US Industrial R&D on the Rise

Total US R&D expenditures increased an estimated 5.8% in 2007, or 3.1% when adjusted to 2000 dollars to exclude inflation, to $368,098 million, according to the latest data from the National Science Foundation (NSF). Industry was the primary source of the increase, continuing a trend evident since the 1980s that also reflects slower increases in federal R&D spending. The trend was borne out by university funding last year. Industry funding for science and engineering (S&E) R&D at US universities and colleges rose 11.2%, faster than expenditures by any other source.

Industry accounted for the majority of US R&D performed last year, as well as the majority of R&D funding. R&D performed by industry rose 6.6% to account for 72% of all US R&D conducted in 2007 (see table, page 6). Industrial funding for US R&D rose 7.2% to make up 67% of all R&D funding last year. Not surprisingly, the majority of industry-funded R&D was for development. In 2007, development, applied research and basic research accounted for 76%, 20% and 4% of industry’s funding for R&D. In fact, industry accounted for 91% of all developmental R&D performed last year and 67% of applied R&D that was conducted.

In contrast, R&D performed by the federal government fell 2.4% last year to $24,744 million, or 7% of all US R&D. However, R&D funding by the federal government rose 0.6% to make up 27% total US R&D funding in 2007. Interestingly, the US government’s share of funding for development was also notable. Development, applied research and basic research represented 35%, 26% and 39% of federal government–funded R&D last year. However, the US government performed only 8% of the US’s basic research last year and only 10% and 5% of applied research and development, respectively.

Universities and colleges accounted for 13% of all US R&D performed last year, a 3.9% increase. The share of R&D performed by US universities and colleges has gradually increased in the past 20 years. In inflation-adjusted 2000 dollars, universities and colleges performed 13% of all R&D in 2007, up from 11% in both 2000 and 1990. This corresponds to a declining share of R&D performed by the federal government, fluctuations in the industrial share, and an increase in the share performed by nonprofit organizations. R&D funding by universities and colleges also rose last year, growing 6.3%, but it made up only 3% of total R&D funding.

Nonprofit R&D funding, excluding universities and government, rose 10.5% last year to $11,647 million, its fastest growth since 2005. Nonprofit funding represented 3% of total US R&D funding last year among five categories (see pie chart above), up from 3.0% in 2006. By type of research, 60% of nonprofit funding went to basic research, 25% to applied research and 15% to development. Although nonprofit funding of R&D grew in double digits, the amount of R&D conducted by nonprofits increased only 5.5% in 2007 to make up 4% of all R&D performed in the US. Also picking up last year was R&D funding by nonfederal government sources, which increased 5.0% to $3,226 million. However, such funding accounted for less than 1% of total US R&D funding.

Universities’ growing role in US R&D, particularly industrial R&D, is evident in a separate NSF report examining S&E R&D expenditures by US universities last year. According to the NSF, S&E R&D expenditures by US universities and colleges rose 3.5% last year, or 0.8% when adjusted for inflation, to $49,431 million. At 62%, the federal government continued to account for the majority of universities’ S&E R&D expenditures, however, these expenditures rose only 1.1%. In contrast, industrial expenditures jumped 11.1% to make up 5% of total S&E R&D expenditures at US universities. Institutional funds (funds that are separately budgeted from “unrestricted sources, unreimbursed indirect costs associated with externally funded R&D projects, and mandatory and voluntary cost sharing on federal and other grants”) accounted for 20% of universities’ S&E R&D expenditures in 2007 and rose 6.6%, while state and local government accounted for 6% of such expenditures and rose 6.1%. Other sources accounted for 7% of expenditures and rose 10.0% .

Despite the increase in industry-funded research, universities’ S&E R&D expenditures for basic research increased faster than expenditures for applied research last year, rising 4.3% to $37,609 million. S&E R&D expenditures for applied R&D rose 1.2% to $11,822 million. Among the fields benefiting from the increase were bioengineering/biomedical engineering, for which expenditures for S&E R&D at universities rose 12.8% to $537 million, and chemical engineering, for which they increased 7.5% to $602 million. However, it was the life sciences that remained the largest field for S&E R&D expenditures at US universities and colleges, as they rose 3.3% to $29,764 million in 2007. Within the life sciences, S&E R&D expenditures for medical sciences grew the fastest, increasing 4.5%, followed by agricultural sciences and biological sciences, for which such expenditures increased 3.7% and 1.9%, respectively. However, expenditures for multidisciplinary life science projects fell 1.9%. S&E R&D expenditures for the physical sciences at US universities and colleges grew only 0.8% last year to $3,842 million, including 2.4% increase for chemistry expenditures and a 0.2% increase in expenditures for physics.

Among federal agencies, the Department of Health and Human Services (HHS) was responsible for the largest share of S&E R&D expenditures at universities and colleges last year, accounting for 56%, or $15,179 million. The life sciences received 89% of the HHS’s 2007 expenditures for S&E R&D at US universities. The second largest source of federally funded S&E R&D expenditures at universities and colleges in 2007 was the National Science Foundation (NSF), which was responsible for 12%. The physical sciences, environmental sciences and life sciences received the bulk of such NSF expenditures for 2007 at 22%, 17% and 16%, respectively.

As in 2006, the top five universities with the largest total S&D R&D expenditures in 2007, according to an NSF survey of 672 universities, were John Hopkins University ($49,431 million), the University of California San Francisco (UCSF) ($843 million), the University of Wisconsin Madison ($841 million), the University of California Los Angeles ($823 million) and the University of Michigan ($800 million). The only difference from fiscal 2006’s rankings was UCSF’s jump from number 5 to number 2, as its S&D R&D expenditures rose 6.5%. Only two universities among the top 20, Duke University at number 7 and Ohio State University at Number 9, posted double-digit increases in S&E R&D last year, as their expenditures rose 19.0% and 10.4%, respectively.

Life Sciences S&E R&D at Universities and Colleges, FY 2006–2007

Agricultural sciences 2,902

Biological sciences 9,218

Medical sciences 16,515

Life sciences, Other 1,130

S&E R&D at US Univ. and Colleges

FY02 FY03 FY04 FY05 FY06 FY07

Basic research 27,320 30,006 31,958 34,358 36,063 37,609

Applied R&D 9,085 10,094 11,300 11,434 11,680 11,822

FY 2007 Univ. and Colleges S&E R&D Expenditures in Biological Sciences


145 64 4,942 36 422 183 310

Industry Federal Govt. Univ. and Colleges Nonprofits

2003 188.6 32.9 38.0 12.1

2004 190.3 3 2.6 39.4 11.8

2005 200.1 33.4 40.0 12.3

2006 212.5 33.2 40.3 12.4

2007 Est. 221.6 32.3 40.9 12.8

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