TECHNICAL NOTES FOR 1976

GENERAL NOTES

-   Two new data items are contained in this report: 1) Table B‑13
    presents statistics on the amount of research and development
    performed by foreign affiliates of U.S. domestic companies outside
    the United States, and 2) a forward budgeting estimate for company
    funds for 1977 has been included in table B‑14. This estimate is
    based on data provided by companies indicating their R&D budget for
    the year in progress when surveyed. These forward budgeting
    estimates tend to reflect a somewhat lower level of R&D effort than
    final survey figures will show.

-   The data published in this report for the years 1968--75 have been
    revised from those published in earlier reports in this series.
    These data revisions reflect the following: 1) Reassignment of some
    companies into different industry classifications. This reassignment
    is carried out periodically to ensure that firms are properly
    identified in the industry that represents their major business; 2)
    Company revisions in 1975 R&D spending estimates; 3) Statistical
    variation caused by resampling.

-   The industrial R&D data are presented on two different bases. First,
    total R&D data are furnished on an industry‑by‑industry basis
    (tables B‑1 to B-49); the second approach presents the applied
    research and development data on a product field basis (tables B‑50
    to B‑55). Classification by industry and product field is based on
    the Standard Industrial Classification (SIC) code. Because of its
    generalized nature, basic research cannot readily be classified by
    product field; instead, the data are classified by field of science.

-   The industry survey does not cover trade associations. Although
    their primary mission is to serve industry, trade associations are
    established as nonprofit organizations and are covered in the NSF
    survey of independent nonprofit institutions. R&D expenditures of
    trade associations are estimated at less than 1 percent of the
    industry R&D total.

-   Data in this report were collected by the Bureau of the Census for
    the National Science Foundation in the annual Survey of Industrial
    Research and Development and cover the periods 1956--76 for funding
    data and January 1957--January 1977 for personnel data.

**TECHNICAL NOTES**

**Scope of Study**

The National Science Foundation sponsored its first survey of industrial
research and development in 1953. Since then, the scope of the survey
has gradually been modified in response to changing needs for
information on the Nation's R&D effort.

The 1976 industry survey is the 20th in the annual series sponsored by
the Foundation and conducted by the Bureau of the Census, U.S.
Department of Commerce. The Foundation also sponsored two industry
surveys covering the 1953--56 period, which were conducted by the Bureau
of Labor Statistics (BLS), U.S. Department of Labor.[^1] Data obtained
in the BLS survey are not directly comparable with the Census figures
for 1957--76 because of methodological and other differences in the
surveys conducted by the two agencies. In addition, beginning in 1957,
the Census surveys have collected data on the R&D activities of
federally funded research and development centers (FFRDC's) operated by
business firms, whereas the earlier BLS surveys did not. To account for
the R&D performance of these research centers in 1956, Census adjusted
data for that year (collected in the 1957 survey) to provide comparable
trend data for 1956 and earlier years.

Data on scientific personnel are not directly comparable with data in
surveys conducted by BLS during the 1953--56 period. For example, the
reporting unit used in the Census surveys of industrial research and
development is the company, which is defined to include all
establishments under common ownership or control. Surveys of scientific
and technical personnel conducted by BLS were on an
establishment‑reporting‑unit basis. Further, the Census surveys obtain
data on the number of R&D scientists and engineers on a
full‑time‑equivalent (FTE) basis, unlike the BLS surveys in which data
were provided in terms of scientists and engineers primarily employed in
research and development.

**Survey Definitions**

*Research and development***---**Basic and applied research in the
sciences and engineering and the design and development of prototypes
and processes. This definition excludes quality control, routine product
testing, market research, sales promotion, sales service, research in
the social sciences or psychology, and other nontechnological activities
or technical services.

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

*Applied research***---**Investigations directed to the discovery of new
scientific knowledge having specific commercial objectives with respect
to products or processes. This definition differs from that 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. Does not include routine technical
services to customers or other activities excluded from the above
definition of research and development.

