by Brandon Shackelford and John Jankowski[1]
Information and communications technologies (ICTs) have grown to be pervasive throughout the economy, and companies that develop these technologies account for a large share of business R&D expenditures in the United States. According to the Business R&D and Innovation Survey (BRDIS), of the $323 billion of research and development performed by companies in the United States in 2013, ICT industries accounted for 41% ($133 billion) (table 1). For perspective, R&D expenditures of ICT industries is 2.5 times larger than the pharmaceutical manufacturing industry, the single largest industry in terms of R&D expenditures in the United States.[2]
i = more than 50% of value imputed. ICT = information and communications technologies; NAICS = North American Industry Classification System; nec = not elsewhere classified. a Includes a small amount of non-ICT R&D from the motion picture and sound recording industries (NAICS 512) and broadcasting industries (NAICS 515). NOTES: Detail may not add to total because of rounding. Statistics are representative of companies located in the United States that performed or funded R&D. Industry classification was based on dominant business code for domestic R&D performance, where available. For companies that did not report business codes, the classification used for sampling was assigned. Excludes data for federally funded research and development centers. SOURCE: National Science Foundation, National Center for Science and Engineering Statistics, Business R&D and Innovation Survey, 2013. |
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All R&D | Paid for by the company |
Paid for by others |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Industry and NAICS code | |||||||||||||||||
All industries, 21–33, 42–81 | 322,528 | 264,913 | 57,615 | ||||||||||||||
ICT industries, 334, 51 (part), 5415 | 133,339 | 121,169 | 12,170 | ||||||||||||||
ICT manufacturing (computer and electronic products), 334 | 67,205 | 57,364 | 9,841 | ||||||||||||||
Communications equipment, 3342 | 15,658 | 13,693 | 1,964 | i | |||||||||||||
Semiconductor and other electronic components, 3344 | 30,800 | 28,576 | 2,224 | ||||||||||||||
Navigational, measuring, electromedical, and control instruments, 3345 | 14,478 | 9,001 | 5,477 | ||||||||||||||
Other computer and electronic products, other 334 | 6,269 | 6,093 | 176 | ||||||||||||||
ICT services, 51 (part), 5415 | 66,134 | 63,805 | 2,329 | i | |||||||||||||
Software publishers, 5112 | 35,333 | 34,296 | 1,037 | ||||||||||||||
Telecommunications, 517 | 3,041 | 3,037 | 4 | i | |||||||||||||
Data processing, hosting, and related services, 518 | 6,446 | 6,333 | 113 | ||||||||||||||
Other ICT information, other 51a | 12,046 | 12,032 | 14 | ||||||||||||||
Computer systems design and related services, 5415 | 9,268 | 8,107 | i | 1,161 | i | ||||||||||||
Non-ICT industries | 189,189 | 143,743 | 45,446 | ||||||||||||||
Food manufacturing, 311 | 5,028 | 4,801 | 227 | ||||||||||||||
Pharmaceuticals and medicines, 3254 | 52,426 | 45,891 | 6,534 | ||||||||||||||
Automobiles, bodies, trailers, and parts, 3361–63 | 16,729 | 14,081 | 2,647 | ||||||||||||||
Aerospace products and parts, 3364 | 27,114 | 10,042 | 17,072 | i | |||||||||||||
Medical equipment and supplies, 3391 | 10,954 | 10,638 | 317 | ||||||||||||||
Manufacturing nec, other 31–33 | 42,020 | 38,353 | 3,668 | ||||||||||||||
Nonmanufacturing nec, other 21–23, 42–81 | 34,918 | 19,937 | 14,981 | ||||||||||||||
For this InfoBrief the ICT sector is defined as the sum of ICT manufacturing, which comprises North American Industrial Classification System (NAICS) 334 (computer and electronic products), and ICT services, which comprises NAICS 5112 (software publishers), NAICS 517 (telecommunications), NAICS 518 (data processing, hosting, and related services), NAICS 5415 (computer systems design and related services), and the remaining industries within NAICS 51 (information) other than traditional paper publishers. This definition is generally comparable to that used by the Organization for Economic Cooperation and Development (OECD), which defines the ICT sector using the International Standard Industrial Classification (ISIC) (OECD 2011).[3]
These groupings are a useful proxy, but they exclude some companies and industries that might otherwise be considered ICT companies. For example, companies that provide financial services or travel services via the Internet are classified with the more traditional companies providing those services in the NAICS methodology.
