Microbusinesses Performed $5.2 Billion of R&D in the United States in 2019

Over half (55%) of microbusiness domestic R&D costs (which include performance and nonperformance expenditures) were for salaries, wages, and benefits. Outsourced R&D—payments to others for R&D, including purchasing R&D services—was 17% of total R&D costs. An additional 15% of microbusiness R&D costs was for other expenses, such as consultants, contractors, travel, or rent; 8% was for materials and supplies; 3% was for machinery and equipment; and 1% was for depreciation on R&D property and equipment (table 2).

Across industries, there is variation in the composition of R&D costs. Industries classified as manufacturing spent 39% of their R&D costs on salaries, wages, and benefits compared to 58% for the selected nonmanufacturing industries. Microbusinesses in the software publishing sector (North American Industry Classification System [NAICS] 5112) spent 85% of their R&D expenses on salaries, wages, and benefits. Microbusinesses in pharmaceuticals and medicines (NAICS 3254) spent 22% of their R&D performance dollars on salaries, wages, and benefits, and they expended 53% on payments to others for R&D including purchasing R&D services. Scientific research and development services (NAICS 5417) spent 43% of their R&D dollars on salaries, wages, and benefits and expended 27% on payments to others for R&D (including purchasing R&D services).

As was the case in previous ABS surveys, microbusiness R&D is highly concentrated within a few industries.^{​R&D questions were asked only of manufacturers and certain selected nonmanufacturing industries that in previous NCSES surveys (2017 ABS, BRDI-M, and Business R&D Innovation Survey) represented almost all R&D of microbusinesses in the United States.} In 2019, R&D costs by microbusinesses in the United States were approximately $6.3 billion (table 2), of which $1.1 billion was for outsourced R&D and $5.2 billion (or 83%) was R&D performed by the microbusinesses themselves. Of this $5.2 billion in microbusiness R&D performance, selected nonmanufacturing industries accounted for $4.6 billion (table 3). Nearly three-fourths (72%) of all microbusiness R&D performance was done by microbusinesses classified by the following three R&D intensive industries: architectural, engineering, and related services (NAICS 5413), computer systems design and related services (NAICS 5415), and scientific research and development services (NAICS 5417).

There are three types of R&D: basic research, applied research, and development.^{​As defined by the Frascati Manual (OECD 2015), basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. Applied research is original investigation undertaken to acquire new knowledge. It is, however, directed primarily toward a specific, practical aim or objective. Experimental development is systematic work, drawing on knowledge gained from research and practical experience and producing additional knowledge, which is directed to producing new products or processes or to improving existing products or processes. See Organisation for Economic Co-operation and Development (OECD). 2015. Frascati Manual: Guidelines for Collecting and Reporting Data on Research and Experimental Development. The Measurement of Scientific, Technological and Innovation Activities. Paris: OECD Publishing.} Just over half (52%) of microbusiness R&D performance in 2019 was development, 41% was applied research, and 7% was basic research (table 3). This is compared to 2018, when almost two-thirds (65%) of microbusiness R&D performance was development, 30% was applied research, and 5% was basic research.^{​Kindlon A; National Center for Science and Engineering Statistics (NCSES). 2021. Microbusinesses Performed $4.5 Billion of R&D in the United States in 2018. NSF 22-309. Alexandria, VA: National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf22309/.}

In 2019, four-fifths (79%) of microbusiness R&D performance was paid from the companies’ own funds, 14% was from federal, state, or local governments combined, 4% came from another U.S. company, and 2% was from a foreign owner (table 4). Manufacturing microbusinesses fund 84% of their R&D performance, and nonmanufacturing microbusinesses fund 78% of their R&D performance. In the scientific research and development services industry (NAICS 5417), 62% of microbusiness R&D performance was self-funded, and 29% was funded by federal, state, or local governments combined. Three-fourths (74%) of all government funding ($735 million) spent on microbusiness R&D went to companies in the scientific research and development industry group (NAICS 5417).

Six states (California, Florida, Massachusetts, Texas, Colorado, and New York) accounted for 53% of all microbusiness R&D in 2019 (table 5). California led all states in microbusiness R&D activity, accounting for 27% of the U.S. microbusiness R&D performance with $1.4 billion of microbusiness R&D performance.

More than three-fourths (76%) of microbusiness R&D performance was by male-majority–owned (figure 1) companies. Female-majority–owned microbusinesses accounted for 14% of R&D performance, and microbusinesses that are equally owned by men and women accounted for 5% of R&D performance. Almost three-fourths (71%) of R&D performance is spent by microbusinesses that are primarily owned by nonminority owners (figure 2). Minority-owned companies accounted for 21% of microbusinesses R&D performance in 2019.

There were almost 38,000 domestic R&D employees (81% men, 19% women) working for microbusinesses in 2019 (table 6), and 90% of those domestic R&D employees were in the selected nonmanufacturing microbusinesses.^{​The Business Enterprise Research and Development Survey found that in 2019 for businesses with 10 or more employees, there were approximately 1,384,000 domestic fulltime R&D employees. See table 61 in National Center for Science and Engineering Statistics (NCSES). 2020. Business Enterprise Research and Development: 2019. NSF 22-329. Alexandria, VA: National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf22329.} Among all domestic R&D employees, the highest percentages worked in the computer systems design and related services industry (NAICS 5415) and in the scientific research and development services industry (NAICS 5417), 35% and 27%, respectively.

R&D employee occupations included researchers (e.g., R&D scientists, engineers, and their managers), R&D technicians and equivalent staff, and R&D support staff (clerical and other). Among domestic R&D employees only, 74% were researchers, 20% were R&D technicians, and the remaining 6% were R&D support staff. More than a quarter (28%) of the domestic researchers had doctoral degrees.

In this InfoBrief, R&D costs and performance are expressed in current U.S. dollars and are not adjusted for inflation. For ABS, a microbusiness is defined as a business organization located in the United States, either U.S. owned or a U.S. affiliate of a foreign parent company, of one or more establishments under common ownership or control, with one to nine domestic employees.

The survey was administered to companies whether or not they were known to have R&D activity. ABS collected detailed statistics from microbusinesses located in the United States on R&D expenditures, R&D employees, intellectual property, company and primary owner characteristics, and innovation activities.

Only microbusinesses (those with one to nine employees) are asked the R&D questions, and only those microbusinesses are presented in this InfoBrief.

The statistics from the survey are based on a sample; as such, they are subject to both sampling and nonsampling errors (see “Technical Notes” in the data tables at https://www.nsf.gov/statistics/srvyabs/). Microbusinesses with less than $50,000 in R&D are excluded from the ABS national estimates and this InfoBrief.

For the full 2020 ABS, 300,000 companies were sampled to represent the population of 5.3 million companies. For the full 2020 ABS, the unit response rate was 71.3%.

The full set of data tables on R&D, company demographics, innovation, technology, and patent and intellectual property protection from this survey will be available in the report Annual Business Survey: 2020 (Data Year 2019) (https://www.nsf.gov/statistics/srvyabs/). Individual data tables and tables with relative standard errors and imputation rates from the ABS 2020 are available in advance of the full report.

Kindlon A; National Center for Science and Engineering Statistics (NCSES). 2022. Microbusinesses Performed $5.2 Billion of R&D in the United States in 2019. NSF 22-333. Alexandria, VA: National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf22333/.

Audrey Kindlon
Survey Manager
Tel: (703) 292-2332
E-mail: akindlon@nsf.gov

National Center for Science and Engineering Statistics
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