by Mark Boroush [1]

New data from the National Center for Science and Engineering Statistics (NCSES), National Science Foundation (NSF), indicate that research and experimental development performed in the United States totaled $515.3 billion in 2016 (table 1). The estimated total for 2017, based on performer-reported expectations, is $542.2 billion. These numbers compare with U.S. R&D totals of $454.0 billion in 2013, $475.4 billion in 2014, and $493.7 billion in 2015. In 2008—just before the onset of the main economic effects of the national and international financial crisis and the Great Recession—the U.S. total was $404.8 billion. (All amounts and calculations are in current dollars, unless otherwise noted.)

These data depict a continuing stream of sizable, annual increases over the most recent years: up $20.3 billion in 2013, $21.5 billion in 2014, $18.3 billion in 2015, and $21.6 billion in 2016. The estimate for 2017 points to a nearly $27 billion increase. After essentially no change between 2008 and 2010, yearly increases from 2011 to 2016 averaged $18.1 billion. This pattern of sustained annual increase is due mainly to consistently growing levels of business R&D performance (figure 1).

FFRDC = federally funded research and development center.

NOTE: Data for 2016 are preliminary, and those for 2017 are estimates; some of these data may later be revised.

SOURCE: National Science Foundation, National Center for Science and Engineering Statistics, National Patterns of R&D Resources (annual series).

Figure 1 Source Data: Excel file

Adjusted for inflation, growth in U.S. total R&D averaged 1.6% annually over the 8-year period 2008–16, matching the 1.6% average pace of U.S. gross domestic product (GDP) over the same period (table 2). By comparison, the average annual rate of R&D growth was notably higher in the prior 8-year period (2000–08) and also above the pace of GDP expansion: 2.8% for total R&D, and 2.2% for GDP. However, excluding the recession-affected period of 2008–10, the average annual pace of growth for U.S. total R&D over 2010–16 is 2.4%, modestly ahead of the 2.1% growth rate for GDP. The estimate for 2017 shows R&D expanding substantially faster than the pace of GDP: 3.3%, compared to 2.2% for GDP

R&D Performers and Funders

The U.S. R&D system operates through the activities of a diverse group of R&D performers and sources of funding. Performers and funders include private businesses, the federal government, nonfederal government agencies, higher education institutions, and other nonprofit organizations.[2] Organizations that perform R&D often receive significant outside funding, and R&D funders may also be significant performers.

R&D Performers

The business sector continues to be the largest performer (by far) of U.S. R&D. In 2016, domestically performed business R&D accounted for $374.7 billion, or 73% of the $515.3 billion national total (tables 1 and 3).[3] The business sector's predominance in the composition of national R&D performance has long been the case, with its annual share ranging between 69% and 75% over the 16-year period 2000–16. Business R&D performance increased by $18.9 billion in 2016, following gains of $20.3 billion in 2013, $18.2 billion in 2014, and $15.1 billion in 2015 (figure 1).

Inflation-adjusted growth in business R&D averaged 1.7% annually over the 8-year period 2008–16, largely the same as the 1.6% annual average for U.S. total R&D and 1.6% annual average for GDP (table 2). However, looking just at the 2010–16 period (i.e., excluding the recession period of 2008–10), the average annual rate of business R&D growth was 3.4%, well ahead of the rates for both total R&D (2.4%) and GDP (2.1%).

R&D performed in the United States by the higher education sector totaled $67.8 billion in 2016, or 13% of U.S. total R&D (tables 1 and 3). The higher education sector is typically the second-largest performer of U.S. R&D. Over the 16-year period 2000–16, the higher education share of U.S. R&D has ranged between 11% and 14%.

R&D performance by the higher education sector increased by $2 billion to $3 billion dollars yearly in 2009–11, dropped to below $1 billion yearly in 2012–14, but returned to $2 billion to $3 billion yearly increases in 2015 and 2016 (table 1). Adjusting for inflation, growth in this sector's R&D performance averaged 1.9% annually in 2008–16, compared to 1.6% for U.S. total R&D and 1.6% for GDP. However, when the year-by-year track is examined, the sector's R&D growth was marked by stark contrasts: particularly high growth in 2009 and 2010, a noticeable slowdown in 2011, negative numbers in 2012–14, and a return to substantial growth in 2015 and 2016 (table 2).

The federal government performed $51.1 billion, or 10%, of the U.S. R&D total in 2016 (tables 1 and 3). This included $31.7 billion (6% of the U.S. total) performed by the intramural R&D facilities of federal agencies and $19.4 billion (4%) performed by the 42 federally funded research and development centers (FFRDCs). In 2000, the combined performance share for both types of federal R&D facilities was about 11%, fluctuated between 12% and 13% between 2001 and 2012, but gradually declined to about 10% in 2016.