The ICT sector's share of total business R&D performance is higher in the United States than in most other economies. Of the 36 economies with business R&D data tracked by the OECD, in only four (Taiwan, South Korea, Finland, and Israel) do ICT industries account for a larger share of business R&D than in the United States (figure 1). In both Taiwan and South Korea, ICT manufacturing industries account for over half of each economy's business R&D performance. In Israel, ICT services industries are estimated to have performed over twice as much R&D as ICT manufacturing industries. Other economies where R&D in ICT services exceeded that of ICT manufacturing include Ireland, Canada, and the United Kingdom. In the United States, the ICT manufacturing and ICT services industries performed roughly the same amount of R&D, accounting for 20.8% and 20.5%, respectively, of business R&D performance in 2013. ICT industries are estimated to have accounted for less than 20% of China's business R&D in 2013.[4]
The preceding analysis comparing international R&D expenditures included business R&D performance that was paid for by companies out of their own budgets as well as by companies' customers and business partners. In the United States, a large share of the R&D paid for by companies' customers and business partners is funded by the federal government and is concentrated in defense-related industries, such as aerospace manufacturing. This explains why the ICT share of business R&D that was paid for by sources other than the performing companies was relatively low, at 21%, in 2013 (table 1). In terms of only the R&D that is both paid for and performed by the same companies, the ICT sector accounted for 46% of the $265 billion of R&D performed in the United States in 2013. This share has grown from 42% in 2008 (figure 2). Growth in ICT R&D has been most evident in the ICT services industries, which accounted for 20% of the $233 billion of R&D paid for and performed by companies in the United States in 2008 and 24% of the $265 billion of R&D in 2013. The R&D performed by the ICT services industries grew from an estimated $45.3 billion in 2008 to $63.8 billion in 2013.
BRDIS asks companies to report the various types of costs that make up their R&D expenditures. These cost categories include labor costs (which include salaries and wages, fringe benefits, and stock-based compensation of employees, as well as temporary staffing costs, including on-site consultants), extramural R&D (the amount the company pays other parties, such as contract research organizations, to perform R&D), and other intramural costs (which include, for example, materials and supplies, rent, expensed equipment, and depreciation).
ICT industries have some of the most labor-intensive R&D in the United States (figure 3). Labor costs accounted for 76% and 67% of domestic R&D expenditures paid for by ICT services and ICT manufacturing industries, respectively, in 2013. The comparable statistic for the entire U.S. business sector was 60%. In contrast to the ICT industries, the aerospace products and parts industry and the pharmaceuticals and medicine industry are each estimated to spend less than 40% of their domestic R&D expenditures on labor costs. These two industries also spend relatively more than ICT industries on extramural R&D.
Within the ICT sector, the computer systems design and related services industry (NAICS 5415) is estimated to have the most labor-intensive R&D, with labor costs accounting for 83% of its domestic R&D expenditures (figure 3). Labor costs account for 80% of R&D in the "other ICT information" industry, which is dominated by companies in the Internet publishing and broadcasting and Web search portals industry (NAICS 519130). The communications equipment industry (NAICS 3342), which includes makers of line-based communications equipment such as routers, as well as makers of wireless communications equipment has labor costs estimated as almost two thirds (65%) of its domestic R&D expenditures in 2013. Nonetheless, the communications equipment industry is one of the least labor-intensive ICT industries.
