Microbusinesses Performed $5.7 billion of R&D in the United States in 2022

Figure 1 presents the trajectory of total R&D costs, total domestic R&D costs, and R&D performance for microbusinesses for the 2018–22 timeframe. Although the estimated amounts decreased from 2021 to 2022, the differences were not statistically significant. Total domestic R&D performance increased 26% from 2018 to 2022 ($4.5 billion to $5.7 billion), although total R&D costs and domestic R&D costs increased 18% and 16%, respectively, over the same time period (from $6.5 billion in 2018 to $7.6 billion in 2022 and from $5.8 billion in 2018 to $6.7 billion in 2022, respectively).^{​Reported percent changes are based on the data in the full set of tables (available at the ABS homepage) rather than the rounded values shown here.,​The smallest companies on the Business Enterprise Research and Development Survey also experienced a decrease in domestic R&D performance over the same time period. Businesses with 10 to 19 employees experienced a decrease in domestic R&D performance from 2021 to 2022, from $5.8 billion to $5.5 billion. Businesses with 20 to 49 employees experienced a decrease in domestic R&D performance during that period, from $15.9 billion to $15.6 billion. But it is important to note that these decreases are not statistically significant.} In 2022, domestic R&D costs by microbusinesses in the United States were approximately $6.7 billion (table 1), of which $1 billion was for outsourced R&D and the remaining $5.7 billion (or 85%) was for R&D performed by the microbusinesses themselves. This proportion is not significantly different from the ones found in 2021 and 2020, where 84% and 83%, respectively, of domestic R&D was performed by the microbusinesses.

Of the $6.7 billion in domestic R&D costs in 2022, 55% was for salaries, wages, and fringe benefits (table 2). For manufacturing businesses, 39% of domestic R&D costs was spent on salaries, wages, and fringe benefits; for selected nonmanufacturing businesses, it was 57%. The information sector (NAICS [North American Industry Classification System code] 51) spent an even larger proportion of its domestic R&D costs on salaries, wages, and fringe benefits (80%). Nearly identical to the information sector is the computer systems design and related services industry group (NAICS 5415), where 79% of domestic R&D costs was spent on salaries, wages, and fringe benefits.

Other types of costs for domestic R&D included payments to others for R&D (15%), materials and supplies (9%), expensed machinery and equipment (3%), and depreciation on R&D property and equipment (1%). The remaining 17% was used for other expenses, such as consultants, contractors, travel, or rent.

In 2022, microbusinesses spent $11.4 billion on capital expenditures, but only 3% of capital expenditures was for R&D operations (table 1). Nearly half (46%) of the capital expenditures for R&D operations was for machinery and equipment, 12% was for capitalized software, 11% was for intellectual property, 3% was for buildings and land improvement, and less than 1% was for land acquisition. The remaining 29% of the capital expenditures for R&D operations was for other costs.

As was the case in findings from previous ABS surveys, microbusiness R&D was highly concentrated within a few industries in 2022.^{​R&D questions were asked only of manufacturers and certain selected nonmanufacturing industries. In previous NCSES surveys (2017 ABS, Business R&D and Innovation Survey-Microbusiness, and Business R&D Innovation Survey) these industries represented almost all R&D of microbusinesses in the United States.} Selected nonmanufacturing industries accounted for 88% of the microbusiness domestic R&D performance costs (table 3). Almost half of that amount (45%), or 39% of all domestic R&D costs, was from scientific research and development services (NAICS 5417). Computer systems design and related services (NAICS 5415) accounts for 25% of all microbusiness domestic R&D performance costs. Among the manufacturing industries (12% of all microbusiness domestic R&D performance costs), chemicals (NAICS 325) and computer and electronic products (NAICS 334) each made up 3% of the total domestic R&D performed by microbusinesses.

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 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, 7th ed. Paris: OECD Publishing.} In 2022, 57% of microbusiness R&D performance was for development, 36% was for applied research, and 7% was for basic research (figure 2). The allocation of R&D across the three types was similar between microbusinesses in manufacturing and nonmanufacturing industries.

In 2022, three-quarters (77%) of microbusiness R&D performance was paid for from the companies’ own funds; 13% was from federal, state, or local governments combined; 5% was from another U.S. company; and 3% was from a foreign owner (table 4).

The information subsector (NAICS 51) had the highest percentage of self-funding for R&D (95%). In scientific research and development services (NAICS 5417), the industry with the most domestic R&D performance costs, 69% of microbusiness R&D performance was self-funded and 19% was funded by federal, state, or local governments combined.

Estimated federal and state government funding for microbusinesses changed from $1.1 billion in 2021 to $730 million in 2022, a decrease of 32%. However, the difference was not statistically significant. In 2022, 79% of all government funding 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 (NAICS 5417). These same industries received the highest percentage of government funding for microbusinesses in 2021.

In 2022, five states (California, Massachusetts, Pennsylvania, Texas, and New York) accounted for 54% of all domestic microbusiness R&D performance cost. In 2021, California, Texas, and Massachusetts were also among the top five states (the other two were Florida and Washington). In 2021, the top five states accounted for 51% of all domestic microbusiness R&D performance cost.

There were just over 36,000 domestic R&D employees (78% male and 22% female) working for microbusinesses in 2022 (table 5), and 89% of those domestic R&D employees were in the selected nonmanufacturing microbusinesses.

Among domestic R&D employees across all selected industries, the largest numbers of employees worked in the computer systems design and related services industry (NAICS 5415) and in the scientific research and development services industry (NAICS 5417), 33% and 28%, respectively.

R&D employee occupations include 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 2022, 71% were researchers, and among these approximately 26,000 researchers, 28% have PhDs.

Almost 8,000, or 22% of domestic R&D employees, were R&D technicians, and the remaining 2,600, or 7%, 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 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. 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 (those businesses with one to nine employees) are asked the R&D questions, and data for 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” at https://ncses.nsf.gov/surveys/annual-business-survey/2023#methodology). Microbusinesses with less than $50,000 in R&D are excluded from the ABS national estimates and this InfoBrief.

For the full ABS 2023 (reference year 2022), 850,000 employer companies were sampled to represent the population of 4.9 million employer companies, and the unit response rate was 62.0%.

The full set of data tables on R&D, company demographics, innovation, technology, and patent and intellectual property protection from this survey will be available in the report Annual Business Survey: 2023 (Data Year 2022) (https://ncses.nsf.gov/surveys/annual-business-survey/2023). Individual data tables and tables with relative standard errors and imputation rates from the ABS 2023 are available from the Survey Manager upon request.

NCSES has reviewed this product for unauthorized disclosure of confidential information and approved its release (NCSES-DRN24-040).

Kindlon A; National Center for Science and Engineering Statistics (NCSES). 2024. Microbusinesses Performed $5.7 Billion of R&D in the United States in 2022. NSF 25-302. Alexandria, VA: U.S. National Science Foundation. Available at https://ncses.nsf.gov/pubs/nsf25302.

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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