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New NSF Estimates Indicate that U.S. R&D Spending Continued to Grow in 2008

NSF 10-312 | January 2010| PDF format. PDF  

by Mark Boroush[1]

Preliminary estimates by the National Science Foundation (NSF) indicate that U.S. expenditures to perform research and development (R&D) totaled $397.6 billion in 2008, up from $372.5 billion in 2007 (table 1). This increase in overall national R&D performance represented growth in 2008 of 6.7% over the 2007 level (table 2). It also substantially exceeded the pace of growth in U.S. gross domestic product (GDP) over the same year, which was 3.3%.

TABLE 1. U.S R&D expenditures, by performing sector and source of funding: 2003–08.

  Table 1 Source Data: Excel file

TABLE 2. Annual rates of growth in U.S. R&D expenditures and gross domestic product.

  Table 2 Source Data: Excel file

Adjusted for inflation, the estimated 2008 figure for U.S. spending on R&D is $324.8 billion in constant year 2000 dollars, with annual growth over the 2007 level of 4.5% and constant dollar GDP growth that same year at 1.1% (table 2).

These figures for 2008 are preliminary. Nonetheless, they suggest that the economic and financial crises that deepened throughout 2008 and began to have a noticeable impact on the national economy in the last quarter had not yet affected the conduct and funding of R&D–particularly in the business sector, which continued to account for most U.S. R&D performance and funding.

These 2008 results extend the pattern of the last several years where overall R&D spending has expanded both at a relatively high annual rate and well ahead of the pace of growth of GDP. In addition to the 2008 figures cited above, R&D spending (current dollars) grew at 7.3% in 2007, compared to 4.8% for GDP, and in 2006, R&D grew at 7.7% and GDP at 6.1%.

Over the last 5 years (2003–08), U.S. R&D spending growth (current dollars) has averaged 6.6% per year, compared to 5.4% for GDP (table 2).[2] Comparable annual average figures for the last 10 years (1998–2008) are 5.8% for R&D and 5.0% for GDP. And for the last 20 years (1988–2008), R&D annual growth averaged 5.6%, compared to 5.3% for GDP. The notably faster pace of (average) growth in the level of overall R&D performance relative to that of the expansion in the national economy (the difference between the R&D and GDP growth rates) for the last 5 years, compared to the comparable figures for the last 20 years (where the difference between the growth rates is far smaller), is certainly suggestive of a still growing role for R&D in the national economy.

R&D Performers and Funders

The U.S. R&D system is comprised of a variety of performers and funding sources, including the federal government, businesses, universities and colleges, other (nonfederal) government agencies, and nonprofit organizations.[3] A mix of performing and funding roles exists across this diverse group of organizations. Organizations that perform R&D often receive significant levels of outside funding; those that fund R&D may also be significant performers.

R&D Performers

In 2008, the business sector continued to be the largest performer, by far, of U.S. R&D, conducting $289.1 billion, or 72.7%, of the preliminary total (table 1, figure 1, and figure 2). Business R&D itself accounted for about $20 billion of the $25 billion increase in total U.S. R&D in 2008. In fact, the rate of annual growth in business R&D has outpaced that of total U.S. R&D each year since 2005.

FIGURE 1. Share of U.S. R&D expenditures, by performing sector and funding source: 2008.

  Figure 1 Source Data: Excel file

FIGURE 2. U.S. R&D, by performing and funding sector: 1953–2008.

  Figure 2 Source Data: Excel file

Universities and colleges accounted for $51.2 billion, or 12.9%, of estimated U.S. R&D performance in 2008. The federal government conducted $41.8 billion, or 10.5%, (including federal intramural, $27.0 billion, and federally funded research and development centers, $14.8 billion). Other nonprofit organizations performed $15.6 billion, or 3.9%.

The 2008 distribution of expenditures among performers is roughly similar to what prevailed 5 years ago. In 2003, the business sector performed 69.6%; universities and colleges, 14.0%; federal government, 12.1%; and other nonprofit organizations, 4.2%.

Nonetheless, there are noteworthy differences among the sectoral rates of growth. From 2003 to 2008, total U.S. R&D, adjusted for inflation, expanded at an average annual rate of 3.7%. The business sector was well ahead of this pace, at an average annual rate of 4.6%. But the federal government, universities and colleges, and nonprofit organizations were all well behind, with average annual growth rates, respectively, of 0.7%, 1.9%, and 2.3%.

R&D Funders

With regard to R&D funding, the business sector was again the predominant source in 2008, providing an estimated $267.8 billion, or 67.4%, of the total (table 1, figure 1, and figure 2). The federal government accounted for $103.7 billion, or 26.1%, of the funding total. Universities and colleges provided $10.6 billion, or 2.7%; other nonprofit organizations, $12.0 billion, or 3.0%; and nonfederal government agencies, $3.5 billion, or 0.9%. Five years ago, a similar distribution prevailed among R&D funding sources. In 2003, industry accounted for 64.6%; the federal government, 29.0%; universities and colleges, 2.7%; other nonprofit organizations, 2.8%; and nonfederal government agencies, 1.0%.

