Science and Engineering Indicators 2014

Chapter 6. Industry, Technology, and the Global Marketplace

Knowledge- and Technology-Intensive Industries in the World Economy

Knowledge- and technology-intensive (KTI) industries have been a major and growing part of the global economy. The United States has the highest KTI share of gross domestic product (GDP) of any large economy.

• Ten KTI industries, consisting of five service industries and five high-technology (HT) manufacturing industries, represented 27% of world GDP in 2012. Among the KTI industries, the commercial knowledge-intensive (KI) services—business, financial, and communications—have the highest share (16% of GDP). The public KI services, education and health, have a 9% share. The five HT manufacturing industries—aircraft and spacecraft; communications and semiconductors; computers; testing, measuring, and control instruments; and pharmaceuticals—have a 2% share.
• The U.S. economy had the highest concentration of KTI industries among major economies (40% of U.S. GDP). The KTI concentrations for the European Union (EU) and Japan were considerably lower at 29%–30%.
• Major developing countries have lower KTI shares than developed countries. The KTI shares in Brazil, China, and India were 19%–21%. Turkey had the highest KTI share (23%) among larger developing countries.

Productivity growth in the world's developing countries since 2000 has been much faster than in developed countries.

• Labor productivity growth in developing countries accelerated from 2% in the early 2000s to 6% in the mid-2000s before falling to 4% in the latter half of the 2000s. China and India led productivity growth of developing countries, growing 10% and 6%, respectively, between 2003 and 2012.
• Labor productivity growth in the United States and other developed countries slowed from 2% in the early 2000s to negative growth during the global recession before rising to 1%.

Worldwide Distribution of Knowledge- and Technology-Intensive Industries

The United States is the largest global provider of commercial KI services and HT manufactured goods.

• The United States has the largest global share (32%) in commercial KI services industries (business, financial, and communications). The EU is the second-largest global provider (23%).
• China's commercial KI services industries have been growing rapidly, but from a low base. China's global share reached 8% in 2012 to tie with Japan as the third-largest global provider.
• In HT manufacturing, the United States has a global share of 27%, closely followed by China. China's HT industries have grown exponentially from a global share of 4% in 2000 to 24% in 2012.

U.S. KTI industries generally fared better than those of the developed economies in the EU and Japan in the aftermath of the recession.

• The U.S. commercial KI services industries did better than their EU competitors following the 2008–09 global recession. U.S. value-added output in these industries grew 9% in 2010–12, whereas value added in the EU was stagnant.
• U.S. HT manufacturing industries fared better than those in the EU or Japan following the 2008–09 global recession. U.S. value-added output grew 2% in 2010–12, while value-added output of the EU and of Japan remained flat or declined.

U.S. KTI industries are a major part of the U.S. economy, and they have mostly recovered from the recession.

• U.S. commercial KI services industries employ one of every seven U.S workers (18 million) and pay higher-than-average wages. These industries have a higher-than-average share of skilled workers and fund about one-fourth of U.S. business R&D.
• Although U.S. HT manufacturing industries are much smaller than commercial KI services, they fund nearly one-half of U.S. business R&D. These industries employ 1.8 million workers and have an even higher share of highly skilled workers than commercial KI services.
• The value-added outputs of U.S. commercial KI services and HT manufacturing in 2012 are higher than their levels prior to the recession. However, employment in U.S. commercial KI services and HT manufacturing industries remains below its pre-recession levels.

Trade and Other Globalization Indicators

The EU is the world's largest exporter of commercial KI services, followed by the United States. Both the EU and the United States have substantial surpluses.

• The EU's commercial KI services exports more than doubled to reach $432 billion between 2004 and 2011, with its surplus widening to $127 billion.
• U.S. exports of commercial KI services grew as fast as the EU's to reach $235 billion between 2004 and 2011; the U.S trade surplus climbed from $25 billion to $52 billion.
• Commercial KI services exports of developing countries grew much faster than developed countries, but from a much lower base. In these services, China and India have the largest export shares (4%–5% each) among developing countries. India's trade surplus widened from $11 billion in 2004 to $51 billion in 2011.

In HT manufactured goods, China is the world's largest exporter, followed by the EU and the United States.