*Funds for research and development***---**Operating expenses incurred
by a company in the conduct of research and development in its own
laboratories or other company‑owned or ‑operated facilities. Includes
wages and salaries, materials and supplies consumed, property and other
taxes, maintenance and repairs, depreciation, and an appropriate share
of overhead, but excludes capital expenditures. Funds for R&D
performance are expressed in current dollars rather than in constant
dollars.

*Federally financed research and development***---**Receipts for work
done by the company on R&D contracts or subcontracts and R&D portions of
procurement contracts and subcontracts.

*Company‑financed research and development***---**Cost of the
company‑sponsored research and development performed within the company.
Does not include company‑financed research and development contracted to
outside organizations, such as research institutions, universities and
colleges, or other nonprofit organizations.

*R&D scientists and engineers***---**The January number of those engaged
full time in research and development and the full-time equivalent (FTE)
of those working part time. 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.

*Employment***---**Total number of persons employed by the company in
all activities during the pay period which includes the 12th of March.
These data are not completely comparable with employment of R&D
scientists and engineers data which are collected as of January.

*Net sales and receipts***---**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. Excludes domestic
intracompany transfers as well as sales by foreign subsidiaries, but
includes transfers to foreign subsidiaries. Net sales and receipts
figures are expressed in current dollars rather than constant dollars.

*Geographic area covered***---**Includes only those operations located
in the 50 States and the District of Columbia.

**Explanation of Tabular Data**

*Industry classification***---**Industries and industry groups shown
separately in statistical tables are classified according to their
Standard Industrial Classification Manual[^2] codes as follows:

Food and kindred products (20)

Textiles and apparel (22, 23)

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

Paper and allied products (26)

Chemical and applied products (28)

Industrial chemicals (281--82)

Drugs and medicines (283)

Other chemicals (284--89)

Petroleum refining and extraction (29, 13)[^3]

Rubber products (30)

Stone, clay, and glass products (32)

Primary metals (33)

Ferrous metals and products (331--32, 3398, 3399)

Nonferrous metals and products (333--36)

Fabricated metal products (34)

Machinery (35)

Office, computing, and accounting machines (357)

Electrical equipment and communication (36, 48)[^4]

Radio and TV receiving equipment (365)

Electronic components (367)

Communication equipment and communication (366, 48)

Other electrical equipment (361--64 and 369)

Motor vehicles and motor vehicles equipment (371)

Other transportation equipment (373--75, 379)

Aircraft and missiles (372, 376)[^5]

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)

Nonmanfacturing industries---agriculture, forestry, and fisheries
(07--09); mining (10--12, 14); contract construction (15--17);
transportation and other public utilities (41--47, 49); wholesale and
retail trade (50­--59); finance, insurance, and real estate (60--67); and
selected service industries (739, 807, 891).

*Company size‑class***---**The size of a company as determined by the
total number of its employees. The five company size‑classes used in
this report are less than 1,000 employees; 1,000 to 4,999 employees;
5,000 to 9,999 employees; 10,000 to 24,999 employees; and 25,000 or more
employees.

*Classification of reporting units***---**The company or corporate
family which includes all establishments under common ownership or
control. Similarly, each company was classified in a single
size‑category on the basis of its total employment.

*Cost per R&D scientist or engineer***---**The number of R&D scientists
and engineers used to estimate the cost per R&D scientists or engineer
for 1957--76 is the arithmetic mean of the numbers of R&D scientists and
engineers reported in each industry for January in two consecutive
years.

*Nonavailability of certain statistics***---**Estimates withheld for not
meeting publication standards for reasons such as extremely high
associated sampling error of estimate; high rate of imputation (over 50
percent) because of failure of companies to report; possible disclosure
of data on an individual company; or cases where data were inconsistent
for inclusion in a time series. In tables, the term "not separately
available but included in total" indicates statistics could not be
published for any of these reasons.

*Questionable data***---**Data with imputation rates over 50 percent
have not been published. Users should consult table A-1 for imputation
rates of specific items.

