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Chapter 4. R&D: National Trends and International Comparisons


Affiliate: A company or business enterprise located in one country but owned or controlled (in terms of 10% or more of voting securities or equivalent) by a parent company in another country; may be either incorporated or unincorporated.

Applied research: The objective of applied research is to gain knowledge or understanding to meet a specific, recognized need. In industry, applied research includes investigations to discover new scientific knowledge that has specific commercial objectives with respect to products, processes, or services.

Basic research: The objective of basic research is to gain more comprehensive knowledge or understanding of the subject under study without specific applications in mind. Although basic research may not have specific applications as its goal, it can be directed in fields of present or potential interest. This is often the case with basic research performed by industry or mission-driven federal agencies.

Development: Development is the systematic use of the knowledge or understanding gained from research directed toward the production of useful materials, devices, systems, or methods, including the design and development of prototypes and processes.

Company-funded R&D: R&D paid for with a company's own funds, no matter the location of R&D activity or who performs or conducts the R&D (the company itself or others outside the funding company). Company-funded R&D is also known as R&D expense for certain tax, accounting, and data collection purposes.

EU: Prior to 2004, the European Union (EU) consisted of 15 member nations: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom. In 2004, the membership expanded to include an additional 10 countries: Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. Bulgaria and Romania were added in January 2007, bringing the total of current EU member countries to 27.

Federally funded research and development center (FFRDC): R&D-performing organizations that are exclusively or substantially financed by the federal government either to meet a particular R&D objective or, in some instances, to provide major facilities at universities for research and associated training purposes. Each FFRDC is administered by an industrial firm, a university, or a nonprofit institution.

Foreign affiliate: Company located outside the United States but owned by a U.S. parent company.

Foreign direct investment (FDI): Ownership or control of 10% or more of the voting securities (or equivalent) of a business located outside the home country.

General university fund (GUF): Block grants provided by all levels of government in Europe, Canada, and Japan to the academic sector that can be used to support departmental R&D programs that are not separately budgeted; the U.S. federal government does not provide research support through a GUF equivalent.

Gross domestic product (GDP): The market value of goods and services produced within a country. It is one of the main measures in the NIPAs.

Innovation: The introduction of new or significantly improved products (goods or services), processes, organizational methods, and marketing methods in internal business practices or in the open marketplace (OECD/Eurostat 2005).

Majority-owned affiliate: Company owned or controlled, by more than 50% of the voting securities (or equivalent), by its parent company.

Multinational company (MNC): A parent company and its foreign affiliates.

National income and product accounts (NIPAs): The economic accounts of a country that display the value and composition of national output and the distribution of incomes generated in this production.

Organisation for Economic Co-operation and Development (OECD): An international organization of 34 countries, headquartered in Paris, France. The member countries are Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States. Among its many activities, the OECD compiles social, economic, and science and technology statistics for all member and selected nonmember countries.

Public-private partnership: Collaboration between private or commercial organizations and at least one public or nonprofit organization such as a university, research institute, or government laboratory. Examples include cooperative research and development agreements (CRADAs), industry-university alliances, and science parks.

R&D: Research and development, also called research and experimental development; comprises creative work undertaken on a systematic basis to increase the stock of knowledge—including knowledge of man, culture, and society—and its use to devise new applications (OECD 2002).

R&D intensity: A measure of R&D expenditures relative to size, production, financial, or other characteristic for a given R&D-performing unit (e.g., country, sector, company). Examples include R&D to GDP ratio, company-funded R&D to net sales ratio, and R&D expenditures per employee.

Technology transfer: The process by which technology or knowledge developed in one place or for one purpose is applied and exploited in another place for some other purpose. In the federal setting, technology transfer is the process by which existing knowledge, facilities, or capabilities developed under federal research and development funding are utilized to fulfill public and private needs.

U.S. affiliate: Company located in the United States but owned by a foreign parent.