This section examines the importance of knowledge- and technology-intensive (KTI) industries in the global economy, and the positions of the United States and other major economies in global KTI industry production. In this report, KTI industries consist of high and medium-high R&D intensity industries as identified internationally in a report by the Organisation for Economic Co-operation and Development (OECD). Industries are classified into R&D intensity groups using the ratio of an industry’s business R&D expenditures to its value-added output.

Value added is a net measure of output; it is the difference between the total revenue generated from the sale of an industry’s output and the total cost of inputs that were used in production such as the cost of labor, raw materials, and services purchased from other businesses. For production activities that take place within a country’s geographic borders, value added from all industries at all stages of production equals GDP, thus value added is a measure of an industry’s contribution to overall GDP. Value added is used in the computation of R&D intensity instead of gross output because as a net measure, it avoids double counting of intermediate production.

Five industries are classified as high R&D intensive—aircraft; computer, electronic, and optical products; pharmaceuticals; scientific R&D services; and software publishing (Table 6-1). Eight industries are classified as medium-high R&D intensive—chemicals excluding pharmaceuticals; electrical equipment; IT services; machinery and equipment; medical instruments; motor vehicles; railroad and other transportation; and weapons (see sidebar New Definition of KTI Industries). These industries have lower, but still substantial levels of R&D intensity.

Global KTI industries, by output and share of global GDP: 2018

(Billions of dollars and percent)

GDP = gross domestic product; IT = information technology; KTI = knowledge and technology intensive.

Note(s):

Output of KTI industries is on a value-added basis. Value added is the amount contributed by a country, firm, or other entity to the value of a good or service and excludes purchases of domestic and imported materials and inputs. KTI industries include high R&D intensive and medium-high R&D intensive industries based on a classification by the Organisation for Economic Co-operation and Development. Data for the software publishing are not available; data on the larger publishing industry, which includes software publishing, is used as a proxy for this industry. Data are not available for medical and dental instruments. World total does not include all countries and economies due to limitations in data availability. See Table S6-2 through Table S6-16.

Source(s):

IHS Markit, special tabulations (2019) of Comparative Industry Service.

Science and Engineering Indicators

This report presents data on most of these industries. Data on software publishing are not available; instead data are presented on the publishing industry, which includes software publishing. The data presented on the publishing industry is an imperfect measure of the software publishing industry because the share of software publishing in the publishing industry varies across countries. Data on medical instruments and military vehicles are also not available. Military vehicles are part of the railroad and other transportation industry.

New Definition of KTI Industries

Knowledge- and Technology-Intensive Industries in the Global Economy

KTI industries contribute globally $9 trillion in value added, accounting for 11% of GDP (Table 6-1 and Table S6-2). The medium-high R&D intensive industries produce the largest share (64%) of global KTI output, accounting for 7% of global GDP. The output of the high R&D intensive industries is comparatively lower, accounting for 4% of global GDP (Table 6-1).

The United States and EU both have KTI output shares of their domestic GDP at the global average (11% of GDP). China and Japan have KTI shares that are considerably larger because of much higher output shares of medium-high R&D intensive industries (Figure 6-1). Over the past 15 years, the KTI output shares of domestic GDP in the United States, EU, China, and Japan have remained relatively constant (Figure 6-2). The next two sections discuss the specific trends for high and medium-high R&D intensive industries.

KTI industries of selected economies, by share of domestic GDP: 2018

EU = European Union; GDP = gross domestic product; KTI = knowledge and technology intensive.

Note(s):

Output of KTI industries is on a value-added basis. Value added is the amount contributed by a country, firm, or other entity to the value of a good or service and excludes purchases of domestic and imported materials and inputs. KTI industries include high R&D intensive and medium-high R&D intensive industries classified by the Organisation for Economic Co-operation and Development. High R&D intensive industries include aircraft; pharmaceuticals; computer, electronic, and optical products; scientific research and development services; and software publishing. Data for the software publishing are not available; data on the larger publishing industry, which includes software publishing, is used as a proxy for this industry. Medium-high R&D intensive industries include weapons and ammunition; motor vehicles; medical and dental instruments; machinery and equipment; chemicals and chemical products; electrical equipment; railroad, military vehicles, and transport; and IT and other information services. Data on medical and dental instruments are not available. World total does not include all countries and economies due to limitations in data availability.