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

**Methodology of Survey**[^6]

The sample used for the 1976 Survey of Industrial Research and
Development represented all manufacturing industries and those
nonmanufacturing industries known, on the basis of earlier, more
detailed samples, to conduct or to finance research and development. The
sampling unit for the survey was the company, defined as a business
organization consisting of one or more establishments under common
ownership or control.

Approximately once every 5 years a new panel for the R&D survey is
selected. A new panel was selected for the 1976 survey (the first since
the 1971 survey). Approximately 11,500 manufacturing and
nonmanufacturing companies are included in the new sample, which consist
of about 4,500 certainty companies (those with 100 percent chance of
inclusion in the panel) and about 7,000 noncertainty companies.

Companies in the new panel which had received an RD‑1 form in the old
panel once again received an RD‑1 form in 1976 (about 1,200 companies
each year). This form seeks detailed R&D information. The remaining
certainty (about 3,300 companies) and noncertainty companies (about
7,000) in the new panel received an RD‑2 survey port in 1976. Form RD‑2
is an abbreviated version of RD‑1 and is only mailed to companies the
year in which a new sample is drawn. The purpose of Form RD‑2 is to
canvass smaller R&D performers with a minimum reporting burden. Once the
RD‑2 forms were received and tabulated from the survey respondents in
1976, they were reviewed for size. Those RD‑2 companies which reported
R&D expenditures of \$500,000 or greater were converted to Form RD‑1 and
mailed with other RD‑1 companies in the 1977 survey. There were about
450 such companies. The remaining RD‑2 companies are not mailed another
form but data for them are estimated by the Bureau of the Census based
upon their 1976 report.

All manufacturing and selected nonmanufacturing companies (in SIC's 49,
7391, 7392, 7399 and 8911) with 1,000 or more employees were included in
the sample with certainty. Manufacturing and selected nonmanufacturing
companies with fewer than 1,000 employees were sampled at rates
depending upon their industry and employment size (table A‑2). The
source of this sample was the 1974 Standard Statistical Establishment
List (SSEL). For 1976, the SSEL was used for the first time as a source
for the R&D sample. For other nonmanufacturing industries, the sample
was based on the 1966 records of the Social Security Administration.

Each year the annual Department of Defense (DOD) and National
Aeronautics and Space Administration (NASA) lists of R&D contractors are
reviewed to ensure that the large contractors are included in the
sample. For the 1976 survey, R&D‑performing manufacturing companies from
the 80 largest contractors on the DOD list and R&D‑performing
manufacturing companies from the 50 largest NASA contractors were
included in the reporting panel with certainty.

The particular sample selected is one of a large number of samples of
the same type and size that, by chance, might have been selected.
Estimates from each of the different samples would differ somewhat from
each other, and from the results of a complete canvass conducted under
essentially the same conditions as the survey. This variation among the
possible estimates is defined by the sampling error, measured in
standard error units. The complete canvass total would be included in
the range---

> 1\. From one standard error below to one standard error above the
> derived estimate for about two‑thirds of all possible samples;
>
> 2\. From two standard errors below to two standard errors above the
> derived estimate for about 95 percent of all possible samples; and
>
> 3\. From three standard errors below to three standard errors above
> the derived estimate, almost always.

An inference that the comparable complete canvass total would be within
the indicated ranges would be correct in approximately the relative
frequencies shown. Those proportions, therefore, may be interpreted as
defining the confidence that the estimates from a particular sample
would differ from complete coverage results by as much as one, two, or
three standard errors, respectively.

For example, suppose an estimated total is shown as 400 with an
associated relative standard error of 2 percent. Then, there is
approximately 67‑percent confidence that the interval 392 to 408
includes the complete canvass total, about 95‑percent confidence that
the interval 384 to 416 includes the complete canvass total, and almost
certain confidence that the interval 376 to 424 includes the complete
canvass total.