R&D by Character of Work

Basic research activities accounted for an estimated $69.1 billion, or 17.4%, of total U.S. R&D expenditures in 2008 (table 3). Applied research was $88.6 billion, or 22.3%; development was $239.9 billion, or 60.3%. These character-of-work fractions in 2008 have remained roughly the same overall for some time. Five years ago (in 2003), basic research represented 18.9% of the U.S. R&D total; applied research was 21.4%; and development 59.8% (table 4). Ten years ago (1998), basic research was 15.6% of the total; applied research was 20.5%; and development 63.9%.

TABLE 3. U.S. R&D expenditures, by character of work, performing sector, and source of funds: 2008.

  Table 3 Source Data: Excel file

TABLE 4. U.S. R&D expenditures, by character of work and performing sector: 1998, 2003, and 2008.

  Table 4 Source Data: Excel file

Universities and colleges were the predominant performer (56.1%) of the $69.1 billion of basic research in 2008, with the federal government providing the largest share (57.0%) of the funding (table 3). The business sector performed nearly two-thirds (69.3%) of the $88.6 billion of applied research–and was also by far the largest funder (60.8%). Business was even more predominant in development, where it both performed the vast majority (89.9%) and also provided the largest fraction (84.1%) of the nation's $239.9 billion of development expenditures in 2008.

R&D Intensity

The ratio of total national R&D expenditures to gross domestic product is often reported as a measure of the intensity of R&D effort compared to overall economic activity. The ratio is widely viewed as a useful gauge of a nation's commitment to R&D at different points in time. It is frequently used as a benchmark metric in international comparisons of nations' overall R&D systems.

NSF estimates that U.S. expenditures on R&D totaled 2.79 % of GDP in 2008. This figure is somewhat higher than the ratios prevailing in the last several years (figure 3). Over the last 10 years, the ratio has fluctuated somewhat year to year–between a low of 2.56% in 2004 and the high of 2.79% in 2008. The broader trend since the mid-1990s has been movement of the ratio toward a modestly higher level since a low point of 2.39% in 1994.

FIGURE 3. U.S. R&D share of gross domestic product, by federal and nonfederal funding: 1953–2008.

  Figure 3 Source Data: Excel file

The federal and nonfederal components of U.S. R&D performance are plotted in figure 3. It is evident from this figure that most of the rise of the R&D/GDP ratio over the last several decades has come from the increase of nonfederal spending on R&D, particularly that by industry, whereas the ratio of federal R&D spending to GDP declined from the mid-1980s to the late 1990s, rose somewhat in the early 2000s, and has been fairly flat since then.

International Comparisons

Overall R&D spending by the United States continues to far exceed that of all other countries (table 5).[4] Nonetheless, several nations continue to report R&D/GDP ratios above the current U.S. level.

TABLE 5. International comparisons of national R&D expenditures and R&D share of gross domestic product, by selected region/country/economy: Most recent year, 2004–08.

  Table 5 Source Data: Excel file

NSF estimates that worldwide R&D expenditures in 2007 totaled $1,107 billion.[5] The United States, itself, accounts for about 33% of this global total. Japan, the second largest performer, accounts for about 13%. China, the third largest performer, accounts for about 9%. Germany and France, respectively, fourth and fifth (and the largest performers in Europe), account for 6% and 4%.

By these figures, the top two countries together account for about 47% of the global R&D total. The top five countries represent about 66% of the global total. Adding the next five countries–South Korea, United Kingdom, Russian Federation, Canada, and Italy–encompasses 80% of global R&D performance.

With respect to major geopolitical groupings, the R&D performance of the 27 nations of the European Union (EU-27) account currently for about 24% of the global total. The 30 countries comprising the Organisation for Economic Co-operation and Development (OECD) account for 80% of worldwide R&D. Within the OECD, the U.S. R&D is about 42% of the total. Among the major current R&D performing nations, only China is not an OECD member.

From the standpoint of R&D intensity, the U.S. R&D/GDP ratio in 2007 was nearly 2.7% (table 5).[6] At this level, it was eighth among the economies tracked by the OECD. Israel had the highest, at 4.7%.[7] Sweden, Finland, Japan, and South Korea all had ratios above 3%. Switzerland and Iceland also had ratios somewhat higher than the U.S. The U.S. R&D/GDP ratio in 2007 was noticeably ahead of that for the OECD countries as whole in the same year (2.3%) and much larger than for the EU-27 as whole (1.8%).

