SCIENCE & ENGINEERING INDICATORS

Businesses have been the predominant performers of U.S. R&D dating back to the 1950s. Given its prominent role, year-to-year increases and declines in business R&D performance greatly influence the overall U.S. R&D total (Figure 4-2). The U.S. business sector is diverse, with wide differences in the goods and services provided across industries and in the various production inputs required, including for R&D. Historically, companies in manufacturing industries have accounted for two-thirds or more of U.S. business R&D, with the balance accounted for by companies in nonmanufacturing industries. However, most business R&D in the United States currently stems from a relative handful of industries, classified in both the manufacturing and nonmanufacturing sectors.

U.S. business R&D is the R&D performed by companies in the domestic United States, including R&D paid for by the company itself (from company-owned, U.S.-located units or from company subsidiaries located overseas) and R&D paid for by others (such as other companies, domestic or foreign, including foreign parents of U.S. subsidiaries; the federal government; nonfederal government, domestic or foreign; and nonprofit or other organizations, domestic or foreign). NCSES’s annual Business R&D and Innovation Survey (BRDIS) and Business Research and Development Survey (BRDS) provide data on for-profit, nonfarm companies that are publicly or privately held in the United States.^{​Up through 2016, the reference population for the Business R&D and Innovation Survey (BRDIS) did not include companies with fewer than 5 employees in the United States. Starting in 2017, the survey was renamed the Business R&D Survey (BRDS), and the reference population was revised to exclude companies with fewer than 10 employees.}

U.S. businesses performed $400.1 billion of R&D in 2017, 81% of which is accounted for by five business sectors and subsectors ($324.0 billion) (Table 4-9).^{​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.}

• Chemicals manufacturing (North American Industry Classification System [NAICS] 325, which includes the pharmaceuticals industry) accounts for 19% of business R&D performance, most of which is from the pharmaceuticals and medicines industry.
• Computer and electronic products manufacturing (NAICS 334) accounts for 20% of business R&D performance.
• Transportation equipment manufacturing (NAICS 336, which includes the automobiles and aerospace industries) accounts for 13% of business R&D performance.
• Information (NAICS 51, which includes the software publishing industry) accounts for about 20% of business R&D performance, two-fifths of which was in software publishing.
• Professional, scientific, and technical (PST) services (NAICS 54, which includes the computer systems design and scientific R&D services industries) accounts for 9% of business R&D performance. About half of PST services is in the scientific R&D services industry, but R&D is also sizable in the computer systems design and related services industry (Table 4-9).

These sectors and subsectors have R&D intensities that are generally higher than others in the national economy (Table 4-10). While the distribution of R&D performance shares among these five sectors or subsectors has been relatively stable since 2008, notable changes include a 4 percentage point drop in the shares for transportation equipment and PST services, as well as a 7 percentage point increase in the share of the information industry.

Business R&D performance is primarily funded by the companies themselves. In 2017, 85% of U.S. business R&D performance was funded mainly by companies’ own funds. The vast majority of these funds came from company units owned and located in the United States (80%), with a small amount (nearly 5%) from companies’ foreign subsidiaries (Table 4-11). The remainder (15%) came from R&D performed by the company but paid for by others. The federal government is the largest of these sources, funding about 6% of business R&D performance in 2017.

The most notable change since 2010 is the declining role of federal funding, falling from 12% in 2010 to 6% in 2016 and 2017 (Table 4-11). In addition, there are some noteworthy differences when more narrowly defined sectors and industries are considered, particularly for the five top R&D-performing sectors and subsectors previously discussed (see Table 4-9).

In 2017, the largest companies (i.e., those with 25,000 or more domestic employees) performed over a third (37%) of U.S. business R&D (Table 4-12). Micro companies (5–9 employees) and small companies (10–49 employees) accounted together for about 3%. The remaining 60% was distributed among the size classifications between these extremes. The distribution of business R&D performance by company size has not greatly changed in recent years. Nonetheless, a more extensive NCSES analysis of the Business R&D and Innovation Survey data from 2009–15 concluded that R&D performance by larger-sized companies rebounded from the Great Recession considerably better than small companies and micro companies (see Anderson and Kindlon ).

The industries currently predominant in performing business R&D in the other largest R&D-performing countries exhibit both similarities and differences to those in the United States. This section analyzes cross-national comparisons for the United States, France, Germany, the United Kingdom, China, Japan, and South Korea (Table 4-13). Corresponding statistics for India are not presently available. The data analyzed come from OECD’s Analytical Business Enterprise R&D (ANBERD) database (OECD 2019a). The industry classification used in this section is based on the International Standard Industrial Classification of All Economic Activities (ISIC), Revision 4, for all countries (including the United States). The ISIC differs somewhat from NAICS, which is used elsewhere in this report to analyze the U.S. trends.^{​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.} Only those industries with comparatively higher levels of annual R&D performance are included in the following analysis. For a more complete listing of industries, see the OECD ANBERD database. (All amounts and calculations are in current PPP dollars, unless otherwise noted. The text below focuses on comparing the shares of national R&D performed by differing industries within countries; the associated dollar amounts are listed in Table 4-13.)

Overall, the manufacturing sector accounted for a substantially higher share of overall business R&D in Germany, Japan, South Korea, and China (85% to 90%) relative to the United States, France, and the United Kingdom (41% to 67%) (Table 4-13). For Germany, within manufacturing, motor vehicles, trailers, and semi-trailers (ISIC 29, 35%) and computer, electronic, and optical products (ISIC 26, 12%) accounted for substantial levels of business R&D. For Japan, motor vehicles, trailers, and semi-trailers (ISIC 29, 26%), computer, electronic, and optical products (ISIC 26, 20%), and pharmaceuticals, medicinal chemical, and botanical products (ISIC 21, 10%) were the three largest R&D-performing sectors in 2016. For South Korea, computer, electronic, and optical products (ISIC 26, 50%) and motor vehicles, trailers, and semi-trailers (ISIC 29, 13%) were important sectors. Most of China’s business R&D in 2016 was conducted in manufacturing (87%) but is more diverse among manufacturing industries than the other countries analyzed here. Computer, electronic, and optical products (ISIC 26, 16%), chemicals and chemical products (ISIC 20, 8%), motor vehicles, trailers, and semi-trailers (ISIC 29, 9%), and the other manufacturing industries all played important roles in China.

Based on ISIC, the manufacturing section (ISIC 10–33) accounted for about two-thirds (67%) of the overall business R&D performance in the United States in 2016. The three largest sectors were computer, electronic, and optical products (ISIC 26, 21%); pharmaceuticals, medicinal chemical, and botanical products (ISIC 21, 17%); and the air and spacecraft and related machinery industry (ISIC 303, 7%). These shares are similar to those reported earlier in this report based on the NAICS categories.

In addition to manufacturing, a comprehensive group encompassing all services (ISIC 45–99) accounted for most of the rest of U.S. business R&D in 2016 ($120.2 billion, or 32%) (Table 4-13), with information and communication (ISIC 58–63, 23%) and PST activities (ISIC 69–75, 6%) playing important roles.

France and the United Kingdom were exceptions to the manufacturing emphasis, given the large shares of R&D that occurred in services industries (Table 4-13). For France, 47% of business R&D came from services, with 26% from PST activities (ISIC 69–75) and 12% from information and communication (ISIC 58–63). For the United Kingdom, 57% of business R&D comprised services: 32% from PST activities (ISIC 69–75), and 14% from information and communication (ISIC 58–63).