National Trends in Research and Development Expenditures
- The lack of real
growth in industrial R&D
performance in the 1990s is largely due to the defense drawdown. Federal funding of R&D performed by companies has been falling steadily in both current and constant dollars since the late 1980s. The impact of defense downsizing on federally
funded R&D performed by industry was particularly severe in states such as California and Texas that are heavily dependent on the defense industry. Federal R&D support to firms that perform R&D in those states dropped dramatically between 1989 and
- The defense drawdown has had a multifold impact on federally funded R&D activity. Not only has it engendered restructuring of some industrial and nonprofit defense contractors, but also it has triggered
an ongoing dialogue over the
future mission of Federal laboratories. The role of these facilities in supporting commercially relevant R&D has been expanding. For example, the annual number of new Cooperative Research and Development Agreements increased between 1987 and 1994.
DOD funding priorities have also been affected as evidenced by an increase in financial support for dual-use technologies (technologies with both military and civilian applications).
Industrial research and development
- The most striking recent trend in industrial R&D performance has been the increase in the proportion of total R&D performed by companies classified in nonmanufacturing
industries. Prior to 1983,
nonmanufacturing industries accounted for less than 5 percent of the industry total. That share grew steadily during the ensuing decade so that in 1993, nonmanufacturing firms represented more than 25 percent of all industrial R&D performed in the
- Between 1984 and 1994, there were some significant changes among the 100 largest publicly held R&D-performing companies, although the four leading firms were the same in both 1984 and 1994.
During the decade, the number of
pharmaceutical and computer hardware and software companies among the largest R&D performers rose. In contrast, the number of large defense contractors and chemical and petroleum companies among the largest R&D performers fell.
- The ratio of
company R&D funds to net sales for all R&D-performing manufacturing companies has been fairly stable since the late 1980s, despite a lack of growth in manufacturing companies' R&D financing. In 1993, this ratio stood at 3.1 percent, similar
to that recorded for other recent years. The general stability of the R&D/sales ratio in the 1990s indicates that little change has occurred in the level of importance accorded R&D, relative to other discretionary spending. That is, roughly the same
proportion of companies' income has been devoted to R&D for almost 10 years. At 12.1 percent, the pharmaceutical industry had the highest and only double-digit ratio in 1993.
- Considerable indirect Federal R&D
support is provided to
industry. Between 1981 and 1994, an estimated $24 billion was provided to industry through tax credits on incremental research and experimentation expenditures, an amount equivalent to about 3 percent of direct Federal R&D support during this
period. Most of the credits have been claimed by manufacturing firms, but the nonmanufacturing share has risen from less than 20 percent to about 24 percent of the total.
- The annual number of new joint research
ventures has been growing
fairly steadily for nearly a decade; more than 450 of these efforts were registered under the National Cooperative Research Act between 1985 and 1994. Most of the research conducted by these joint ventures has been process-oriented.
Telecommunications and environmental research appear to be the most predominant focus areas for joint research ventures.
Government Focus by National Objective
Geographic Distribution of Research and Development Spending
Internationalization of Research and Development and Technology
- Industry's use of international research/technology partnerships increased in the early 1990s. Although the growth rate in the total number of known international multifirm R&D alliances may have
tapered off since the late
1980s, such partnerships are still expanding in several high technology areas. Notably, growth is occurring in alliances involving information technologies.
- Substantial R&D investments are being made by U.S.
companies overseas. From 1985
to 1993, the overseas R&D investment of U.S. firms increased three times faster than did the R&D performed domestically; overseas investment accounts for an amount equivalent to more than 10 percent of industry's domestic R&D spending compared
with a 6-percent share in 1985. (For nonmanufacturing industries, overseas R&D represented an amount equivalent to 7 percent of their 1993 performance total, compared with a 0.4-percent share in 1985.) Most of the U.S. R&D performed abroad is
undertaken in Germany and the United Kingdom, but there has been considerable growth of U.S. R&D performed in Asian countries, including Japan, Singapore, and Indonesia.
- Substantial R&D investments are being made by
foreign firms in the
United States. In 1993, foreign companies accounted for an amount equivalent to 15 percent (majority-owned foreign affiliates for 12 percent) of all industrial R&D funding in the United States, compared with a 9-percent share in 1985.
Foreign-funded research was concentrated in the chemicals, pharmaceuticals, and electrical equipment industries in 1993; the majority of funding came from Swiss, German, British, Canadian, and Japanese firms. Moreover, there were about 635
foreign-owned freestanding R&D facilities in the United States in 1994; roughly one-third of these facilities are owned by Japanese companies.