The U.S. R&D system consists of the activities of a diverse group of R&D performers and sources of funding. Included here are private businesses, the federal government, nonfederal governments, higher education institutions, and nonprofit organizations. The organizations that perform R&D often receive significant levels of outside funding, and organizations that fund R&D may also themselves be performers.

The principal sources of data for the indicators and analyses discussed in this section come from annual surveys of the R&D expenditures of these major performers and funders, conducted by the National Center for Science and Engineering Statistics (NCSES) within the National Science Foundation (NSF). A Technical Appendix to this report provides an overview of these surveys and the methods involved in collecting, compiling, and analyzing the data.^{​These data time series and additional statistics are part of the NCSES National Patterns of R&D Resources series released yearly and can be accessed on the NCSES website at https://www.nsf.gov/statistics/natlpatterns/. In addition to the data presented in this section’s figures and tables, NCSES statistics on U.S. R&D performance go back to 1953 and provide details by R&D performers, funders, and type of R&D.}

Research and experimental development (R&D) performed in the United States totaled $666.9 billion in 2019 (Figure RD-1; Table RD-1). The estimated total for 2020, based on performer-reported expectations, is $708.0 billion. These numbers compare with U.S. R&D totals of $494.5 billion in 2015 and $406.6 billion in 2010. (All amounts and calculations are reported in current dollars, unless otherwise noted.)

Year-over-year increases in the total of U.S. R&D expenditures averaged $19.2 billion over the 2010–16 period (calculated from the data in Table RD-1). This level of annual increase was, in general, a sufficient pace to remain well ahead of the rate of expansion of the nation’s gross domestic product (GDP) (Table RD-2). Nonetheless, an even stronger pace of R&D increase has emerged in the years since. The U.S. R&D total in 2017 was $32.3 billion ahead of the previous year; $50.8 billion in 2018; and $62.0 billion in 2019—and, as presently estimated, $41.1 billion in 2020 (Figure RD-2). This pattern of sustained annual increase in the U.S. total R&D since 2010 has been due mainly to consistently higher levels of business R&D performance, which have been near 80% or more of the total annual increases since 2010 (Figure RD-2).

Adjusting for inflation, growth in U.S. total R&D averaged 3.8% annually over the 2010–19 period, well above the 2.2% average growth of U.S. gross domestic product (GDP) over the same period (Table RD-2).^{​In this report, dollars adjusted for inflation (i.e., constant dollars) are based on the GDP implicit price deflator (currently in 2012 dollars) as published by the Department of Commerce, Bureau of Economic Analysis (BEA) (https://www.bea.gov/iTable/index_nipa.cfm). Note that GDP deflators are calculated on an economy-wide scale and do not explicitly gauge R&D.} The average annual growth of U.S. total R&D in the prior decade (2000–10) was lower at 2.1%, compared to 1.8% rate of GDP expansion.^{​Due to sample variability in the data for the business R&D component (particularly the variability for 2000), the compound annual growth rate of the U.S. R&D total over the 2000–10 period fails (but only barely so) to exceed the corresponding rate of growth of GDP at a 90% confidence level.} The estimate for 2020 shows R&D growing at 4.9%, compared to a 3.4% decline in GDP.

The ratio of total national R&D expenditures to GDP is widely used by national statistical offices and policy analysts as an overall gauge of the intensity of a nation’s R&D effort. In this new edition of the data, the ratio of U.S. R&D to GDP was 3.12% in 2019, and it is estimated to be 3.39% in 2020.

The U.S. ratio generally has been rising since the mid-1990s, although with some periods of decline (Figure RD-3). The highest U.S. ratios recorded in the past have been 2.79% in 1964, 2.78% in 2009, 2.79% again in 2016, 2.84% in 2017, and 2.95% in 2018.^{​Due to sample variability in the data for the business R&D component, the calculated R&D-to-GDP ratios for 1964, 2009, and 2017 are not significantly different from one another at a 90% confidence level.} Reaching an R&D intensity level above 3.0% is widely regarded in the R&D policy community as a notable national achievement. Some further maturity in the data is warranted in interpreting the reported 3.39% for 2020—both due to its estimated nature and the fact that the sizable uptick from 2019 reflects both a rising R&D level but also a declining GDP.

Most of the rise in the R&D-to-GDP ratio over the past several decades has been the result of the increase in nonfederal spending on R&D, particularly by the business sector. This arises largely 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 share of federally funded R&D expenditures declined from the mid-1980s to the late 1990s, notably from cuts in defense-related R&D. This was followed by a gradual uptick through 2009, driven by 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 (ARRA). The federally funded share, however, has returned to a path of mainly decline since 2010 (Figure RD-3).

