Chapter 4 | Research and Development: U.S. Trends and International Comparisons

Recent Trends in U.S. R&D Performance

1 In this chapter, dollars adjusted for inflation (i.e., constant dollars) are based on the GDP implicit price deflator (currently in 2009 dollars) as published by the Department of Commerce, BEA (https://www.bea.gov/iTable/index_nipa.cfm). A 1953–2015 time series for this deflator appears in Appendix Table 4-1. Note that GDP deflators are calculated on an economy-wide scale and do not explicitly focus on R&D.

2 Because of sample variability in the data for the business R&D component, the reported totals for 2009 and 2010 are not significantly different from one another at a 90% confidence level.

3 The data for academic R&D reported in this chapter adjust the academic fiscal year basis of NSF’s Higher Education Research and Development Survey data to calendar year and net out pass-throughs of research funds to remove double-counting in the national totals. Accordingly, the academic data reported in this chapter may differ from those cited in Chapter 5.

4 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.

5 NCSES maintains a current Master Government List of Federally Funded R&D Centers. For information on the current FFRDC count, along with its history, see https://www.nsf.gov/statistics/ffrdclist/. The R&D expenditure data cited here are for all the FFRDCs as an aggregate. For data on individual FFRDCs, see NCSES’s annual FFRDC Research and Development Surveys at https://www.nsf.gov/statistics/srvyffrdc/.

6 This figure does not include federal government investments in R&D infrastructure and equipment, which support the maintenance and operation of unique research facilities and the conduct of research activities that would be too costly or risky for a single company or academic institution to undertake.

7 R&D funding by business in this section refers to nonfederal funding for domestic business R&D plus business funding for FFRDCs and U.S. academic and nonprofit R&D performers.

8 The Organisation for Economic Co-Operation and Development notes that in measuring R&D, one source of error is the difficulty of locating the dividing line between experimental development and the further downstream activities needed to realize an innovation (OECD 2015:51–52). Most definitions of R&D set the cutoff at the point when a particular product or process reaches “market readiness.” At this point, the defining characteristics of the product or process are substantially set—at least for manufactured goods, if not also for services—and further work is primarily aimed at developing markets, engaging in preproduction planning, and streamlining the production or control system.

9 The arithmetic is straightforward to calculate type-of-R&D shares for past years, based on the data in Appendix Table 4-2 through Appendix Table 4-5. Nonetheless, care must be taken in describing the trends for these shares over time. Although NCSES’s sectoral surveys of R&D expenditures have consistently used the OECD Frascati Manual’s type-of-R&D definitions, the survey instruments have occasionally been revised to improve the reliability of the responses received, most notably in the academic, business, and FFRDC R&D expenditure surveys. Accordingly, some differences observed in the shares directly calculated from the appendix table time series data more nearly reflect the effects of these improvements in the type-of-R&D survey questions than changes in the type-of-R&D shares among R&D performers.

Cross-National Comparisons of R&D Performance

1 The figures cited for total global R&D in 2000, 2010, and 2015 are NCSES estimates. R&D expenditures for all countries are denominated in U.S. dollars, based on PPPs. These estimates are based on data from the OECD’s (2017) Main Science and Technology Indicators (Volume 2017/1) and from R&D statistics for additional countries assembled by UNESCO’s Institute for Statistics (as of mid-October 2017). Presently, no database on R&D spending is comprehensive and consistent for all nations performing R&D. The OECD and UNESCO databases together provide R&D performance statistics for 158 countries, although the data are not current or complete for all. NCSES’s estimate of total global R&D reflects 106 countries, with reported annual R&D expenditures of $50 million or more, which accounts for most of current global R&D.

U.S. Business R&D

1 The Business R&D and Innovation Survey does not collect data for companies with fewer than five employees. See sidebar Measured and Unmeasured R&D.

2 The industry-level data presented in this section are obtained by classifying a company’s total R&D into a single industry, even if R&D activities occur in multiple lines of business. For example, if a company has $100 million in R&D expenses—$80 million in pharmaceuticals and $20 million in medical devices—the total R&D expense of $100 million is assigned to the pharmaceuticals industry because it is the largest component of the company’s total R&D expense (Shackelford 2012). However, most companies performed R&D in only one business activity area. In 2010, 86% of companies reported domestic R&D performed by and paid for by the company related to only one business activity. See Shackelford (2012) for an in-depth analysis of the relationship between business codes and industry codes.

3 For a description of the OECD’s ANBERD methodology and data, see https://www.oecd.org/innovation/inno/
anberdanalyticalbusinessenterpriseresearchanddevelopmentdatabase.htm.

4 ISIC Revision 4 was released by the United Nations Statistics Division in August 2008. For an overview of the classification structure, comparisons with earlier editions, and background, see https://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=27.

5 For further information on the BEA surveys, see https://www.bea.gov/international.

Recent Trends in Federal Support for U.S. R&D

1 The analysis in this section focuses primarily on developments in federal R&D priorities and funding support over the course of the last decade. Nevertheless, there is an important and interesting story to tell about how the comparatively minor federal role in the nation’s science and research system up until World War II was reconsidered, redirected, and greatly enlarged, starting shortly after the end of the war and moving through the subsequent decades to the present. For a review of the essential elements of this evolving postwar federal role, see Jankowski (2013).

2 For a further account of this recent federal budget history, see Boroush (2015, 2016). Notable among the various interconnected developments over these years were the federal-wide spending reductions imposed by the enacted FY 2011 federal budget: the Budget Control Act of 2011, intended to address the then-ongoing national debt ceiling crisis, which commanded a 10-year schedule of budget caps and spending cuts; the budget sequestration provision, which ultimately took hold in the FY 2013 federal budget; and the Bipartisan Budget Act of 2013, which provided some subsequent relief from the deepening sequestration requirements, but only for the FY 2014 and FY 2015 budgets.

3 GBARD classifies total government funding on R&D into the 14 socioeconomic categories specified by the EU’s 2007 edition of the Nomenclature for the Analysis and Comparison of Scientific Programmes and Budgets (NABS). These categories are exploration and exploitation of the earth; environment; exploration and exploitation of space; transport, telecommunications, and other infrastructures; energy; industrial production and technology; health; agriculture; education; culture, recreation, religion, and mass media; political and social systems, structures, and processes; general advancement of knowledge: R&D financed from general university funds; general advancement of knowledge: R&D financed from sources other than general university funds; and defense. GBARD statistics published by the OECD in the Main Science and Technology Indicators series report on clusters of these 14 NABS categories. (Prior to the fall of 2015, GBARD was referred to as GBAORD, or government budget authority or outlays for R&D. Earlier data may continue to use the GBAORD terminology.)

4 Some analysts argue that the relatively low nondefense GBARD share for economic development in the United States reflects the expectation that businesses will finance industrial R&D activities with their own funds. Moreover, government R&D that may be useful to industry is often funded with other purposes in mind, such as defense and space, and then classified in these other socioeconomic objectives.