The federal R&D performance total increased by $2 billion to $3 billion each year in 2009–11. But it decreased $1.4 billion in 2012 and $1.1 billion in 2013, the result of reduced R&D expenditures by both federal intramural and FFRDCs. In 2014, there was a $1.6 billion increase, predominantly the result of increased federal intramural; 2015 had a negligible increase ($0.2 billion); and 2016 saw a $1.7 billion decline. Trend interpretation for 2015 and 2016 is complex, as the 2016 expenditures reported for Department of Defense (DOD) intramural R&D are reduced by about $5 billion due to implementation of federal agency R&D reporting guidelines with a less expansive definition for "development."[4]

R&D performed in the United States by other nonprofit organizations (which excludes higher education and government) is estimated at $21.0 billion in 2016 (table 3). This was 4% of U.S. total R&D that year, a share that has changed only marginally since the late 1990s.

R&D Funders

Paralleling its predominant role in R&D performance, the business sector is also the leading source of funding for R&D performed in the United States. In 2016, business sector funding accounted for $355.5 billion, or 69% of the $515.3 billion of total U.S. R&D performance (tables 1 and 3). Nearly all (98%) of the business sector's funding for R&D that year reflected R&D by business performers (including funding provided by some businesses that was performed by other businesses) (table 3). The small remainder went to R&D performers in higher education, other nonprofit organizations, and FFRDCs.

In 2000, R&D funding from the business sector accounted for 69% of the U.S. R&D total. It has exhibited increases and decreases over the years since but, for the most part, stayed in the range of 63%–69%.

Funds from the federal government accounted for $116.1 billion, or 23%, of U.S. total R&D in 2016 (tables 1 and 3). This federal funding was directed mainly to R&D performance by the federal government, businesses, and higher education (table 3). Federal funding accounted for all the $31.7 billion of federal intramural R&D performance in 2016 and almost all of the $19.4 billion of R&D performed by FFRDCs. (Nonfederal support for FFRDC R&D has been around $0.4 billion in recent years, or 2% of total support to FFRDCs.) Federal funding to the business sector accounted for $23.8 billion of business R&D performance in 2016, or 6% of the sector's R&D total that year (table 3). Federal funds to higher education supported $34.7 billion (51%) of the $67.8 billion spent on academic R&D in 2016. For the R&D performed by other nonprofit organizations, $6.6 billion (32%) of this sector's estimated $21.0 billion of performance was supported by federal funds.

In 2000, the federal funding share of U.S. total R&D was 25%. Thereafter, it rose gradually to 31% in 2009 and 2010, but it has declined in the years since to 23% in 2016.

The remainder of R&D funding from other sources is relatively small: $43.6 billion in 2016, or 8% of all U.S. R&D performance. Of this amount, $18.5 billion (4%) was academia's own institutional funds, all of which remain in the academic sector; $4.5 billion (1%) was from state and local governments, primarily supporting academic research; and $20.6 billion (4%) was from other nonprofit organizations, the majority of which funds this sector's own R&D. In addition, funds from the nonprofit sector support some R&D in higher education and small amounts of R&D in businesses and FFRDCs.

R&D by Type of Work

Basic research activities accounted for $88.6 billion in 2016, or 17% of total U.S. R&D expenditures (table 4). Applied research was $104.6 billion, or 20% of the total. Most of the total U.S. R&D expenditures is experimental development: $322.1 billion, or 63%.

Higher education accounted for just under half (48%) of the $88.6 billion of basic research in 2016 (table 3). The business sector was the second-largest basic research performer (28%). Business was the majority performer (58%) of the $104.6 billion of applied research in 2016. Higher education was second at 18%; federal intramural performers plus FFRDCs amounted to 17% of the applied research total. Business continued to dominate experimental development, accounting for 90% of the $322.1 billion of that category in 2016.

Federal funding accounted for 43% of the $88.6 billion of basic research in 2016. But federal funds were less prominent for applied research (34% of $104.6 billion) and experimental development (13% of $322.1 billion). The business sector provided the greatest share of funding for applied research (55%) and the predominant share for experimental development (85%). It also accounted for a sizable share (29%) of funding for basic research.

The split of U.S. total R&D expenditures among the three types of R&D—basic, applied, and experimental development—was largely the same in 2016 as in 2010, though care is needed in drawing trend conclusions from these data (see table 4 notes). Adjusted for inflation, about $5 billion more basic research was performed in 2016 than in 2010, $16 billion more applied research, and $42 billion experimental development.

Trend in National R&D Intensity

The ratio of total national R&D expenditures to GDP is often used as an overall gauge of the intensity of a nation's R&D effort. The ratio is widely reported by national statistical offices and other policy analysts as a benchmark for comparing the strength of countries' R&D systems. The ratio of U.S. R&D expenditures to GDP was 2.75% in 2016 and 2.71% in both 2014 and 2015 (figure 2).[5] The ratio for 2017 (2.78%) is estimated to be slightly above the 2016 level. The highwater mark to date for the U.S. R&D-to-GDP ratio is 2.79%—which was reached in 2009 and earlier in 1964. Over the period from 2000 to 2016, the ratio has fluctuated year to year, between a low of 2.48% in 2004 and the aforementioned 2009 high of 2.79% (figure 2). The broader trend since the mid-1990s has been a rising R&D-to-GDP ratio, though with some periods of decline.

