services (including its scientific R&D services component) accounted for a larger share in funding from abroad compared with their share in total domestic R&D performance.
At the same time, sources of funding from abroad differ considerably for pharmaceuticals and scientific R&D services. Over half ($1.0 billion or 55%) of funding from abroad for scientific R&D services companies came from foreign independent companies, with the balance coming almost exclusively from foreign parents ($809 million or 43%) (table
Data at the industry level presented above are obtained by classifying a company’s total R&D into a single industry, even if R&D activities occur in multiple lines of business. For example, if a company has $100 million in R&D expenses—$80 million in pharmaceuticals and $20 million in medical devices—the total R&D expense of $100 million will be assigned to the pharmaceuticals industry because this is the largest component of its R&D expense (Shackelford 2012). In addition to collecting data by the main industry classification, BRDIS collects data by lines of business most closely related to R&D expense. Codes for line of business are collected at a rather fine level of detail, as indicated in appendix table