The U.S. R&D system consists of a variety of performers and sources of funding. These include businesses, the federal government, universities and colleges, other government (nonfederal) agencies, and nonprofit organizations. Organizations that perform R&D often receive significant levels of outside funding; those that fund R&D may also be significant performers. This section discusses the current levels and notable recent trends in overall U.S. R&D performance and funding. (Definitions for key terms in this section appear in this chapter’s glossary. The sidebar “Measured and Unmeasured R&D” discusses the main data sources that provide the basis for this analysis. Appendix tables
R&D performed in the United States totaled $424.4 billion (current dollars) in 2011, an increase of $17.7 billion over the previous year (table
The challenging path for U.S. R&D performance over the last several years is more apparent when the R&D expenditure figures are adjusted for inflation. On a constant dollar basis, U.S. total R&D in 2010 was below the 2008 level (table
U.S. total R&D grew by 4.4% in 2011, compared with a 3.9% expansion of GDP that year (table
A consequence of these shifting growth rates is that the R&D intensity of the national economy (the ratio of R&D expenditures to GDP) exhibited a noticeable decline in 2010 and 2011, compared with the earlier years (figure
U.S. expenditures on R&D totaled 2.80% of GDP in 2010 and 2.81% in 2011. Both of these figures are lower than the 2.90% ratio that prevailed in 2009 (figure
Most of the rise of the R&D/GDP ratio over the past several decades has come from the increase of nonfederal spending on R&D, particularly that by the business sector (figure
The National Science Foundation (NSF) tracks the R&D spending patterns of all the major performers in the overall U.S. R&D system: businesses, the intramural R&D activities of federal agencies, federally funded research and development centers (FFRDCs), universities and colleges, and other nonprofit organizations.
In 2011, the business sector continued to be the largest performer of U.S. R&D, conducting $294.1 billion, or 69%, of the national total (table
The business sector’s predominance in the composition of national R&D has long been the case, with its annual share ranging between 68% and 74% over the 20-year period of 1991–2011 (figure
Academia is the second-largest performer of U.S. R&D. Universities and colleges performed $63.1 billion, or 15%, of U.S. R&D in 2011 (table
Over the 20-year period of 1991–2011, the academic sector’s share in U.S. R&D has ranged between 11% and 15% annually. Furthermore, as discussed below, universities and colleges have a special niche in the nation’s R&D system: they performed more than half (55%) of the nation’s basic research in 2011.
R&D performed by the federal government includes the activities of agency intramural laboratories and that of the FFRDCs. Federal intramural R&D performance includes the spending for both agency laboratory R&D and for agency activities to plan and administer intramural and extramural R&D projects. FFRDCs are R&D-performing organizations that are exclusively or substantially financed by the federal government. An FFRDC is operated to provide R&D capability to serve agency mission objectives or, in some cases, to provide major facilities at universities for research and associated training purposes. (There were 40 FFRDCs in 2011; see appendix table
The federal government conducted $49.4 billion, or 12%, of U.S. R&D in 2011 (table
The federal total was up only barely in 2011 (an increase of $0.5 billion over the prior year). Over the 2006–11 period more generally, however, it has increased from $1 billion to $2 billion annually (table
The volume of the federal government’s R&D performance is relatively small compared with that of the U.S. business sector. Even so, the $49.4 billion performance total in 2011 exceeded the total national R&D expenditures of every country except China, Japan, Germany, South Korea, and France.
R&D performed in the United States by nonprofit organizations other than universities and certain FFRDCs was estimated at $17.8 billion in 2011 (table
The sidebar “Location of R&D Performance, by State,” summarizes the leading geographic locations of U.S. R&D performance. For additional R&D indicators at the state level, see chapter 8.
Funds that support the conduct of R&D in the United States come from a variety of sources, including businesses, federal and nonfederal government agencies, academic institutions, and other nonprofit organizations. The mix of funding sources varies by performer.