Data Sources and Availability

The U.S. R&D statistics presented in this report result from summing the R&D performance for all sectors of the economy for which information can reasonably be assembled. The data come chiefly from NSF's national surveys of R&D expenditures. Estimates are used where these annual surveys do not yet provide final data for 2008.

The NSF R&D expenditure surveys utilized are the Survey of Industrial Research and Development, 2007; the Survey of Federal Funds for Research and Development, FY 2007–09; and the Survey of Research and Development Expenditures at Colleges and Universities, FY 2008. In addition, growth rate elasticity parameters from the Survey of Research and Development Funding and Performance by Nonprofit Organizations, 1996–97 are also used.

The Industrial R&D Survey provides data through calendar year 2007. The R&D expenditure figures for 2008 are estimates based on preliminary data for that year reported by the companies in the survey.

The figures for university and college R&D expenditures in 2008 are based on final figures from the 2008 Survey of R&D Expenditures at Colleges and Universities. Also, these data are based on academic fiscal years and are converted to calendar year figures to provide a consistent annual basis for all the components of the total national R&D estimates. Annual R&D expenditures by FFRDCs are now collected annually by NSF as part of the Survey of R&D Expenditures at Colleges and Universities.

The Survey of Federal Funds for R&D, FY 2007–09 provides preliminary figures for 2008 on federal agency obligations and outlays in support of R&D for all performers (federal and nonfederal, including nonprofit organizations). These figures reflect the federal fiscal year and are converted to a calendar-year basis for integration with the other national R&D components.

In further note, the data on federally funded R&D discussed in this report were derived from surveys of organizations that perform R&D, such as companies, universities, and federally funded research and development centers (FFRDCs). These amounts can differ substantially from the R&D that federal agencies have reported funding. The National Academies' Committee on National Statistics (CNSTAT) has recommended that NSF publish an annual reconciliation of estimates for federal R&D funding as reported by performers of R&D and as reported by federal agencies (National Research Council 2005).

In FY 2007, federal agencies reported obligating $114 billion in total R&D to all R&D performers (including $44 billion to the business sector), compared with an estimated $101 billion in federal funding reported by all performers of R&D ($27 billion by businesses). Although NSF has not found a definitive explanation for this divergence, CNSTAT notes that comparing federal outlays (as opposed to obligations) for R&D to performer expenditures results in a smaller discrepancy. For FY 2007, federal agencies reported R&D outlays of $109 billion to all R&D performers.

A full set of detailed statistical tables associated with the estimates will be available in the report, National Patterns of Research and Development Resources: 2008 Data Update, accessible at http://www.nsf.gov/statistics/natlpatterns/. For more information, contact the author.


[1]  Mark Boroush, Research and Development Statistics Program, Division of Science Resources Statistics, National Science Foundation, 4201 Wilson Boulevard, Suite 965, Arlington, VA 22230 (mboroush@nsf.gov; 703-292-8726).

[2] A geometric mean was used to calculate the average annual rates of growth.

[3]  NSF identifies several different R&D performers: business, federal agency intramural R&D facilities, federally funded R&D centers (FFRDCs–administered by business, universities/colleges, or nonprofit organizations), universities and colleges, and other nonprofit organizations. With regard to R&D funding, NSF identifies business, the federal government, other nonfederal government agencies, universities and colleges, and other nonprofit organizations.

[4]  The data cited in this section comes chiefly from the OECD's Main Science and Technology Indicators (Volume 2009/1). NSF and other U.S. statistical agencies provide data to the OECD in support of these international comparative statistics. There are, however, some minor differences in the NSF and OECD approaches to totaling national R&D expenditures. As such, the NSF and OECD calculations of total R&D expenditures and R&D/GDP ratios can differ slightly. Furthermore, to provide a consistent basis for comparison, the OECD converts national currency figures to dollars based on purchasing power parities.

[5]  NSF's figure for total global R&D draws on data provided by the OECD (as above) and the United Nations Educational, Scientific and Cultural Organization (UNESCO), Institute for Statistics. These sources together track R&D for 126 countries—although not all of these provide figures for recent R&D expenditures. Currently, there is no database on R&D spending that is comprehensive of all nations performing R&D and comparable in quality to that provided by the OECD on its member countries. NSF's figure for the 2007 global total is an estimate.

[6] The most recent year for which the OECD has published an R&D/GDP ratio for the United States is 2007.

[7] The figures for Israel's R&D expenditures are for civilian R&D only.


National Research Council. 2005. Measuring Research and Development Expenditures in the U.S. Economy. LD Brown, TJ Plewes, MA Gerstein, eds. Washington, DC: National Academy Press.

National Science Foundation, Division of Science Resources Statistics
New NSF Estimates Indicate that U.S. R&D Spending Continued to Grow in 2008
Arlington, VA (NSF 10-312) [January 2010]

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