Source(s):

IHS Markit, special tabulations (2019) of Comparative Industry Service.

Science and Engineering Indicators

KTI industries of selected economies, by share of domestic GDP: selected years, 2003–18

EU = European Union; GDP = gross domestic product; KTI = knowledge and technology intensive.

Note(s):

Output is measured on a value-added basis. Value added is the amount contributed by a country, firm, or other entity to the value of a good or service and excludes purchases of domestic and imported materials and inputs. World total does not include all countries and economies due to limitations in data availability. See Table S6-2.

Source(s):

IHS Markit, special tabulations (2019) of Comparative Industry Service.

Science and Engineering Indicators

Beyond KTI Industries: The Case of Agriculture

Science and technology are also used outside of KTI industries. Such industries may incorporate advanced technology in their services and delivery of their services, use advanced manufacturing techniques, or incorporate technologically advanced inputs in manufacturing. Agriculture, though not classified as a KTI, is an intensive user of advanced and science-based technologies.

The introduction of many technologies, including biotechnology, has fueled productivity growth in U.S. agriculture (Wang et al. 2015:38-45). Agriculture productivity, as measured by total factor productivity, grew at an annualized average rate of 1.5% between 1948 and 2015. Output more than doubled with only slight growth in use of inputs, including labor and capital, allowing the U.S. agricultural sector to feed far more people today while using less farmland than six decades ago (Wang et al. 2015:5).

U.S. agriculture has benefited from R&D funding provided by the U.S. Department of Agriculture, which was $2.4 billion in FY 2017 (NCSES 2019). U.S. universities received $824 million from the U.S. Department of Agriculture in FY 2017 to perform R&D. U.S. agriculture has also made technological progress with basic science that was not directed at agriculture, such as recombinant DNA technology (Wang et al. 2015:39).

U.S. agriculture has also benefited from R&D performed by companies classified outside of the agricultural sector. For example, the pharmaceutical and biotechnology industries performed a total of $81 billion in R&D in 2016 (NCSES 2016). Newer and emerging technologies, including big data, cloud computing, robotics, and drones, are being widely adopted in agriculture in the United States and other countries (Scott, Chen, and Cui 2018).

Although the U.S. agricultural sector is highly productive and an intensive user of technology, China is the world’s largest agriculture producer, accounting for more than one-third of the $2.8 trillion total global value-added output. The EU (10% global share) and the United States (6% global share) are the next largest producers (Figure 6-10). Between 2006 and 2018, the rapid growth of China’s agriculture industry resulted in its global share jumping from 22% to 36%—similar to its trend in the high and medium-high R&D intensive industries (Figure 6-10). The shares of the United States, the EU, and Japan all declined during this period.

Output of agriculture industry for selected regions, countries, or economies: 2006–18

EU = European Union; ROW = rest of world.

Note(s):

Output of agriculture includes forestry and fisheries. Output is measured on a value-added basis. Value added is the amount contributed by a country, firm, or other entity to the value of a good or service and excludes purchases of domestic and imported materials and inputs. China includes Hong Kong. Other selected Asia includes India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam.

Source(s):

Oxford Economics, special tabulations (2019) of Global Industry Databank.

Science and Engineering Indicators

Venture capital investment, an indicator of the commercialization of new technologies, has been increasing rapidly in start-up companies in agricultural technologies, including wireless sensors, remote controlled irrigation systems, and software to optimize planting (Figure 6-11). Global venture capital investment for agricultural technologies jumped from less than $200 million in 2008 to $2 billion in 2018, with the majority of the funds being invested in the United States.

Venture capital investment in agricultural technology, by selected region, country, or economy: 2008–18

EU = European Union; ROW = rest of world.

Source(s):

Pitchbook, venture capital and private equity database, accessed October 1, 2019.

Science and Engineering Indicators