Software is no longer the sole province of traditional ICT companies and is of growing importance to a wide range of industries (Kirkpatrick 2011). BRDIS data on the technology focus of companies' R&D confirm that software R&D—R&D for software products or software embedded in other projects or products—is performed by companies in a wide range of industries. Indeed, the ICT industries account for less than half the total number of companies estimated to perform software R&D in 2013 (table 2).[5]
i = > 50% of the estimate is a combination of imputation and reweighting to account for nonresponse. NAICS = North American Industry Classification System; nec = not elsewhere classified. a Statistics for number of companies are weighted estimates based on only companies that reported to the survey. No adjustment is made to account for unit nonresponse. NOTES: Software R&D includes R&D for software products and for software embedded in other projects or products. Detail may not add to total because of rounding. Industry classification based on dominant business code for domestic R&D performance where available. For companies that did not report business codes, classification used for sampling was assigned. SOURCE: National Science Foundation, National Center for Science and Engineering Statistics, and U.S. Census Bureau, Business R&D and Innovation Survey, 2013. |
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Total domestic R&D | Software R&D | ||||||||||||||||
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Industry and NAICS code | Companiesa (number) |
Amount | Companiesa (number) |
Companiesa (percent) |
Amount | Percent of domestic R&D |
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All industries, 21–33, 42–81 | 65,139 | 264,913 | 31,681 | 49 | 87,245 | 33 | |||||||||||
Manufacturing industries, 31–33 | 27,655 | 181,170 | 15,241 | 55 | 24,956 | 14 | |||||||||||
Pharmaceuticals and medicines, 3254 | 906 | 45,891 | 421 | 46 | 401 | 1 | |||||||||||
Semiconductor machinery, 333295 | 162 | 3,097 | 154 | 95 | 468 | 15 | |||||||||||
Computer and electronic products, 334 | 3,944 | 57,364 | 3,552 | 90 | 19,624 | 34 | |||||||||||
Semiconductor and other electronic components, 3344 | 1,305 | 28,576 | 1,201 | 92 | 6,954 | 24 | |||||||||||
Other computer and electronic products, other 334 | 2,640 | 28,788 | 2,352 | 89 | 12,670 | 44 | |||||||||||
Electrical equipment, appliances, and components, 335 | 1,143 | 3,660 | 1,042 | 91 | 694 | i | 19 | ||||||||||
Transportation equipment, 336 | 1,948 | 25,165 | 1,156 | 59 | 1,156 | 5 | |||||||||||
Automobiles, bodies, trailers, and parts, 3361–63 | 1,212 | 14,081 | 906 | 75 | 419 | 3 | |||||||||||
Other transportation, other 336 | 736 | 11,084 | 250 | 34 | 736 | 7 | |||||||||||
Other manufacturing nec, other 31–33 | 19,558 | 45,993 | 8,917 | 46 | 2,614 | i | 6 | ||||||||||
Nonmanufacturing industries, 21–23, 42–81 | 37,486 | 83,742 | 16,440 | 44 | 62,289 | 74 | |||||||||||
Mining, extraction, and support activities, 21 | 246 | 3,602 | 149 | 61 | 330 | 9 | |||||||||||
Information, 51 | 3,890 | 56,039 | 3,020 | 78 | 47,791 | 85 | |||||||||||
Publishing, 511 | 2,055 | 34,637 | 1,611 | 78 | 29,562 | 85 | |||||||||||
Telecommunications, 517 | 231 | 3,037 | 130 | 56 | 2,133 | i | 70 | ||||||||||
Data processing, hosting, and related services, 518 | 1,015 | 6,333 | 969 | 95 | 5,327 | 84 | |||||||||||
Other information, other 51 | 589 | 12,032 | 310 | 53 | 10,769 | 90 | |||||||||||
Professional, scientific, and technical services, 54 | 12,693 | 15,617 | i | 10,041 | 79 | 8,993 | i | 58 | |||||||||
Architectural, engineering, and related services, 5413 | 2,074 | 1,261 | 1,753 | 85 | 131 | i | 10 | ||||||||||
Scientific research and development services, 5417 | 1,320 | 2,838 | 615 | 47 | 203 | i | 7 | ||||||||||
Other professional, scientific, and technical services, other 54 | 9,300 | 11,518 | i | 7,673 | 83 | 8,659 | i | 75 | |||||||||
Other nonmanufacturing nec, other 21–23, 42–81 | 20,656 | 8,484 | 3,230 | 16 | 5,175 | 61 |
Almost half (49%) of the companies performing their own R&D in the United States are estimated to have performed software R&D, and this software R&D is estimated to account for 33% of all domestic R&D paid for and performed by companies in 2013 (table 2). For the nonmanufacturing industries, it is estimated to account for 74% of company R&D. Even after excluding the information industry (NAICS 51), the remaining nonmanufacturing industries are estimated to devote about half (52%) of their domestic R&D to software R&D.
