**TECHNICAL NOTES FOR 1962**

**Survey Definitions**

*Research and Development---*Basic and applied research in the sciences
and engineering and the design and development of prototypes and
processes. Excluded from this definition are routine product testing,
market research, sales promotion, sales service, research in the social
sciences or psychology, or other nontechnological activities or
technical services.

*Basic Research---*Original investigations for the advancement of
scientific knowledge that do not have specific commercial objectives,
although such investigations may be in fields of present or potential
interest to the reporting company.

*Applied Research---*Investigations that are directed to the discovery
of new scientific knowledge and that have specific commercial objectives
with respect to products or processes. This definition of applied
research differs from the definition of basic research chiefly in terms
of the objectives of the reporting company.

*Development---*Technical activities of a nonroutine nature concerned
with translating research findings or other scientific knowledge into
products or processes. Development does not include routine technical
services to customers or other activities excluded from the above
definition of research and development.

*Funds for R&D Performance---*The operating expenses incurred by a
company in the conduct of research and development in its own laboratory
or other company‑owned or ‑operated facilities. Such expenses include
wages and salaries, materials and supplies consumed, property and other
taxes, maintenance and repairs, depreciation, and an appropriate share
of overhead, but exclude capital expenditures.

*Federally Financed R&D Performance---*The cost of work done by the
company on R&D contracts or subcontracts and R&D portions of procurement
contracts and subcontracts.

*Company‑Financed R&D Performance---*The cost of the company-sponsored
research and development performed within the company. It does not
include company‑financed research and development contracted to outside
organizations, such as: colleges and universities, research
institutions, or other nonprofit organizations.

*R&D Scientists and Engineers---*Scientists and engineers engaged full
time in research and development and the full‑time‑equivalent of those
working part time in research and development. Scientists and engineers
are defined as persons engaged in scientific or engineering work at a
level which requires a knowledge of physical, life, engineering, or
mathematical sciences equivalent at least to that acquired through
completion of a 4‑year college course with a major in one of those
fields.

*Total Employment---*The total number of persons employed by the company
in all activities during the mid‑March pay period of a given year.

*Net Sales and Receipts---*The recorded dollar values for goods sold or
services rendered by a company to customers outside the company
including the Federal Government, less such items as returns,
allowances, freight charges, and excise taxes. Excluded from the dollar
values are domestic intracompany transfers as well as sales by foreign
subsidiaries, whereas transfers to foreign subsidiaries are included.

*Geographic Area Covered---*The United States, the Virgin Islands,
Puerto Rico, and Guam.

**Explanation of Tabular Data**

*Industry Classification---*Industries and industry groups shown
separately in statistical tables are classified according to their
*Standard Industrial Classification Manual* codes as follows:[^1]

Food and kindred products (20)

Textiles and apparel (22 and 23)

Lumber, wood products, and furniture (24 and 25)

Paper and allied products (26)

Chemicals and allied products (28)

Industrial chemicals (281‑82)

Drugs and medicines (283)

Other chemicals (284‑89)

Petroleum refining and extraction (29 and 13) [^2]

Rubber products (30)

Stone, clay, and glass products (32)

Primary metals (33)

Primary ferrous products (331‑32)

Nonferrous and other metal products (333‑39)

Fabricated metal products (34)

Machinery (35)

Electrical equipment and communication (36 and 48) ^2^

Communication equipment and electronic components (366-67 and 48)

Other electrical equipment (361‑65 and 369)

Motor vehicles and other transportation equipment (371 and 373-79)

Aircraft and missiles (372 and 19) [^3]

Professional and scientific instruments (38)

Scientific and mechanical measuring instruments (381‑82)

Optical, surgical, photographic, and other instruments (383‑87)

Other manufacturing industries---Tobacco manufacturers (21), printing
and publishing (27), leather products (31), and miscellaneous
manufacturing industries (39)

Nonmanufacturing industries---Mining (10‑12 and 14); contract
construction (15‑17); transportation and other public utilities (40‑47
and 49); wholesale and retail trade (50‑59); finance, insurance, and
real estate (60‑67); and selected service industries (70‑79 and 89)

*Company Size Class---*The size of a company as determined by the total
number of its employees. The three company‑size classes used in this
report are: less than 1,000 employees; 1,000 to 4,999 employees; and
5,000 or more employees.

*Median---*The value of the middle item when items are arrayed according
to size. For example, if 15 companies are arrayed from lowest to highest
on the basis of a given statistical relationship, such as funds for R&D
performance as percent of net sales, the median value is that of the 8th
ranked company in the array.

*Interquartile Range---*The range in values prevailing in the middle
half of a distribution arrayed according to size. Outside the
interquartile range are one‑fourth of the values below the lower
quartile and another one‑fourth of the values that exceed the upper
quartile. Interquartile ranges presented in this report for selected
items are based on the arithmetic means of those items in individual
companies in various industry‑size strata.