The business sector is by far the largest performer of U.S. R&D. In 2019, domestically performed business R&D accounted for $498.2 billion, or 75% of the $666.9 billion national R&D total (Table RD-1 and Table RD-3).^{​Starting in 2016, the business R&D data reported by the National Patterns series include the R&D expenditures reported by microbusinesses (generally, companies with fewer than 10 employees). These new data come from NCSES surveys fielded for 2016 and onward: the 2016 Business R&D and Innovation Survey–Microbusiness, which collected statistics on the R&D activities of businesses with 1–4 employees, and for 2017–19, the Annual Business Survey (ABS), which collected statistics on the R&D activities of businesses with 1–9 employees. The totals for business R&D performance are $4 billion to $5 billion higher for 2016 and beyond as a result of this microbusiness R&D being included.} The business sector’s status as the predominant player in national R&D performance has long been the case, with its annual share ranging between 69% and 75% over the two-decade period of 2000–19 (Figure RD-1).

Adjusted for inflation, growth in business R&D averaged 4.8% annually over the period 2010–19, well ahead of the 3.8% annual average for U.S. total R&D and the 2.2% annual average for GDP (Table RD-2).

R&D performed in the United States by the higher education sector totaled $78.2 billion in 2019, or 12% of U.S. total R&D (Table RD-1 and Table RD-3). Over the period 2000–19, the higher education share of U.S. R&D has ranged between 11% and 14%.^{​The data for higher education R&D appearing in this report adjust the academic fiscal year basis of NCSES’s Higher Education Research and Development Survey data to calendar year and net out pass-throughs of research funds to remove double counting in the national totals (see NCSES National Patterns of R&D Resources: https://www.nsf.gov/statistics/natlpatterns/). Accordingly, the higher education data included in this report differ from those cited in the Indicators 2022 thematic report “Academic Research and Development.”}

Adjusted for inflation, growth in this sector’s R&D performance averaged 1.6% annually over 2010–19, well behind both U.S. total R&D (3.8%) and GDP (2.2%) (Table RD-2). The year-by-year trajectory in higher education R&D expenditures has been marked by contrasts: relatively low growth in 2010 and 2011, a noticeable slowdown in 2012–14, and then higher but still comparatively modest rates (similar to those for GDP) in 2015–19.

The federal government performed $62.8 billion, or 9% of U.S. R&D in 2019 (Table RD-1 and Table RD-3). This included $39.9 billion (6% of the U.S. total) performed by the intramural R&D facilities of federal agencies and $22.9 billion (3%) of R&D performed by the 42 federally funded research and development centers (FFRDCs).^{​FFRDCs are R&D-performing organizations that are exclusively or substantially financed by the federal government. An FFRDC is operated to provide R&D capability to serve federal agency mission objectives or, in some cases, to provide major facilities at universities for research and associated training purposes. Each FFRDC is administered by an industrial firm, a university, a nonprofit institution, or a consortium. NCSES maintains a current Master Government List of Federally Funded R&D Centers. For information on the current FFRDC count, along with its history, see https://www.nsf.gov/statistics/ffrdclist/.} The federal share of U.S. R&D performance rose from about 11% in 2000 to 12% in 2010 but has declined since then, down to about 9% in 2019.

Adjusted for inflation, this sector’s R&D performance over 2010–19 has increased at an annual rate of 0.6%—in contrast to the 3.8% rate for total U.S. R&D and 2.2% for GDP (Table RD-2). In the previous decade (2000–10), federal R&D performance grew an average of 3.8% yearly, well ahead of U.S. total R&D (2.1%). However, the year-over-year changes for 2010–19 are a varied picture, with outright declines or low growth rates for 2012–17 but a turn to markedly higher rates of increase in 2018–19. Part of this history reflects the waning after 2010 of the incremental funding from ARRA and the more challenging environment for federal budget support after 2011; in 2018 and 2019, the results of lengthy congressional debates on federal spending resulted in substantial increases to federal funding for R&D.^{​An additional factor affecting the reported level of federal intramural R&D performance in 2016 and beyond is OMB’s adoption in 2016 of a definition of development that narrowed what is counted to experimental development. The largest effect has been the exclusion of DOD’s Budget Activity 6.7, Operational Systems Development, from the federal tally of R&D expenditures. As a result, the federal intramural R&D totals reported for 2016 and beyond (in Figure RD-2, Table RD-1, and elsewhere in this report) are approximately $5 billion lower than they would have been if tallied in the same way as 2015 and earlier. For a further discussion of this technical development in federal R&D reporting, see this report’s section Recent Trends in Federal Support for U.S. R&D.}

State agency intramural R&D performance in 2019 totaled $675 million—a small share (about 0.1%) of the U.S. total (Table RD-1 and Table RD-3). This includes all 50 states and the District of Columbia.