GDP = gross domestic product.

federal government as a funder of R&D by all performers; similarly for the business funded data. The other nonfederal category includes R&D funded by all other sources-mainly, higher education, nonfederal government, and other nonprofit organizations. The GDP data used reflect BEA's comprehensive revisions of the National Income and Product Accounts of August 2018.

SOURCE: National Science Foundation, National Center for Science and Engineering Statistics, National Patterns of R&D Resources (annual series).

Figure 2 Source Data: Excel file

Most of the rises of the R&D-to-GDP ratio over the past several decades result from the increase of nonfederal spending on R&D, particularly by the business sector. This arises from the growing role of business R&D in the national R&D system, which in turn reflects the increase of R&D-dependent goods and services in the national and global economies.

By contrast, the ratio of federally funded R&D expenditures to GDP declined from the mid-1980s to the late 1990s, notably from cuts in defense-related R&D. There had been a gradual uptick in the ratio through 2009, the result of increased federal spending on biomedical and national security R&D and the one-time incremental funding for R&D provided by the American Recovery and Reinvestment Act of 2009. The federally funded share, however, has returned to a path of decline since 2010 (figure 2).

Data Sources and Availability

The statistics on U.S. R&D presented in this report derive chiefly from integrating the data on R&D expenditures and funding collected from the NCSES annual national surveys on the organizations that perform the vast majority of U.S. R&D. In some cases, the primary data from these surveys are adjusted to enable consistent integration of the statistics across these separately conducted surveys. In addition, preliminary or otherwise estimated values may be used where final data from one or more of the surveys are not yet available but can reasonably be calculated.

The R&D surveys involved include NCSES's Business R&D and Innovation Survey (for 2008–16; for 2007 and earlier years, data from the preceding Survey of Industrial R&D are used), the Higher Education Research and Development Survey (for FYs 2010–17; for 2009 and earlier years, the preceding Survey of R&D Expenditures at Universities and Colleges), the Survey of Federal Funds for Research and Development (FYs 2017–18 and earlier years), and the FFRDC Research and Development Survey (FY 2017 and earlier years).[6] Amounts for the R&D performed by other nonprofit organizations with funding from with the nonprofit sector and from business sources are estimated, based on parameters from the 1996–97 Survey of R&D Funding and Performance by Nonprofit Organizations.

A full set of detailed statistical tables associated with the National Patterns data will be available in the report National Patterns of R&D Resources: 2016–17 Data Update, at https://www.nsf.gov/statistics/natlpatterns/. For further information on the National Patterns data and methodology, contact the author.

Notes

[1] Mark Boroush, Research and Development Statistics Program, National Center for Science and Engineering Statistics, National Science Foundation, 2415 Eisenhower Avenue, Suite W14200, Alexandria, VA 22314 (mboroush@nsf.gov; 703-292-8726).

[2] NCSES identifies the main categories of R&D performers as follows: businesses; federal agencies; federally funded research and development centers (administered by businesses, universities, or nonprofit organizations); state government agencies; higher education; and other nonprofit organizations. For R&D funding, the main categories are businesses, the federal government, nonfederal government (state and local), higher education, and other nonprofit organizations.

[3] R&D performed in the domestic United States by businesses occurs widely in manufacturing and nonmanufacturing. Presently, most occurs in five sectors: chemicals manufacturing (which includes the pharmaceuticals industry); computer and electronic products manufacturing; transportation equipment manufacturing (which includes the automobiles and aerospace industries); information (which includes the software publishing industry); and professional, scientific, and technical services (which include the computer systems design and scientific R&D services industries). For further details and statistics, see the current report of the NCSES Business R&D and Innovation Survey, https://www.nsf.gov/statistics/srvyindustry/.

[4]With this new edition of National Patterns, the data on federal intramural R&D, 2016 and thereafter, exclude expenditures for preproduction development. (Preproduction development is nonexperimental work on a product or system before it goes into full production. For example, activities and programs that are categorized as "Operational Systems Development" in the DOD's Research, Development, Test, and Evaluation (RDT&E) budget activity structure.) This change aligns the federal intramural data with a recent change introduced in the definition of R&D by the U.S. Office of Management and Budget. In FYs 2016 and 2017, federal intramural preproduction development totaled about $5.5 billion each year.

[5] Due to sample variability in the data for the business R&D component, the calculated R&D-to-GDP ratios for 2014, 2015, and 2016 are not significantly different from one another at a 90% confidence level. Likewise, the 2008 and 2009 ratios are not significantly different at the 90% confidence level.

[6] Estimates from the Business R&D and Innovation Survey and the Survey of Industrial R&D are both derived from sample data and thereby contain sampling error. Consequently, the total U.S. R&D estimates also contain sampling error. For more information on this topic and other surveys used in the National Patterns tabulations, please see the technical notes in the accompanying Data Update at https://www.nsf.gov/statistics/natlpatterns/.