• China, the world's second-largest manufacturer of electronic products, is the world's largest exporter of HT products, with a surplus of over $200 billion. China imports components and inputs from the United States, the EU, and Asia for final assembly in China.
• The U.S. share of global HT exports remained stable for much of the 2000s. However, the U.S. trade deficit in HT products widened from $50 billion to $130 billion during this period.
• The U.S. trade deficit in HT goods is almost entirely due to information and communications technologies (ICT) products—communications, computers, and semiconductors. In other HT manufactured goods, notably aircraft and spacecraft, the United States has a substantial trade surplus.

A separate measure of U.S. trade in advanced technology products (ATP) shows patterns similar to those found in internationally comparable HT product trade data.

• In 2012, the United States exported $305 billion of ATP and imported $396 billion of ATP products. The $92 billion deficit of ATP trade is largely due to trade in ICT products, primarily with China. The United States has a substantial surplus in trade of aerospace products.

U.S. overseas investment in foreign KTI industries exceeds foreign investment in U.S. KTI industries.

• In the commercial KI services industries, the stock of U.S. overseas investment was $1 trillion in 2012. The EU is the largest recipient, followed by Asia, which in these data includes Australia and New Zealand. The stock of foreign direct investment in the United States in these industries was $600 billion, with the EU as the largest investor.
• In computer and electronics manufacturing, which includes three HT manufacturing industries, the stock of U.S. overseas investment was $102 billion. Asia, which in these data includes Australia and New Zealand, and the EU are the two largest destinations. The stock of foreign direct investment in these industries in the United States was $61 billion, with the EU and Asia and the Pacific regions being the two largest investors.

Innovation-Related Indicators of the United States and Other Major Economies

U.S. firms in commercial KTI industries reported much higher incidences of innovation than firms in other industries.

• Five HT manufacturing industries—aircraft; computers; communications; testing, measuring, and control instruments; and pharmaceuticals—reported rates of product innovation that were at least double the U.S. manufacturing sector average.
• In the U.S. nonmanufacturing sector, software firms were the leading innovators, with 69% of companies reporting the introduction of a new product or service compared to the 9% average for all nonmanufacturing companies. Innovation is two to three times higher than the nonmanufacturing average in computer systems design; data processing, hosting, and related services; and scientific R&D services.

The U.S. Patent and Trademark Office (USPTO) granted U.S. inventors 127,000 patents in 2012, not quite half of all USPTO patents granted worldwide.

• The share of patents granted by USPTO to U.S. inventors declined from 53% in 2003 to 48% in 2012.
• The United States has a higher concentration relative to other major economies in USPTO patenting activity in several advanced and science-based technologies, including ICT, automation, biotechnology, and pharmaceuticals.

The United States has a similar share to the EU and Japan in triadic patents, which are considered an indicator of higher-value inventions.

• Triadic patents are patents sought for protection in the world's largest markets—the United States, the EU, and Japan.
• The U.S. share of triadic patents has remained constant during the 2000s at 27%–30%.

Investment and Innovation in Clean Energy Technologies

More of the world's investment in clean energy technologies occurred in developing countries than in developed countries in 2012. More commercial investment in clean energy technologies occurred in China than in any other country.

• Clean energy investment in China, largely in solar and wind technologies, rose exponentially over the last decade to reach $61 billion in 2012.
• Commercial investment in clean energy was between $27 billion and $29 billion in the United States and the EU in 2012. Commercial investment in the EU is down sharply due to the EU's economic difficulties and cutbacks in government support for clean energy production and investment.
• Worldwide venture capital investment in clean energy technologies was estimated at $4 billion in 2012. The United States is the largest recipient, accounting for more than 80% of all investment. Three technologies—energy smart and efficiency, solar, and biofuels—dominate venture capital investment.
• Worldwide venture capital investment rose rapidly, more than quadrupling from $1 billion to $4 billion from 2004 to 2012.

The United States and Japan were the largest investors in 2012 public research, development, and demonstration (RD&D) for clean energy technologies.

• Expenditures of most OECD countries on RD&D investment for clean energy and nuclear technologies were an estimated $13 billion in 2010.
• U.S. public RD&D investment in clean energy technologies jumped from $1.5 billion in 2004 to spike at $7.0 billion in 2009 due to one-time stimulus funding under the American Recovery and Reinvestment Act of 2009. In 2011, U.S. public RD&D dropped to $4.0 billion, still $2.5 billion higher than its level in 2004.