R&D performed in the United States by nonprofit organizations (excluding higher education institutions, the federal government, and nonfederal governments) was an estimated $27.0 billion in 2019 (Table RD-1 and Table RD-3). This was 4% of U.S. total R&D, a share that has changed little since the early 2000s.

Matching 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 2019, business sector’s funding accounted for $481.8 billion, or 72% of the total U.S. R&D performance (Table RD-3). Nearly all (98%) of the business sector’s funding for R&D that year supported business R&D performance—whether performed by the company itself or in support of the R&D performed by other companies.^{​R&D funding by business in this section refers to business funding for domestic business R&D performance plus business funding for FFRDCs and U.S. academic and nonprofit R&D performers.} Most of the remainder went to R&D performers in higher education and nonprofit organizations, along with small amounts to FFRDCs and nonfederal governments.

The business sector’s dominant role in the nation’s R&D funding began in the early 1980s, when its support started to exceed 50% of all U.S. R&D funding (Figure RD-4). Over 2000–19, the business sector’s share of the U.S. R&D funding total has ranged from 61% to 72% yearly.

The federal government is the second-largest source of funding for U.S. R&D, behind the business sector. It is a significant resource for most of the U.S. R&D performer sectors, except the business sector, in which the federal role, while far from negligible, is overshadowed by businesses funding business R&D.

Funds from the federal government accounted for $133.8 billion, or 20% of U.S. total R&D in 2019 (Table RD-1). The largest amounts of federal funding were directed to R&D performance by the federal government, higher education, and businesses (Table RD-3). In 2019, federal funding supported about 51% of academic R&D performance, 5% of business R&D performance, 33% of nonprofit R&D performance, all of federal intramural R&D performance, and almost all (98%) of FFRDC R&D performance.

Several decades ago, the federal government was the leading sponsor of the nation’s R&D—funding 67% of all U.S. R&D in 1964 (Figure RD-4). The federal share decreased to half (49%) of all funding in the late 1970s, to a little over a third (36%) in the mid-1990s, and to a quarter (25%) by the turn of the century. (A major factor in the decrease of the federal share of national R&D was the sharp decline in funding for space R&D after the United States won the race to the moon in the late 1960s. At largely the same time, the business sector was rapidly expanding its energy-related R&D in response to the world oil supply crises. For additional detail on this history, see Jankowski [2001, 2013].) The share ticked up again to 31% in 2009 and 2010, amid changing business conditions and expanded federal funding for health, defense, and counterterrorism R&D (including ARRA funding). The federal share, however, again declined in subsequent years and stood at 20% in 2019. Some of this recent year’s decline reflects the waning of the ARRA incremental funding and the more challenging federal budget environment since 2011. Another reason for the decline, however, is a natural consequence of the large increases in R&D funding from the business sector that also have been happening in these recent years.

The remainder of R&D funding from other sources is a smaller component: $51.3 billion in 2019, or about 8% of all U.S. R&D performance (Table RD-3). Of this amount, $21.6 billion was from higher education’s own institutional funds, nearly all of which remain in the academic sector; $4.9 billion was from state and local governments, primarily supporting academic research; and $24.8 billion was from nonprofit organizations, mostly funding this sector’s own R&D. Of the estimated nonprofit total, some funds ($7.9 billion) support R&D in higher education, and small amounts supported that of businesses ($0.9 billion), FFRDCs ($0.2 billion), and state government ($0.1 billion).

In 2019, basic research activities comprised $102.9 billion (15%) of total U.S. R&D expenditures, followed by applied research at $132.0 billion (20%) and $432.0 billion (65%) for experimental development (Table RD-3 and Table RD-4). (For definitions of these terms, see the Glossary section.)^{​R&D encompasses a wide range of activities, from research yielding fundamental knowledge in the physical, life, and social sciences; to research addressing national defense needs and such critical societal issues as global climate change, energy efficiency, and health care; to the development of platform or general-purpose technologies that can enable the creation and commercial application of new and improved goods and services. The most widely applied classification of these activities characterizes R&D as basic research, applied research, or experimental development (OECD 2015; OMB 2016; NSF 2018). This longstanding trio of categories has been criticized over the years as reinforcing the idea that creating new knowledge, invention, and innovation is a linear process beginning with basic research, followed by applied research and then development, and ending with the production and diffusion of new technologies and eventually commercially significant innovations. Nonetheless, alternative classifications that provide measurable distinctions, capture major differences in types of R&D, and are widely accepted as superior have yet to be developed. Despite the recognized limitations of the basic research–applied research–development classification framework, it remains useful in providing indications of differences in the motivation, expected time horizons, outputs, and types of investments associated with R&D projects.}

