U.S. R&D Performance and Funding
Businesses perform and fund most of the overall R&D in the United States as well as most of the applied research and experimental development. Higher education is the second-largest performer of R&D and performs the largest share of basic research; the federal government is the second-largest funder of R&D and funds the largest share of basic research. While federal R&D funding of basic research has increased since 2000, the proportion of R&D funded by the federal government has declined. Eight federal departments and agencies together account for most of the federal R&D spending.
Performance and Funding Trends
The business sector performed most (73%) of the $548 billion of U.S. R&D total in 2017. The next largest performers were higher education (universities and colleges; 13%) and the federal government (10%) (Figure 16). Many organizations performing R&D receive outside funding; they may also be significant funders of R&D themselves. Mirroring its predominant role in R&D performance, the business sector is also the leading source of R&D funding (70%) in the United States. However, nearly all (98%) of the business sector's R&D funding supported R&D performance by businesses, either the same business that funded the R&D or another business. The federal government, the second-largest source of R&D funding (22%) (Figure 17), supports all R&D-performing sectors. Federal support, however, varies by sector. In 2017, federal funding supported half (51%) of all academic R&D performance. Federal funds also supported R&D performance by businesses (6%), nonprofits (35%), and federally funded research and development centers (FFRDCs) (98%).
Type of R&D
About 17% of the U.S. R&D performance is for basic research, while the remainder, more than 80%, is for applied research and experimental development. Organizations bring different perspectives and approaches to R&D. The business sector, with its focus on new and improved goods, services, and processes, dominates both experimental development (90% of performance and 85% of funding) and applied research (57% of performance and 54% of funding). In comparison, nearly half (48%) of U.S. basic research is performed by higher education institutions, while 42% of funding for all basic research is provided by the federal government (Figure 18). The role of higher education is not surprising given the integration of advanced graduate education and R&D performance. However, businesses are now funding more basic research. Between 2000 and 2017, the share of basic research funded by the business sector increased from 19% to 29%.
Since 2000, the expansion in U.S. R&D has been driven primarily by the business sector, notwithstanding the temporary boost provided by the federal government in the wake of the 2008 financial crisis. Although the levels of federal R&D funding rose across performing sectors between 2000 and 2017, the share of total U.S. R&D funded by the federal government declined from 25% to 22%. This decline was observed across performing sectors including higher education institutions, other nonprofit institutions, and businesses (Figure 19). Among higher education institutions, where the federal government is a major source of R&D support, the share of federally funded R&D performance declined from 57% in 2000 to 51% in 2017.
By type of R&D, the shares of federal government funding for basic research and experimental development declined since 2000 despite rising levels of funding (Figure 20). The federal government is a major funder of basic research, and between 2000 and 2017, the share of basic research funded by the federal government declined from 58% to 42%. Federally funded applied research was an exception during this period, as both the level and share rose.
Eight federal departments and agencies together account for most of the federal R&D spending. Defense has long been a federal R&D budget priority, accounting for 44% of federal R&D support in 2017. This R&D support comes mainly from the Department of Defense but also from several other defense-related agencies. Over half (56%) of the federal R&D budget is devoted to nondefense. Health and environment account for slightly more than one-half (56%) of federal nondefense R&D budget. The other federal agencies with large R&D portfolios—the Department of Health and Human Services, Department of Energy, National Science Foundation, Department of Agriculture, Department of Commerce, and Department of Transportation—focus primarily in the areas of basic and applied research. The National Aeronautics and Space Administration distributes its budget more evenly across the different types of R&D, with about half going to basic and applied research and half to experimental development.