Geographic Distribution of Business R&D Performance in 2021

From 2001 to 2021, expenditures for research and development (R&D) performed by for-profit businesses in the United States doubled in real terms. Over half of the growth in U.S. business R&D over this period can be attributed to 2 states: California and Washington. In 2001, the 10 largest states in terms of business R&D accounted for 70% of the national estimate that could be attributed to a state, and the 3 largest states (California, Michigan, and Massachusetts) accounted for 37%.^{​In 2001, 4.9% of U.S. business R&D performance could not be assigned a state location. In 2021, 0.1% of the same measure could not be assigned a state location. All location shares of U.S. R&D presented in this InfoBrief exclude these undistributed amounts.} Business R&D was more geographically concentrated in 2021, with the 10 largest states accounting for 75% of the national estimate and the 3 largest (California, Washington, and Massachusetts) accounting for 50% (figure 1 and table 1). Data are from the Business Enterprise Research and Development (BERD) Survey, cosponsored by the National Center for Science and Engineering Statistics within the U.S. National Science Foundation and the Census Bureau.

Over this period, business R&D expenditures as a percentage of private industry output in the United States grew from 2.20% to 2.90%, indicating an overall increase in the intensity of R&D activity among businesses in the United States.^{​Private industry output is a measure of industries’ sales or receipts and is estimated by the Bureau of Economic Analysis.} Figure 2 shows this indicator for the 50 U.S. states and the District of Columbia in 2021. The 3 largest states in terms of business R&D expenditures also have the highest values of this indicator. Each are estimated to have business R&D expenditures as a percentage of private industry output over twice the national average. In contrast, Texas and New York, 2 of the top 10 states in terms of business R&D performance, have business R&D expenditures as a percentage of private industry output that are about half the national average, placing them close to the median value of this indicator. The relatively low business R&D intensities for these 2 states is in part due to the outsized role of industries with low-R&D intensity in their economies: oil and gas in Texas and financial services in New York. Outside of the top 10 states in terms of business R&D performance, only 4 had higher business R&D expenditures as a percentage of private industry output than the U.S. average: Connecticut, Delaware, New Hampshire, and Oregon.

Focusing on the business R&D paid for by companies’ own funds, more than half of the state’s R&D was in a single industry for 5 of the top 10 states with the highest level of business R&D (table 2). Automobile manufacturers accounted for 71% of Michigan’s total, semiconductor manufacturers for 62% of Oregon’s total, and the pharmaceutical industry for 56%, 52%, and 51% of New Jersey’s, Pennsylvania’s, and Massachusetts’s totals, respectively. As a point of reference, the pharmaceutical industry is the single-largest industry in terms of business R&D, as tabulated by the BERD Survey, and it accounts for 17% of the nation’s R&D performed and paid for by companies from their own funds. As a group, the information and communication technology (ICT) industries account for close to half of U.S. business R&D. About two-thirds of California’s business R&D is performed by these ICT industries.^{​For this InfoBrief, the ICT sector is defined as the sum of ICT manufacturing, which comprises North American Industrial Classification System (NAICS) 334 (computer and electronic products) and ICT services, which comprises NAICS 5112 (software publishers), NAICS 517 (telecommunications), NAICS 518 (data processing, hosting, and related services), NAICS 5415 (computer systems design and related services), and the remaining industries within NAICS 51 (information) other than traditional paper publishers.}