Microbusinesses Performed $6.1 Billion of R&D in the United States in 2021

Figure 1 presents the trajectory of total R&D costs, total domestic R&D costs, and R&D performance for microbusinesses for the 2018–21 time frame. Total domestic R&D performance increased 35% over the 3-year period (from $4.5 billion in 2018 to $6.1 billion in 2021), whereas total R&D costs and domestic R&D costs each increased 26% over the same period (from $6.5 billion to $8.1 billion and from $5.8 billion to $7.3 billion, respectively).

Of the $7.3 billion in domestic R&D costs (including performance and nonperformance costs) in 2021, 56% were for salaries, wages, and fringe benefits. Outsourced R&D—payments to others for R&D, including purchasing R&D services—was 16% of total domestic R&D costs. An additional 17% of microbusiness domestic R&D costs was for other expenses such as consultants, contractors, travel, or rent. Another 8% was spent on materials and supplies, 3% on machinery and equipment, and 1% on depreciation on R&D property and equipment (table 2).

Manufacturing industries spent 46% of their domestic R&D costs on salaries, wages, and fringe benefits, whereas selected nonmanufacturing industries spent 57% on salaries, wages, and fringe benefits; however, this difference is not statistically significant. Computer systems design and related services (NAICS 5415) and scientific research and development services (NAICS 5417)—the two largest industries by domestic R&D performance costs—spent 73% and 41% on salaries, wages, and fringe benefits, respectively.

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 2021, domestic R&D costs by microbusinesses in the United States were approximately $7.3 billion (table 1), of which $1.1 billion was for outsourced R&D and the remaining $6.1 billion (or 84%) was R&D performed by the microbusinesses themselves. This proportion was nearly identical to findings from 2020, where 83% of domestic R&D was performed by microbusinesses.

Selected nonmanufacturing industries accounted for 88% of the domestic R&D performance costs in 2021. Scientific research and development services (NAICS 5417) accounted for 37% of domestic R&D performance, and just over one-half (53%) of this from R&D in the physical, engineering, and life sciences (except nanotechnology and biotechnology) (NAICS 541715) (table 2). One-quarter (26%) of domestic R&D performance costs were from the computer systems design and related services industry (NAICS 5415).

There are three types of R&D: basic research, applied research, and development.^{​As defined by the Frascati Manual, 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 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.} In 2021, just over one-half (52%) of microbusiness R&D performance was for development, 36% was for applied research, and 12% was for basic research (table 3). The allocation of R&D across the three types was similar between microbusinesses in manufacturing and nonmanufacturing industries.

In 2021, three-fourths (74%) of microbusiness domestic R&D performance was paid from the companies’ own funds; 17% was from federal, state, or local governments combined; 4% came from another U.S. company; and 3% was from a foreign owner (table 4). Few differences were found across industries. In the scientific research and development services industry (NAICS 5417), the industry with the most domestic R&D performance costs, 66% of microbusiness R&D performance was self-funded and 22% was funded by federal, state, or local governments combined. In 2021, 82% of all government funding (federal, state, or local) for microbusinesses went to three industries: architectural, engineering, and related services (NAICS 5413); computer systems design and related services (NAICS 5415); and scientific research and development services industry (NAICS 5417).

In 2020, five states (California, New York, Massachusetts, Michigan, and Washington) accounted for 51% of all domestic microbusiness R&D performance cost.^{​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/.} In 2021, the five states (California, Texas, Florida, Massachusetts, Washington) also accounted for 51% of all domestic microbusiness R&D performance cost (table 5). California made up nearly one-third of all domestic microbusiness R&D performance cost in 2021 and its estimated costs were more than six times the estimated costs of Texas (which had the next highest estimated costs).

Just under 39,000 domestic R&D employees (78% male, 22% female) worked for microbusinesses in 2021, and 88% of those domestic R&D employees were in the selected nonmanufacturing microbusinesses (table 6). Among all domestic R&D employees, the largest percentages worked in the computer systems design and related services industry (NAICS 5415) and scientific research and development services industry (NAICS 5417) (30% and 26%, respectively), but these percentages are not significantly different.

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 2021, 73% (about 28,000 employees) were researchers; among these researchers, 26% had PhDs. Almost 7,500, or 19% of domestic R&D employees, were R&D technicians, and the remaining (about 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 the ABS, a microbusiness is defined as a business organization located in the United States, either a U.S.-owned company 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. The 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 (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” under the Methodology tab at https://ncses.nsf.gov/surveys/annual-business-survey/). Microbusinesses with less than $50,000 in R&D are excluded from the ABS national estimates and this InfoBrief.

For the full ABS 2022 (reference year 2021), 300,000 employer companies were sampled to represent the population of 4.9 million employer companies, and the unit response rate was 67.0%.

The full set of data tables on R&D, company demographics, innovation, technology, and patent and intellectual property protection from this survey will be listed under the Data tab at https://ncses.nsf.gov/surveys/annual-business-survey/. Individual data tables and tables with relative standard errors and imputation rates from the ABS 2022 are available from the Survey Manager upon request.

Kindlon A; National Center for Science and Engineering Statistics (NCSES). 2023. Microbusinesses Performed $6.1 Billion of R&D in the United States in 2021. NSF 24-302. Alexandria, VA: National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf24302.

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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