The business sector is the predominant source of funding for the R&D performed in the United States. In 2011, business sector funding accounted for $267.3 billion, or 63% of the $424.4 billion of total U.S. R&D performance (table
The business sector’s predominant role in the nation’s R&D funding began in the early 1980s, when the support it provided started to exceed 50% of all U.S. R&D funding (figure
The federal government is the second-largest source of overall funding for U.S. R&D. It is a major source for most U.S. performer sectors except private businesses, where the federal role, while not negligible, is substantially overshadowed by the business sector’s own funds.
Funds from the federal government accounted for $125.7 billion, or 30%, of U.S. total R&D in 2011 (table
Federal funding accounted for all of the $31.5 billion of federal intramural R&D performance in 2011 and nearly all of the $17.9 billion of R&D performed by FFRDCs. (Nonfederal support for FFRDC R&D has been around $0.4 billion in recent years, or less than 1% of total support; see appendix table
Federal funding to the business sector accounted for $31.3 billion of business R&D performance in 2011, or 11% of the sector’s R&D total that year (table
The federal government was once the leading sponsor of the nation’s R&D, funding some 67% of all U.S. R&D in 1964 (figure
The balance of R&D funding from other sources is small: $31.4 billion in 2011, or about 7% of all U.S. R&D performance that year. Of this amount, $12.5 billion (3%) was academia’s own institutional funds, all of which remain in the academic sector; $3.8 billion (1%) was from state and local governments, primarily supporting academic research; and $15.1 billion (4%) was from other nonprofit organizations, the majority of which funds this sector’s own R&D. In addition, some funds from the nonprofit sector support academic R&D.
The share of R&D funding from these sources has been gradually increasing over the 2006–11 period (figure
R&D encompasses a wide range of activities: from research yielding fundamental knowledge in the physical, life, and social sciences; to research addressing national defense needs and such critical societal issues as global climate change, energy efficiency, and health care; to the development of platform or general-purpose technologies that can enable the creation and commercial application of new and improved goods and services. The most widely applied classification of these activities characterizes R&D as “basic research,” “applied research,” or “(experimental) development” (OMB 2012b; OECD 2002; NSF 2006). (For definitions of these terms, see this chapter’s glossary.) These categories have been criticized as reinforcing the idea that creating new knowledge and innovation is a linear process beginning with basic research, followed by applied research and development, and ending with the production and diffusion of new technology. However, alternative classifications that involve measureable distinctions and capture major differences in types of R&D have yet to emerge. Despite the recognized limitations of the basic research-applied research-development classification framework, it remains useful in providing indications of differences in the motivation, expected time horizons, outputs, and types of investments associated with R&D projects.
The most recent character-of-work cross-section in NSF’s R&D expenditures and funding data covers 2011. Basic research activities accounted for 18% ($75.0 billion) of the $424.4 billion of total U.S. R&D that year. Applied research was 19% ($82.4 billion); development was 63% ($267.1 billion) (table
Universities and colleges remain the primary performers of U.S. basic research, accounting for 55% of the $75.0 billion in 2011 (table
The federal government continues as the prime source of funding for basic research, accounting for about 55% of all such funding in 2011 (table
In choosing whether to perform basic research, businesses consider various factors, such as the extent of appropriability of results, the commercialization risks involved, and the uncertainties of investment returns over business-acceptable time horizons. Despite the risks and uncertainties involved, many companies believe that company engagement in basic research can help them develop human capital, attract and retain talent, absorb external knowledge, and strengthen innovation capacity. Businesses that invest most heavily in basic research tend to be in industries that are most directly tied to ongoing scientific and technological advances, such as the pharmaceuticals and scientific R&D service industries.
The business sector performed 57% of the $82.4 billion of applied research in 2011 (table
Businesses provided the bulk of funding (53%) for applied research in 2011. The federal government provided 37%. Academia, nonfederal governments, and other nonprofit organizations contributed 4%, 1%, and 5%, respectively.
Industries that perform relatively large amounts of applied research include chemicals and aerospace. Federal funding for applied research is spread broadly across all the performers, with the largest amounts (in 2011) going to universities and colleges, federal intramural labs, the business sector, and FFRDCs (table
The business sector dominates in development, performing 88% of the $267.1 billion that the United States devoted to development in 2011 (table
The business sector provided about three-quarters (78%) of development funding ($208.3 billion) in 2011, nearly all of it in support of development activities by businesses (table