*Arithmetic Average---*The average obtained by adding items and dividing
the total by the number of items. For example, R&D cost per R&D
scientist or engineer in a given company or group of companies is the
quotient obtained by dividing total R&D performance funds by the number
of R&D scientists and engineers employed.

*Classification of Reporting Units---*The reporting unit in the present
survey was the company or corporate family, which includes all
establishments under common ownership or control. Each company was
classified in a single industry on the basis of its major productive
activity. Similarly, each company was classified in a single size
category on the basis of its total employment.

*Nonavailability of Certain Statistics---*Estimates were withheld if
they did not meet publication standards for reasons such as: excessive
associated sampling error of estimate, high rate of imputation because
of failure of companies to report, or possible disclosure of data of an
individual company, as well as in cases where data were inconsistent for
inclusion in a time series. The term, \"not available,\" is used in
tables to indicate that statistics could not be published for any of
these reasons.

*Method of Computation---*Detailed statistics in the tables may not add
to totals or subtotals because of rounding. Percentages were calculated
on the basis of thousands of dollars and may differ from those based on
rounded figures.

**TECHNICAL NOTES** [^4]

**Methodology of Survey**

The sample for the 1962 Survey of Industrial Research and Development
represented all manufacturing industries, and those non-manufacturing
industries believed to conduct or finance research and development. In
manufacturing, the sampling unit was the company defined as all
establishments under common ownership or control. All companies with
1,000 or more employees in 1961 were included in the sample with
certainty. [^5] Smaller companies were sampled with rates depending upon
their industry and size. The 300 largest companies from the annual
Department of Defense list of R&D contractors were included in the panel
with certainty regardless of their industry class or employee size. The
non-manufacturing sample was drawn from the records of the Bureau of
Old‑Age and Survivors Insurance as of 1956. [^6]

Approximately 7,000 industrial companies were included in the sample.
More than 1,800 of these were certainty companies (all those with 1,000
or more employees and others in selected industry‑size strata) and they
accounted for almost 95 percent of the total R&D per­formance funds.
Appendix tables C‑1 and C‑2 show the probabilities of selection applied
for each industry‑size stratum.

As in previous years, the survey was a mail canvass. Two basic forms
were used. Form RD‑1 was used for companies in which funds for R&D
performance were expected to total \$100,000 or more during the year.
The less detailed Form RD‑2 was used for companies in which R&D funds
were expected to amount to less than \$100,000. The forms were mailed in
February 1963 and nonrespondents were followed up by mail. Since total
R&D performance funds and total Federal funds expended by industry for
R&D were included in the Census Bureau\'s Company Statistics program,
the few large companies that did not reply were mailed the census
mandatory Form MA‑121. Estimates for about \$50 million of R&D funds
were obtained in this way and included in this report. About \$30
million of the total R&D funds were estimated as representing work
performed by small companies included in the sample but from whom
reports were not received in time for tabulation. Together these two
types of inclusion accounted for less than 1 percent of reported R&D
funds.

The 1962 sampling errors for selected items and the amount of imputation
made by the Bureau of the Census in the major items are shown in
appendix tables C‑3 and C‑4.

**Comparability of Data Over a Period of Several Years**

In the surveys of industrial research and development, there has been
substantial comparability over any 2‑year period. This is because the
respondent has had before him, on the same report used in filing current
data, the figures for the preceding year. These figures are entered on
the form by the Census Bureau before mailing and the respondent is asked
to adjust the data for the two years as necessary in order to make them
comparable. Also, in comparing figures for two adjacent years the same
industry and size codes were used.

When tables covering several years were prepared for this series of
reports, it was not feasible to achieve the same degree of
comparability, because it was not considered practical to carry most
revisions back more than 1 year. The present degree of comparability is
more like that found in other annual surveys. Some measure of the amount
of the change due to mergers and acquisitions and changes in reporting
concepts, in contrast to an actual change in the volume of research and
development, can be gained by comparing figures for the same year
reported in two succeeding report forms, e.g., 1961 R&D statistics in
the final report on the 1961 survey and revised 1961 R&D statistics in
the final report on the 1962 survey. The totals for large
classifications are likely to be very close in the two reports but in
the finer detail some differences are noticeable. The results underscore
the point that the measures are approximate and indicative.

**Industry Codes in These Historical Tables**

All tabulations since 1959 reflect the industry code changes as a result
of the 1958 Census of Manufactures. The 1958 data were retabulated for
cases with 1,000 employees or more, providing revised industry data for
Federal, company, and total R&D funds; numbers of scientists and
engineers; total employment; and net sales measures. Other 1958 and 1957
measures appearing in the historical tables were estimated by the
National Science Foundation. The data for all years thus reflect the
1958 industry codes. Data by employment size, however, are based on
total employment reported for a particular year.

