by Mark Boroush
National Science Foundation (NSF) estimates indicate that U.S. spending on research and development (R&D) totaled $368.1 billion (current dollars) in 2007, up from $347.9 billion in 2006 (table 1). This increase represented growth in 2007 of 5.8% over the 2006 level, or 3.1% in inflation-adjusted year 2000 dollars.
Table 1 Source Data: Excel file
This inflation-adjusted ("real") pace of growth in R&D expenditures outpaced that for gross domestic product (GDP): 2.2% growth in real GDP in 2007, compared with 3.1% for R&D. These 2007 results followed the pattern of the two prior years: 4.4% growth in real R&D expenditures in 2006, compared with 2.9% for real GDP; 4.3% growth in real R&D expenditures in 2005, compared with 3.1% for real GDP.
Total R&D expenditures in 2007 were some $9.1 billion higher in real dollars than in 2006. Nearly all of this increase reflected greater R&D expenditures by industry. NSF's estimates indicate that the federal government's overall spending on R&D declined somewhat in real dollar terms in 2007.
R&D Funders and Performers
The U.S. R&D system is comprised by a variety of performers and funding sources, including the federal government, industry, universities and colleges, other government and nonprofit organizations. Organizations that perform R&D often receive outside funding, and some organizations that fund R&D do not perform all the R&D that they support.
In 2007, industry remained the largest performer, by far, of U.S. R&D, conducting $265.2 billion, or 72.0%, of the total (table 1, figure 1). Universities and colleges accounted for $48.9 billion, or 13.3%, of R&D performance. The federal government conducted $38.6 billion, or 10.5%, (including federal intramural, $24.7 billion, and federally funded research and development centers, $13.9 billion). Other nonprofit organizations performed $15.3 billion, or 4.2%.
Figure 1 Source Data: Excel file
This balance of expenditures among performers in 2007 is similar to what prevailed 5 years ago (in 2002): industry performed 70.1%; universities and colleges, 13.4%; federal government (federal intramural and federally funded research and development centers), 12.0%; and other nonprofit organizations, 4.5%. Looking back over several decades, there has been a marked increase in the share of national R&D performed by universities and colleges (which was around 9% of the total in the mid-1980s). Nevertheless, the most striking long run trend is the continuing, far larger, real-dollar expansion in R&D expenditures by industry (figure 2).
Figure 2 Source Data: Excel file
With regard to R&D funding, industry was again the predominant source in 2007, providing an estimated $245.0 billion, or 66.6%, of the total (table 1, figure 1). The federal government accounted for $98.3 billion, or 26.7%, of the funding total. Universities and colleges provided $9.9 billion, or 2.7%; other nonprofit organizations, $11.6 billion, or 3.2%; and nonfederal government agencies, $3.2 billion, or 0.9%.
Five years ago, a similar balance among R&D funding sources prevailed: industry, 65.3%; the federal government, 28.1%; universities and colleges, 2.7%; other nonprofit organizations, 3.0%; and nonfederal government agencies, 0.9%. Even so, looking back over a longer period of history (figure 3), the striking trend is, again, the substantial and sustained, real-dollar expansion of industry R&D funding since the mid-1980s, while federal government support followed a far flatter growth path.
Figure 3 Source Data: Excel file
R&D by Character of Work
Basic research activities accounted for an estimated $64.4 billion, or 17.5%, of total U.S. R&D expenditures in 2007 (table 2, figure 1). Applied research was $81.2 billion, or 22.1%; development was $222.5 billion, or 60.4%.
Table 2 Source Data: Excel file
These character-of-work fractions in 2007 are similar to those that prevailed in the last several years. Over the previous 10 years (1997–2007), the basic research fraction has ranged between 15.6% and 19.0%; applied research, between 18.5% and 23.4%; and development, between 57.8% and 63.9%.
Universities and colleges were the predominant performer (57.1%) of the $64.4 billion of basic research in 2007, with the federal government providing the largest share (59.0%) of the funding (table 2). Industry performed nearly two-thirds (67.4%) of the $81.2 billion of applied research—and was also by far the largest funder (61.1%). Industry was even more predominant in development, where it both performed the vast majority (90.6%) and also provided the largest fraction (83.2%) of the nation's $222.5 billion of development expenditures in 2007.
Ratio of R&D and Gross Domestic Product
The ratio of total national R&D expenditures to GDP is often reported as a measure of the intensity of R&D effort compared to overall economic activity. The ratio is also widely viewed as a useful gauge of a nation's commitment to R&D at different points in time.
