SCIENCE & ENGINEERING INDICATORS

Key takeaways:

• The U.S. annual total of research and development (R&D) has expanded steadily since 2010 (reaching $548 billion in 2017), due particularly to sizable annual increases in business R&D performance.
• The United States remains the world’s top R&D performer. China continues to close the gap, with an average annual growth rate that is currently nearly three times higher than that of the United States.
• The global concentration of R&D performance continues to shift from the United States and Europe to South Asia and East-Southeast Asia.
• Businesses continue as the predominant performers and funders of U.S. R&D (73% and 70%, respectively, in 2017). Businesses perform the vast majority of U.S. R&D classified as development and considerable shares of U.S. R&D classified as basic or applied research.
• Higher education institutions and the federal government are the second and third largest performers of U.S. R&D (13% and 10%, respectively, in 2017). However, both have experienced some erosion in their shares since 2010.
• The federal government has been a consistent source of funding to all R&D-performing sectors. Federal support varies by sector, ranging from nearly all the R&D performed by the federal government and half of that performed by higher education, to smaller shares for state government, nonprofit organizations, and the business sector. The share of U.S. R&D performance funded by the federal government overall has declined in recent years from 31% in 2010 to 22% in 2017.

Scientific discoveries, new technologies, and inventive applications of cutting-edge knowledge have become increasingly essential for success in a competitive global economy and in addressing challenges and opportunities in diverse societal areas such as health, environment, and national security. As such, the strength of a country’s overall R&D enterprise—including both the public and private sectors of this system—is an important marker of current and future national economic advantage and of prospects for societal improvements. In the United States, the nation’s overall R&D enterprise relies on the R&D performance and funding of a diverse set of actors, including businesses, the federal government, nonfederal governments, higher education institutions, and other nonprofit organizations.

R&D performed in the United States totaled $547.9 billion in 2017, reflecting yearly increases averaging $20.2 billion over the 2010–17 period. The main driver of this sustained and sizable increase was business R&D performance. Adjusted for inflation, U.S. total R&D over 2010–17 grew modestly faster than U.S. gross domestic product (GDP) (with average annual growth rates, respectively, of 2.7% and 2.2%).

The global total of R&D expenditures has risen at a substantial pace since the turn of the century to $2.153 trillion (current purchasing power parity dollars) in 2017—a threefold increase from 2000 ($722 billion). This expansion reflects the escalating knowledge intensity of economic competition among the world’s leading nations, as well as the important role of R&D in addressing global challenges (such as health, environment, and security). The United States and China each account for about a quarter of the global R&D total. The remaining top 16 R&D-performing nations together account for somewhat more than a third of the global total—in decreasing order, Japan, Germany, South Korea, France, India, United Kingdom, Russia, Brazil, Taiwan, Italy, Canada, Spain, Turkey, and Australia.

China’s R&D growth rate continues to greatly exceed that of the United States and contributes to the sustained rise in R&D performance of South Asia and East-Southeast Asia—including China, Japan, South Korea, India, and Taiwan. The combined R&D performance across these regions of Asia rose from 25% to 42% of the global total between 2000 and 2017. With these regions continuing to record substantially faster-than-average R&D growth rates, this remaking of the global geography of R&D is unlikely to slow soon.

Businesses continue to be the predominant performers and funders of U.S. R&D, accounting for 73% of total U.S. R&D performance and 70% of its funding in 2017. Year-to-year increases and declines in business R&D greatly influence the overall U.S. R&D total. Businesses perform the vast majority of U.S. R&D classified as experimental development (90% in 2017) and more than half of the applied research (57% in 2017). The business share of basic research has also been increasing significantly in recent years (from 22% in 2010 to 27% in 2017).

The business sectors of the U.S. economy are diverse, with wide differences in the goods and services provided across industries and in the various production inputs required, including roles for R&D. The present peaks in U.S. business R&D are in a relative handful of industries in both manufacturing and nonmanufacturing.

The federal government has long performed mission-supporting R&D; in the last several years, this R&D was conducted primarily by nearly three dozen federal agencies and totaled about a tenth of the annual U.S. R&D total. Relative to R&D performance, the federal role is larger on the funding side (22% of the U.S. R&D total in 2017), where it has been a sizable resource for many of the U.S. R&D-performing sectors—particularly for higher education and for federal agencies’ intramural R&D, although it has recently declined as a source of funding for the business sector. The federal government remains the largest source of support for the nation’s basic research (although the share has dropped below half since 2012) and is a sizable supporter of the nation’s applied research.