As stated, the standard error refers only to sampling variations. In
addition to the sampling errors as measured by the standard error, the
estimates are subject to errors in response, coding, processing, and
imputation for nonresponse. These nonsampling errors would also occur if
a complete canvass were to be conducted under the same conditions as the
survey.

The 1976 standard errors of estimates for each industry, for all
companies and for those with fewer than 1,000 employees, are shown in
table A‑3.

The forms for the survey were mailed in January 1977, and nonrespondents
received a followup by mail. Since total R&D performance funds, total
Federal R&D funds, total net sales, and total employment are included in
Census' mandatory statistical program, the few companies that did not
reply to Forms RD‑1 and RD‑2 were mailed the Census Form MA‑121 which
collects these mandatory items.

In the absence of respondent‑distributed data, Census has estimated data
for items as required in accordance with past performance and industry
averages. Table A‑4 specifically shows the percent of total R&D funds
for which a distribution by basic research, applied research, and
development was estimated for 1976. These data are not required as part
of Census' mandatory statistical program.

**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 or her, on the same report form used in
filing current data, the figures for the previous year as reported by
the respondent and as entered on the form by Census before mailing; the
respondent has been asked to adjust the data for the previous year as
necessary to make it comparable to those of the current year. Such
adjustments have been made to reflect, for example, changes in reporting
concepts or changes in company structure such as mergers or
acquisitions. To maintain some measure of consistency, the
employment‑size classification of any company affected by such changes
has been adjusted so that the company is tabulated in the same
employment‑size category for 2 consecutive years.

Some measure of the degree of change reflecting these adjustments in
contrast to an actual change in R&D activity can be gained by comparing
figures for the same year reported for two succeeding reporting periods,
e.g., 1975 R&D statistics in the final report of the 1975 survey and the
revised 1975 R&D statistics in the final report of the 1976 survey. (See
table A‑5 for both sets of data.) The totals for broad classification
are likely to be very close in the two reports, but in the finer detail,
larger differences are noticeable. The results underscore the point that
the measures are approximate and indicative rather than precise.

**Changes in 1975 Data Proportionally Applied to Previous Years**

Figures for 1975 reported in the 1976 survey (table A‑5) were different
from those reported in the 1975 survey because of the following factors:

> 1\. The data for 1975 were the first affected by the 1976 resampling.
> (See Methodology of Survey.)
>
> 2\. Interviews undertaken for the "Response Analysis" study helped
> improve respondents interpretation of definitions. (See Efforts to
> Improve Data Quality.) Subsequently, company reporting for the 1975
> data became more accurate.

To lessen the impact of the changes which appeared in the revised 1975
data, the 1972--74 figures for the affected industries were adjusted.
This period was utilized because the last resampling year was 1971. Data
adjustments were made as follows: Items showing increases in the revised
1975 figures were estimated to have changed at the constant rate of 25
percent per year for the 4 years affected (1972 through 1975). For
example, the 2.6‑percent increase in industrial R&D figures for 1975
from the previously reported 1975 figures was applied to each of the 4
years as an annual adjustment of 0.65 percent.

**Efforts to Improve Data Quality**

Beginning in May 1975 and extending through the following year, Census
personnel, in coordination with NSF staff, conducted an extensive
Response Analysis of the Survey of Industrial Research and Development.
The purpose of the analysis was to discuss, on an in‑depth basis, each
of the items on the survey form to determine the sources used by
companies to provide the data, the extent and methodology of estimating
procedures, completeness of reporting, problems encountered by
respondents, and related questions. Interviews (112) were conducted with
representatives from firms in a wide variety of industries, with
emphasis primarily on the larger R&D performers in the most
R&D‑intensive industries.

The consensus among members of the Response Analysis interview team was
that reporting of data on total R&D expenditures by sources of
support---Federal or company funds, and geographic location, net sales,
and total employment, and R&D scientists and engineers---was based on
company records and these data elements could be considered an accurate
reflection of company activities.