NSF estimates that U.S. expenditures on R&D totaled 2.66% of GDP in 2007. This estimate is somewhat higher than the ratios prevailing in the last several years (figure 4). Over the last 10 years, the ratio has fluctuated somewhat year to year—between a low of 2.57% in 2004 and a high of 2.74% in 2001. The broader trend has been movement of the ratio toward a modestly higher level since a low point of 2.39% in the mid-1990s. Separating the federal and nonfederal components (figure 4), it is evident that most of the rise of the ratio over the last several decades has come from the increase of nonfederal spending on R&D—particularly that by industry, while the ratio of federal R&D spending to GDP declined from the mid 1980s to the late 1990s and has been relatively stable since the late 1990s.
Figure 4 Source Data: Excel file
Overall R&D spending by the United States continues to far exceed that of all other countries (table 3). Nevertheless, several nations report R&D/GDP ratios that are above the current U.S. level.
Table 3 Source Data: Excel file
The United States continues to account for somewhat more than half of the total annual R&D expenditures by the Group of Seven (G-7) industrial countries (of which the United States is a member). U.S. R&D expenditures are some 40% larger than the total for the 27 countries of the European Union. Among the 30 nations who are members of the Organization for Economic Co-operation and Development (OECD), U.S. R&D expenditures annually are about 2½ times larger than Japan's (the second ranked country) and more than 5 times that of Germany (the third largest). While fast growing in recent years, China's annual expenditures on R&D are only a quarter of the U.S. level.
The U.S. R&D/GDP ratio in 2006 was 2.62%. This ratio was well ahead of the overall ratio for the main country groupings for the same year: G-7, 2.50%; European Union-27, 1.76%; OECD, 2.26%.
Several individual OECD countries continue to exceed the U.S. R&D/GDP ratio: Finland, 3.41%; Japan, 3.39%; Iceland, 2.78%; South Korea, 3.23%; Sweden, 3.73%; and Switzerland, 2.90%. Among the non-OECD countries tracked, Israel is by far the highest at 4.65%. Across all these countries, however, only Japan's R&D is a sizable fraction of the U.S.'s annual R&D spending.
Data Sources and Availability
The U.S. R&D statistics presented in this report result from adding up 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 the surveys do not yet provide final data for 2007.
The NSF R&D expenditure surveys utilized are: the Survey of Industrial Research and Development, 2006; the Survey of Federal Funds for Research and Development, FY 2005–07; the Survey of Research and Development Expenditures at Colleges and Universities, FY 2006; and the Survey of Research and Development Funding and Performance by Nonprofit Organizations, 1996–97.
Data from the surveys based on fiscal years (i.e., the Survey of R&D Expenditures at Colleges and Universities and the Survey of Federal Funds for R&D) are converted to calendar year figures to provide a consistent annual basis for the national R&D estimates.
The Industrial R&D Survey provides data through 2006. R&D expenditure figures for 2007 are estimates based on the preliminary data for that year reported by the companies in the survey. Estimates for university and college R&D expenditures in 2007 are based on early results from the 2007 Survey of R&D Expenditures at Colleges and Universities.
Data on federal funding for R&D reported here are based on surveys of organizations that conduct R&D, such as companies, universities, and federally funded research and development centers. These amounts differ substantially from the R&D that federal agencies report 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.
For FY 2007, federal agencies reported obligating $112.8 billion in total R&D to all R&D performers ($46.5 billion, or 41%, to industry), compared with an estimated $98.3 billion in federal funding reported by the performers of R&D. 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 $106.3 billion to all R&D performers.
A full set of detailed statistical tables associated with the National Patterns estimates will be available in the report, National Patterns of Research and Development Resources, 2007, accessible at http://www.nsf.gov/statistics/natlpatterns/.
For further information, contact the author.
 Mark Boroush, Research and Development Statistics Program, Division of Science Resources Statistics, National Science Foundation, 4201 Wilson Boulevard, Suite 965, Arlington, VA 22230 (email@example.com; 703-292-8726).
 In its current classification system, NSF identifies several different R&D performers: industry, federal agency intramural R&D facilities, federally funded R&D centers (FFRDCs—with management by industry, universities/colleges, or nonprofit organizations), universities and colleges, and other nonprofit organizations. With regard to R&D funding, NSF identifies industry, the federal government, other nonfederal government agencies, universities and colleges, and other nonprofit organizations.
 $13.9 billion is the sum of the expenditure figures listed in table 1 for industry-administered FFRDCs, university & college-administered FFRDCs, and nonprofit-administered FFRDCs.
 The data cited in this section come from the current edition of the OECD's Main Science and Technology Indicators (Volume 2008/1). NSF and other U.S. statistical agencies provide data to the OECD in support of these international comparative statistics. However, there are some minor differences in the NSF and OECD approaches to totaling national R&D expenditures. As such, the NSF and OECD calculations of R&D/GDP ratios often differ slightly. Also, to provide a consistent basis for comparison, the OECD converts national currency figures to dollars based on purchasing power parities.
 The most recent year for the OECD's calculation of the R&D/GDP ratio for the United States is 2006.