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U.S. Business R&D Expenditures Increase in 2006; Companies' Own and Federal Contributions Rise

NSF 08-313 | August 2008 | PDF format PDF  

by Raymond M. Wolfe[1]

Companies spent $248 billion in current-year dollars on research and development (R&D) performed in the United States during 2006 compared with $226 billion in 2005 (table 1), according to estimates from the Survey of Industrial Research and Development.[2] In inflation-adjusted (2000) dollars, 2006 R&D expenditures increased $12.7 billion, or 6.4%, from 2005 levels. Funding from both the company’s own and other nonfederal sources (hereafter, company or company and other funding) and from federal sources for R&D were higher in 2006 than in 2005. Company funding during 2006 amounted to $223 billion in current-year dollars compared with $204 billion during 2005, and federal funding amounted to $24 billion during 2006 compared with $22 billion during 2005. After adjusting for inflation, company-funded R&D increased 6.2%, and federally funded R&D increased 7.7%.

TABLE 1. Funds expended for industrial R&D performance, by source of funds and size of company, and sales: 2005 and 2006.

  Table 1 Source Data: Excel file

R&D Performance by Industrial Sector

In 2006, companies in manufacturing industries performed $172 billion of R&D, which accounted for 69% of all industrial R&D performed in the United States; companies in nonmanufacturing industries performed $76 billion of R&D (table 2). Manufacturers performed $155 billion of company-funded R&D and $17 billion of federally funded industrial R&D; companies in the nonmanufacturing industries performed $68 billion and $8 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. Funds expended for industrial R&D performed in the United States, by source, by industry: 2006.

  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 were $6.1 trillion in 2005 and $6.6 trillion in 2006. The R&D-to-sales ratio remained 3.7% in 2006, as it was in the two previous years. Domestic employment in R&D-performing companies during 2006 was 16.3 million (table 3), compared with 16.0 million reported in 2005 (National Science Foundation 2008). The number of full-time equivalent scientists and engineers who performed industrial R&D remained 1.1 million, as it was in 2004 and 2005. Other sales and employment estimates by detailed industry are given in table 3. Sales, employment, and R&D performance estimates by size of company are given in table 4.

TABLE 3. Sales and employment for companies performing industrial R&D in the United States, by industry: 2006.

  Table 3 Source Data: Excel file

TABLE 4. Funds expended for industrial R&D, sales, and employment for companies performing industrial R&D in the United States, by company size: 2006.

  Table 4 Source Data: Excel file

R&D Performance by State

During 2006, the following 10 states accounted for two-thirds of the industrial R&D performed in the United States. Companies in California, Connecticut, Illinois, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Texas, and Washington reported aggregate R&D expenditures of $168 billion (table 5). Focusing on the top 5 states, California alone accounted for 23.6% of the U.S. industrial R&D total; Michigan, 6.7%; Massachusetts, 6.3%; New Jersey, 5.9%; and Texas, 5.4%.

TABLE 5. Funds expended for industrial R&D performed in the United States, by state, by source of funds: 2006.

  Table 5 Source Data: Excel file

Data Notes

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%.[3] The primary focus of the survey is U.S. industry as a performer of research and development rather than as a source of funds. Beginning in 1989, the amount of federally funded R&D reported by performers began to diverge from the amount reported by federal agencies. For 2006, federal agencies reported obligations of $108.4 billion and outlays of $103.7 billion in total R&D to all R&D performers and obligations of $44.3 billion to industrial R&D performers (National Science Foundation 2007a). These totals compare with $96.8 billion in federal funding reported by all performers of R&D (National Science Foundation 2007b) and with $24.3 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 (National Research Council 2005).

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 engaged in selling and distribution activities, the potential for the companies to be classified among the wholesale trade industries increased. To improve the relevance and usefulness of the industrial R&D statistics, NSF evaluated ways to ameliorate the negative effects of the industry classification methodology and classification system change. 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 National Science Foundation 2007c.)

The full set of detailed tables from this survey will be available in the report Survey of Industrial Research and Development, 2006 at http://www.nsf.gov/statistics/industry/. Individual detailed tables from the 2006 survey are available in advance of publication of the full report. For further information, contact the author.


[1]  Raymond M. Wolfe, Research and Development Statistics Program, Division of Science Resources Statistics, National Science Foundation, 4201 Wilson Boulevard, Suite 965, Arlington, VA 22230 (rwolfe@nsf.gov; 703-292-7789)

[2]  Company is defined as a business organization of one or more establishments under common ownership or control. 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/).

[3] For more detailed information about the survey sample and methodology, see survey description at http://www.nsf.gov/statistics/survey.cfm.


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.

National Science Foundation, Division of Science Resources Statistics. 2007a. Federal Funds for Research and Development in Industry: Fiscal Years 2004–06. John E. Jankowski, project officer. NSF 07-323. Arlington, VA. Preliminary estimates. http://www.nsf.gov/statistics/nsf07323/.

National Science Foundation, Division of Science Resources Statistics. 2007b. National Patterns of R&D Resources: 2006 Data Update. Brandon G. Shackelford, project officer. NSF 07-331. Arlington, VA. http://www.nsf.gov/statistics/nsf07331/.

National Science Foundation, Division of Science Resources Statistics. 2007c. Revised Industry Classification Better Reflects Structure of Business R&D in the United States. Brandon Shackelford. NSF 07-313. Arlington, VA. http://www.nsf.gov/statistics/infbrief/nsf07313/.

National Science Foundation, Division of Science Resources Statistics. 2008. Research and Development in Industry: 2005. Raymond M. Wolfe, project officer. Arlington, VA. Forthcoming. http://www.nsf.gov/statistics/industry/.

National Science Foundation, Division of Science Resources Statistics
U.S. Business R&D Expenditures Increase in 2006;
Companies' Own and Federal Contributions Rise

Arlington, VA (NSF 08-313) [August 2008]

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