As a share of total R&D, software R&D is much smaller for the manufacturing industries, accounting for 14% of R&D paid for and performed by companies. Within the ICT manufacturing industries, software R&D is relatively smaller in the semiconductor manufacturing industry (NAICS 3344) (24% of domestic R&D performance) than in the other ICT manufacturing industries (44%). The relatively low amount of software R&D (3% of U.S. R&D performance) estimated in the automobile manufacturing industries (NAICS 3361–63) at first seems at odds with the increasing integration of ICT in automobiles, but it is perhaps indicative of these industries' use of software developed by third parties in their products (Newcomb 2012), and software R&D may be captured in part in their extramural R&D funding totals (figure 3).
The sample for BRDIS was selected to represent all for-profit, nonfarm companies that are publicly or privately held and have five or more employees in the United States. Estimates produced from the survey and presented in this InfoBrief are restricted to companies that perform or fund R&D, either domestically or abroad. Because the statistics from the survey are based on a sample, they are subject to both sampling and nonsampling errors (see technical notes in the survey's detailed statistical tables at http://www.nsf.gov/statistics/industry/).
In this InfoBrief, money amounts are expressed in current U.S. dollars and are not adjusted for inflation. Company is defined as a business organization located in the United States, either U.S. owned or a U.S. affiliate of a foreign parent, of one or more establishments under common ownership or control that performs or funds R&D.
For 2013, a total of 45,089 companies were sampled, representing 1,971,959 companies. The actual numbers of reporting units in the sample that remained within the scope of the survey between sample selection and tabulation were 41,588 for 2013. Reasons for the reduced counts include mergers, acquisitions, and instances where companies had fewer than five paid employees in the United States or had gone out of business in the interim. Of these in-scope reporting units, 73.6% met the 2013 survey response criteria. Industry classification was based on the dominant business activity for domestic R&D performance where available. For reporting units that did not report business activity codes for R&D, the classification used for sampling was assigned.
The full set of detailed tables from this survey will be available in the report Business R&D and Innovation: 2013 (http://www.nsf.gov/statistics/industry/). Individual detailed tables and tables with relative standard errors and imputation rates from the 2013 survey will be available in advance of the full report. For further information concerning the BRDIS survey, contact Raymond M. Wolfe at rwolfe@nsf.gov; 703-292-7789.
[1] John E. Jankowski, Research and Development Statistics Program, National Center for Science and Engineering Statistics, National Science Foundation, 4201 Wilson Boulevard, Suite 965, Arlington, VA 22230. Brandon Shackelford is the owner of Twin Ravens Consulting, Austin, TX.
[2] Not all R&D performed by businesses classified in ICT industries is for developing information and communications technologies. Also, some ICT-related R&D is undertaken within businesses that are not part of the ICT sector.
[3] The corresponding ISIC-based definition for the ICT sector would be the sum of ICT manufacturing, which comprises ISIC 26 (manufacture of computer, electronic and optical products), and ICT services, which comprises ISIC 582 (software publishing), ISIC 61 (telecommunications), and ISIC 62–63 (IT and other information services). The OECD ICT sector definition also includes ISIC 4651–2 (wholesale of ICT equipment, software and parts) and ISIC 951–2 (repair of computers and communication equipment), neither of which contribute much to national R&D estimates. (See OECD 2011, Annex 7.A1.)
[4] ICT services are not broken out in China's data after 2009, but total services accounted for 6.3% of China's business R&D total in 2012.
[5] Statistics for number of companies are based only on companies in the United States that reported to the survey. These statistics do not include an adjustment to the weight to account for unit nonresponse.
Kirkpatrick D. 2011. Now every company is a software company. Forbes Techonomy. 30 November. Available at http://www.forbes.com/sites/techonomy/2011/11/30/now-every-company-is-a-software-company/.
Newcomb D. 2012. The next big OS war is in your dashboard. Wired. 3 December. Available at http://www.wired.com/2012/12/automotive-os-war/all/.
Organization for Economic Cooperation and Development (OECD). 2011. OECD Guide to Measuring the Information Society 2011. OECD Publishing. Available at http://www.oecd.org/sti/ieconomy/oecdguidetomeasuringtheinformationsociety2011.htm.