Companies spent $208 billion in current-year dollars
on research and development (R&D) performed in the United States during 2004 compared with $201 billion in 2003 (table 1), according to estimates from the Survey of Industrial Research and Development. In inflation-adjusted (2000) dollars, 2004 R&D expenditures increased $2.1 billion from 2003. The increase for 2004 tracked the long-term trend: annual increases in inflation-adjusted expenditures were reported for all but nine years since the survey's inception in 1953.
Table 1 Source Data: Excel file
Funding from both the company's own and other non-federal sources (hereafter, company or company and other funding) and from federal sources for R&D were higher in 2004 than in 2003. Company funding during 2004 amounted to $188 billion in current-year dollars compared with $183 billion during 2003, and federal funding amounted to $20 billion during 2004 compared with $18 billion during 2003. Since 1953, annual inflation-adjusted company-funded R&D has increased in all but six years; federally funded industrial R&D has increased in about half of the years.
R&D Performance by Industrial Sector
In 2004 companies in manufacturing industries performed $147 billion of R&D which accounted for 71% of all industrial R&D performed in the United States; companies in nonmanufacturing industries performed $61 billion of R&D (table 2). Manufacturers performed $132 billion of company-funded R&D and $15 billion of federally funded industrial R&D; companies in the nonmanufacturing industries performed $56 billion and $5 billion, respectively. Other company and federally funded R&D costs by detailed industry are given in table 2 (see Data Notes for information on industry classification).
Table 2 Source Data: Excel file
Sales and Employment of R&D Performers
Domestic net sales (see table 1 for definition) of companies that performed R&D in the United States was $5.7 trillion in 2003 and $5.6 trillion in 2004. The R&D-to-sales ratio was 3.7% in 2004 compared with 3.5% in 2003. Domestic employment during 2004 was 14.8 million (table 3), compared with 15.3 million reported in 2003. The number of full-time equivalent scientists and engineers who performed industrial R&D was 1.2 million in 2003 and 1.1 million in 2004. Other sales and employment estimates by detailed industry are given in table 3.
Table 3 Source Data: Excel file
R&D Funds and Company Size
Smaller companies, those with fewer than 25,000 employees, performed 62% of industrial R&D in the United States during 2004 (table 4). More specifically, companies with fewer than 500 employees, while reporting only 11% of sales of R&D-performing firms and 14% of domestic employment, performed 18% of all industrial R&D and employed 25% of the scientists and engineers who worked on R&D. Companies with at least 500 but with fewer than 25,000 employees reported 47% of sales and 44% of employment, performed 44% of all R&D, and employed 46% of R&D scientists and engineers. Very large firms with 25,000 or more employees reported 43% of sales and 42% of employment, performed 38% of all R&D, and employed 29% of R&D scientists and engineers. Other R&D costs and sales and employment estimates by size of company are given in table 4.
Table 4 Source Data: Excel file
R&D Performance by State
During 2004, six states accounted for 50% of the industrial R&D performed in the United States. Companies in California, Michigan, Massachusetts, New Jersey, Texas, and Washington (listed by decreasing level) reported aggregate R&D expenditures of $104 billion (table 5). Of that amount, $97 billion accounted for 52% of company-funded R&D performed in the United States. California, Massachusetts, Connecticut, Virginia, Maryland, and Florida (the top six states listed by decreasing level), reported $12.1 billion of federally funded R&D, which accounted for 60% of the U.S. total. Other R&D costs by state and source of funds are given in table 5.
Table 5 Source Data: Excel file
Estimates in this InfoBrief were derived from the annual Survey of Industrial Research and Development. The survey is cosponsored by the National Science Foundation and the U.S. Census Bureau, and Census is the collection and tabulation agent for the survey. The survey is a nationally representative sample of all for-profit companies, publicly or privately held and with five or more employees, that performed R&D within the 50 United States and the District of Columbia. Approximately 32,000 companies are surveyed each year and the overall response rate is approximately 80%. The primary focus of the survey is U.S. industry as a performer of, rather than a source of funds for, research and development. Beginning in 1989, the amount of federally funded R&D reported by performers began to diverge from the amount reported by federal agencies. For 2004, federal agencies reported obligations of $102.7 billion in total R&D to all R&D performers and obligations of $38.9 billion to industrial R&D performers. These totals compare with $93.4 billion in federal funding reported by all performers of R&D and with $20.3 billion reported by industrial R&D performers. Although NSF has not found a definitive explanation for this divergence, the National Research Council notes that comparing federal outlays (as opposed to obligations) for R&D to performer expenditures results in a smaller discrepancy. For 2004, federal agencies reported R&D outlays of $97.3 billion to all R&D performers.
Beginning in the late 1990s, increasingly large amounts of R&D were attributed to the wholesale trade industries, resulting from the payroll-based methodology used to assign industry classifications and the change from the standard industrial classification (SIC) system to the North American Industrial Classification System (NAICS) in 1999. Such classification artifacts were of particular concern for companies traditionally thought of as pharmaceutical or computer-manufacturing firms. As these firms increasingly marketed their own products and more of their payroll involved employees in selling and distribution activities, the potential for the companies to be classified among the wholesale trade industries increased. To increase the relevance and usefulness of the industrial R&D statistics, NSF evaluated ways to ameliorate the negative effects of the industry classification methodology and change in classification systems. Beginning in 2004, in addition to firms originally assigned NAICS codes among the wholesale trade (NAICS 42) industries, firms in the information (NAICS 51); professional, scientific, and technical services (NAICS 54); and management of companies and enterprises (NAICS 55) industries using the payroll-based methodology were manually reviewed by NSF and Census. These firms were reclassified based on primary R&D activity, which in most cases corresponded to their primary products or service activities. The result was that most of the R&D previously attributed to NAICS 42 and 55 industries was redistributed. For detailed information, see SRS InfoBrief, Revised Industry Classification Better Reflects Structure of Business R&D in the United States, forthcoming at http://www.nsf.gov/statistics.
The full set of detailed tables from this survey will be available in the report Survey of Industrial Research and Development, 2004 at http://www.nsf.gov/statistics/industry. Individual detailed tables from the 2004 survey may be available in advance of publication of the full report. For further information, contact
Raymond M. Wolfe
Research and Development Statistics Program
Division of Science Resources Statistics
National Science Foundation
4201 Wilson Boulevard, Suite 965
Arlington, VA 22230
 Company is defined as a business organization of one or more establishments under common ownership or control. The Survey of Industrial Research and Development is conducted jointly by the National Science Foundation (NSF) and the U.S. Bureau of the Census. All estimates from the survey are subject to both sampling and nonsampling errors (see technical notes in the annual reports at http://www.nsf.gov/statistics/industry).
 National Research Council. 2005. Measuring Research and Development Expenditures in the U.S. Economy. Panel on Research and Development Statistics at the National Science Foundation, Committee on National Statistics, Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press.