Chapter 3: Science & Egineering Indicators 93

R&D Employment by U.S. Companies in Other Countries

Industrial R& D is becoming increasingly globalized. U.S. companies' expenditures on R& D performed outside the United States rose dramatically during the 1980s (See chapter 4.) A myriad of factors is responsible for the upsurge in R& D spending abroad. Companies are compelled to conduct more R& D outside the United States to compete in rapidly expanding worldwide markets. To obtain or expand overseas sales, it has become increasingly necessary to tailor products to meet specific needs and requirements of foreign customers. In addition, U.S. companies have been acquiring laboratories in other countries at a record pace--especially in Japan, but also in Europe, other Asian countries, and Canada. Foreign workers' competence, technical skills, and affordability are some of the factors influencing the decisions to build and/or acquire existing foreign laboratories.

In 1989 (the most recent year for which data are available), total R& D employment (including scientists, engineers, managers, and other professional and technical employees) by U.S. companies in other countries reached 95,000--7.6 percent higher than the level reported in 1982. (Click here for footnote 3.) (See appendix table 3-5.) Most of these R& D employees--71 percent in 1989--are located in Europe. Germany and the United Kingdom had the highest numbers of U.S. R& D employees--24,000 and 20,000, respectively. (See figure 3-7 and appendix tables 3-5 and 3-6.)

In 1982, 4.3 percent of employees working for U.S. affiliates in Germany were engaged in R& D, the highest proportion of any country; Japan ranked second at 3.8 percent. But U.S. companies' R& D employment in Japan increased more than 150 percent between 1982 and 1989, the highest rate of growth reported for any country. Thus, by 1989, the proportion of U.S. Japanese affiliates' total employment engaged in R& D had risen to 5.9 percent, the highest of any country. (Click here for footnote 4.) The United Kingdom had a reduction (13 percent) in R& D employment by U.S. affiliates between 1982 and 1989.

The leading industry in terms of R& D employment abroad in 1989 was transportation equipment (20,400 employees); it was followed by the chemicals and allied products industry with 18,700 R& D employees. (See figure 3-6 and appendix tables 3-4 and 3-6) The office and computing machines segment of the machinery industry had the largest absolute increase--5,300 employees--in R& D employment in the mid- and late 1980s (84 percent higher than the R& D employment level reported in 1982). In the nonmanufacturing sector, R& D employment in the finance and services industry nearly doubled between 1982 and 1989, rising from 3,600 to almost 7,000 employees.

Several industries had reductions between 1982 and 1989 in R& D employment abroad by U.S. affiliates. The largest decline--5,700 employees--occurred in the electrical equipment industry.

In most industries, R& D employment grew at a faster pace than overall employment by U.S. affiliates. All segments of the chemicals industry and the office and computing machines segment of the machinery industry had the largest increases in this measure of R& D intensity.

Footnote 3:

Data in this section were collected by the Bureau of Economic Analysis in its 1982 and 1989 Benchmark Surveys of U.S. Direct Investment Abroad. Data on R& D employment are collected only in "benchmark" survey years; 1982 and 1989 are the two most recent years for which data are available. For more detailed information about the methodologies and definitions used in conducting these surveys, see BEA (1985 and 1992).

Footnote 4:

According to one study, the primary reason U.S. companies have been establishing laboratories in Japan is to develop products specifically for the Japanese market (SRS 1991).

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