Higher education institutions continued to be the largest performer of U.S. basic research in 2019, while the federal government remained the largest source of funding for basic research. Higher education performed just under half (48%) of all basic research, and the federal government funded about 41% of all basic research performed (Table RD-3). The business sector was also a substantial performer (32%) and funder (33%) of basic research. The federal government (agency intramural laboratories and FFRDCs) and nonprofit organizations were smaller performers, accounting for 12% and 9%, respectively, of the U.S basic research performance total in 2019.

The business sector was both the largest performer (58%) and largest funder (56%) of applied research in 2019 (Table RD-3). Higher education (17%), the federal government (16%), and nonprofit organizations (10%) were the next-largest performers of applied research.

The vast majority of business sector’s funding for applied research remained within the sector (Table RD-3). The federal government provided about a third of applied research funding, with its funding spread broadly across different sectors; higher education and federal intramural laboratories and FFRDCs received the largest amounts.

The business sector predominates in experimental development, performing 90% of the R&D in this category in 2019 (Table RD-3).^{​The Organisation for Economic Co-operation and Development notes that in measuring R&D, one source of error is the difficulty of locating the dividing line between experimental development and the further downstream developmental activities needed to realize an innovation (OECD 2015:51–52). Most definitions of R&D set the cutoff at the point when a particular product or process reaches market readiness. At this point, the defining characteristics of the product or process are substantially set—at least for manufactured goods, if not also for services—and further work is aimed primarily at developing markets, engaging in preproduction planning, and streamlining the production or control system.} The federal government accounted for another 7%, much of it defense related, with the federal government itself the primary user of the results. By contrast, higher education and nonprofit organizations perform relatively little development (2% and 1%, respectively, of the total in 2019).

The business sector provided 87% of the funding for the experimental development performed in 2019, nearly all of which remained in that sector (Table RD-3). Federal funding accounted for about 12% of the experimental development total, with the business sector (especially defense-related industries) and federal intramural laboratories as the largest recipients.

Over the 2010–19 period, the split of U.S. total R&D expenditures among the three types of R&D has not largely changed. Applied research has tracked in the range of 19%–21% throughout the period (Table RD-4). However, there is the appearance of a gradual drop in the share of basic research, from 19% in 2010 to 15% in 2019. The opposite was the case for experimental development, which rose from 62% in 2010 to 65% in 2019. Nonetheless, adjusting for inflation, about $12 billion more basic research was performed in 2019 than in 2010, $35 billion more applied research, and $123 billion more experimental development.

Interesting shifts in the relative roles of performers and funders continue to be seen in the realm of basic research. In 2010, businesses performed 21% of U.S. basic research, but the sector’s role rose to 32% in 2019—due in large part to substantial increases in basic research performed by the pharmaceuticals and medicines industries as well as the information industry and the professional, scientific, and technical services industry. Over the same period, the share of U.S. basic research performed by higher education institutions—historically, the nation’s largest basic research performer—declined from 51% in 2010 to 48% in 2019. Further, businesses funded 23% of U.S. basic research in 2010, rising to 33% in 2019. Over the same period, the federally funded share declined from 52% in 2010 to 41% in 2019.^{​The data presented in this paragraph come from NCSES National Patterns of R&D Resources, annual series, 2010–20.}

(While these key features of the data are noteworthy, care is needed in definitively identifying trends. Various methodological improvements in the R&D performer surveys—but no material revisions in the type-of-R&D definitions—have been made over time, particularly before 2010, with the net implication that small percentage changes in the reported shares may not be meaningful.)^{​The arithmetic is straightforward to calculate type-of-R&D shares for past years, based on the time-series data reported annually in the NCSES National Patterns of R&D Resources series. Nonetheless, care must be taken in describing the trends for these shares over time. Although NCSES’s sectoral surveys of R&D expenditures have long and consistently used the Organisation for Economic Co-operation and Development Frascati Manual’s type-of-R&D definitions (OECD 2015), the survey instruments have occasionally been revised to improve the reliability of the responses received, most notably in the academic, business, federal funds, and FFRDC R&D expenditure surveys. Accordingly, some differences observed in the shares directly calculated from the supplemental table time-series data more nearly reflect the effects of these improvements in the type-of-R&D survey questions than changes in the type-of-R&D shares among R&D performers.}