Microbusinesses Performed $5.6 Billion of R&D in the United States in 2020

In 2020, total R&D costs were $7.5 billion, up from $7.2 billion in 2019 and $6.5 billion in 2018. Domestic R&D performance was $5.6 billion in 2020, compared with $4.5 billion in 2018—an increase of 24% over the 2-year period. (See figure 1.)

The R&D performance costs for manufacturing industries over 2018–20 increased by 13%, while nonmanufacturing industries increased by 25% (figure 2).

In 2020, 52% of microbusiness domestic R&D costs (which include performance and non-performance 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 domestic R&D costs. An additional 16% of microbusiness domestic R&D costs was for such other expenses as consultants, contractors, travel, or rent. Another 10% was spent on materials and supplies, 4% on machinery and equipment, and 1% on depreciation on R&D property and equipment (table 2).

The composition of R&D costs varies across industries. Microbusinesses in the information sector, including software publishers (North American Industry Classification System [NAICS] 51), spent 81% of their domestic R&D expenses on salaries, wages, and benefits and expended 4% on payments to others for R&D. Scientific research and development services (NAICS 5417) spent 38% of their R&D dollars on salaries, wages, and benefits and expended 27% on payments to others for R&D.

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.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 2020, R&D costs by microbusinesses in the United States were approximately $6.7 billion (table 1), of which $1.1 billion was for outsourced R&D and the remaining $5.6 billion (or 83%) was R&D performed by the microbusinesses themselves. Of this $5.6 billion in microbusiness R&D performance, selected nonmanufacturing industries accounted for $5.0 billion (table 3). Over two-thirds (69%) 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).

In 2020, three-fourths (76%) of microbusiness R&D performance was paid from the companies’ own funds; 16% was from federal, state, or local governments combined; 4% came from another U.S. company; and 3% was from a foreign owner (table 3). Manufacturing microbusinesses funded more than three-fourths (79%) of their own R&D performance, and selected nonmanufacturing microbusinesses funded three-fourths (75%) of their own R&D performance. There were few differences across industries. In the scientific research and development services industry (NAICS 5417), 70% of microbusiness R&D performance was self-funded and 22% was funded by federal, state, or local governments combined. In 2020, 53% of all government funding went to the scientific research and development services industry compared to 74% of all government funding in 2019.^{​Kindlon A; National Center for Science and Engineering Statistics (NCSES). 2022. Microbusinesses Performed $5.2 billion of R&D in the U.S. in 2019. NSF 22-333. Alexandria, VA: National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf22333.Kindlon A; National Center for Science and Engineering Statistics (NCSES). 2022. Microbusinesses Performed $5.2 billion of R&D in the U.S. in 2019. NSF 22-333. Alexandria, VA: National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf22333.}

There are three types of R&D: basic research, applied research, and experimental development.^{​As defined by the Frascati Manual (7th ed., 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 in order to acquire new knowledge. It is, however, directed primarily towards 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.As defined by the Frascati Manual (7th ed., 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 in order to acquire new knowledge. It is, however, directed primarily towards 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.} In 2020, just over half (53%) of microbusiness R&D performance was development or experimental development, while 41% was applied research and 6% was basic research (table 4). The allocation of R&D across the three types was similar between microbusinesses in manufacturing and nonmanufacturing industries.

Five states (California, New York, Massachusetts, Michigan, and Washington) accounted for 51% of all microbusiness R&D in 2020 (table 5). California led all states in microbusiness R&D activity, accounting for 31% ($1.8 billion) of U.S. microbusiness R&D performance. This was followed by New York with 6% ($342 million) of U.S. microbusiness R&D performance and Massachusetts with 5% ($265 million).

There were just over 39,000 domestic R&D employees (79% male, 21% female) working for microbusinesses in 2020 (table 6), and 88% of those domestic R&D employees were in the selected nonmanufacturing microbusinesses. Among all domestic R&D employees, the greatest percentages worked in the scientific research and development services industry (NAICS 5417) and in the computer systems design and related services industry (NAICS 5415), 28% and 26%, 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 in 2020, 69% were researchers and among these approximately 27,000 researchers, 29% have PhDs. Almost 9,000 or 23% of domestic R&D employees were R&D technicians, and the remaining 3,000 or 8% were R&D support staff.

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 businesses 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 reports 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 2021 ABS, 300,000 companies were sampled to represent the population of 4.9 million companies. For the full 2021 ABS, the unit response rate was 68.8%.

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: 2021 (Data Year 2020) (https://www.nsf.gov/statistics/srvyabs/). Individual data tables and tables with relative standard errors and imputation rates from the ABS 2021 are available in advance of the full report.

Kindlon A; National Center for Science and Engineering Statistics (NCSES). 2022. Microbusinesses Performed $5.6 Billion of R&D in the United States in 2020. NSF 23-305. Alexandria, VA: National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf23305/.

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

National Center for Science and Engineering Statistics
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