**Comparison of the Samples of Industrial Companies Used for the
Research and Development Surveys, 1957--61 and 1962**

The annual Surveys of Industrial Research and Development, 1957--61,
were based on a sample drawn primarily from the 1956 Annual Survey of
Manufactures. For 1962, a new sample was drawn from the 1960 Annual
Survey of Manufactures.

The new (1960 based) sample was first used a few months after the 1961
official (1956 based) mailing. The new sample panel was matched against
the 1961 old sample panel, and the unmatched cases in the new panel were
also mailed for 1961. As a result of effectively mailing to both panels
for the year 1961, independent tabulations could be made so that it was
feasible to isolate differences 1) due to the use of a new sample panel
(by comparison of 1961 estimates from old and new panel) and 2) due to
other reasons (mergers, change in reporting system, etc.) by comparison
of 1961 R&D estimates developed from the new panel both for 1961
initially and for 1961 as revised. The mailing of the new sample panel
for 1961 also made possible the identification of the large number of
"no R&D cases" in the small‑size classes. These companies will be
subsampled in future surveys.

The total research and development figures by industry from the new
sample and for 1961 from the old sample are shown on table C‑5.

The new sample has again demonstrated the difficulty of preparing
estimates on research and development in small companies. The number of
companies in the new sample provides an estimate much closer to the 1958
supplemental sample [^7] than to the original Census sample---12,000
compared with a 1958 supplemental figure of about the same size (12,500)
and an original sample figure of about 6,800. The estimates included in
these figures for the under‑8‑employee size group vary from 1,000 in
1957 to 4,000 in 1958 (supplemental sample estimate) and, most recently,
about 2,500 in 1962. The share of total research and development dollars
accounted for by these companies remains quite small. The small
companies (under 100 employees) account for less than 2 percent of total
research and development performance, but that figure has varied from
about 0.5 percent to 2 percent. The number of such companies estimated
as reporting research and development can vary widely without noticeably
affecting this ratio. The universe of small companies in which these
cases are found includes 60 percent of all manufacturing companies, or
about 200,000 cases. Within the universe, research and development is
carried on only by an estimated 1 in 20 companies.

**Inquiries Contained on the Questionnaire for Which Information Was Not
Published**

The results of several inquiries contained on the questionnaire were not
published because response to the item was either insufficient or
questionable. In most instances this was caused by the inability of many
of the companies to supply information from their existing records.

Items for which most response difficulty was experienced were "Forward
Budgeting of Company Funds for Research and Development Performance
Within the Company," and "Capital Expenditures for Research and
Development." Fewer than 20 percent of the large companies responded to
the "Forward Budgeting" item. In terms of company‑financed research and
development, these companies accounted for about 30 percent of the
total. When projected beyond 1 year, the data became even more sparse,
with fewer than 10 percent of the companies supplying the requested
data.

Capital expenditures for research and development, while separate for
some companies, are to a larger extent included in company accounts that
cover more than research and development; e.g., the capital accounts
include plant and equipment costs for both production and research. Only
about 20 to 30 percent of research and development costs were reported
by separately organized research and development laboratories. Further
hindering meaningful measures of capital outlays was the considerable
use made of equipment owned by the Federal Government---in some
instances operation of entire plants under Government ownership by the
heavily R&D‑oriented aerospace and electronics industries.

For the present, these items have been removed from the questionnaire
subject to further investigation of methodology and techniques for
obtaining more accurate measures in these areas.

[^1]: Executive Office of the President, Bureau of the Budget, *Standard
    Industrial Classification Manual.* Washington, D.C. 20402: Supt. Of
    Documents, U.S. Government Printing Office, 1957. Industry code
    numbers are shown in parentheses.

[^2]: For the purposes of this study, crude petroleum and extraction
    (13) is grouped with petroleum refining (29), and communication (48)
    is grouped with electrical equipment (36) in the manufacturing group
    of industries.

[^3]: Companies primarily engaged in the manufacture of ordnance and
    accessories, including complete guided missiles, are grouped with
    companies primarily engaged in the manufacture of aircraft and parts
    because of close similarity of R&D activities carried out by major
    companies in the two industries.

[^4]: Prepared by the U.S. Bureau of the Census, the collecting and
    compiling agent in this survey for the National Science Foundation.

[^5]: This indicates that a sampling ratio of 1:1 (or 1.000) was
    employed in the selection of companies in this particular size
    class.

[^6]: In January 1963, the Bureau of Old-Age and Survivors Insurance was
    abolished as a bureau and reestablished as the Old-Age, Survivors,
    and Disability Insurance (OASDI) program of the Social Security
    Administration, Department of Health, Education, and Welfare.

[^7]: A special sample of small firms surveyed concurrently with the
    regular 1958 survey in an attempt to provide more information about
    the problem of identifying research and development in small firms.