Questions on scientific and technical information (STI) expenditures and
company research and development as indirect costs of Federal contracts
were found to be very difficult for companies to answer; therefore, the
data were unreliable. These items were removed from the survey. Also
deleted was the question on the employment of scientists and engineers
in terms of "personnel." Analysis of historical data showed little
differences between these personnel data and the average of two January
totals; this finding was confirmed by company officials.

It was learned that most companies do not maintain separate accounts for
salaries and wages for scientists and engineers and for supporting
personnel, and that the estimates provided in the survey were extremely
weak. Therefore, the item was simplified to obtain a total figure for
scientists, engineers, and supporting personnel.

The breakdown of R&D expenditures among basic and applied research and
development was cited as one of the more difficult items to provide and
one requiring further clarification in the definitions and instructions.
To assist respondents in overcoming these difficulties, a number of
steps were taken. First, Census personnel offered suggestions regarding
specific problems. In this regard, company officials were encouraged to
rely to a greater extent on "informed estimates" when precise data were
not available. Some changes were made to the survey form to emphasize
the more important instructions, to provide the opportunity to report
that certain R&D activities were not undertaken by the firm, and to
clarify the definitions of both net sales and "contracted‑out" research
and development. Finally, because reporting problems were so
troublesome, the questions on scientific and technical information, and
indirect costs of Federal contracts were deleted from the form.

**Industry Codes for 1967--76**[^7]

The industry codes appearing in the tables are based on the 1972
Standard Industrial Classification (SIC) Manual. The SIC classifications
for individual companies for 1967--74 (which were utilized in the
publications for those years) were originally determined by data
reported in the 1967 Economic Censuses. Between 1967 and 1974, the SIC
code for a company on the R&D survey generally remained fixed and
reflected that company's principal activity as of 1967. However, under
certain circumstances---such as the merger of two or more companies, the
acquisition of one company by another, or the formation of
"conglomerates"---the 1967 SIC code for a company in actuality could
have changed.

Census could not be aware of a possible new SIC code for a company until
the 1976 new sample was drawn based upon the 1974 SSEL file. (See
previous description of the new sample.) When the new sample was
selected, the industry codes of companies in both the old and new panels
were examined for possible change. For larger R&D companies which had
switched industry codes between panels, the historical R&D tables (e.g.,
1968--74) have been adjusted to reflect the change in company
activities. As it is not known normally when a company changed its
industrial activities, the data were adjusted in the following fashion:
For companies changing industry codes between 1967 and 1974, the
industry totals for each of the years affected (1968 through 1974) were
estimated to have changed at a constant rate of 14.3 percent per year.
Accordingly, the data for the industry in which such a company had been
classified in 1967 were deflated by 14.3 percent per year for each of
the years 1968--74 (e.g., 14.3 percent subtracted in 1968, 28.6 percent
in 1969, 42.9 percent in 1970). Similarly, the data for the industry in
which such a company was classified in 1974 were inflated by 14.3
percent per year for each of the years 1968--74. The industry code
assigned to a company for 1974 is also used to classify that company's
activities for the years 1975 and 1976.

The following measures were adjusted in this manner: Number of
scientists and engineers; funds for research and development---total,
Federal, and company; net sales; cost per R&D scientists and engineer;
and basic research expenditures. These items were also adjusted for the
increases in the 1975 data as reported in the 1976 survey. The increases
were apportioned evenly among the four years 1972 through 1975. (See
Changes in 1975 Data Proportionally Applied to Previous Years.) These
historical data appear, for example, in selected tables of this NSF
publication on research and development in industry (See tables B‑3,
B‑6, B‑9, B‑26, B‑29, B‑34, and B‑46.)

[^1]: National Science Foundation, *Science and Engineering in American
    Industry, Final Report on a 1953--54 Survey* (NSF 56‑16) and
    *Science and Engineering in American Industry, 1956* (NSF 59‑50)
    (Washington, D.C. 20402: Supt. of Documents, U.S. Government
    Printing Office, 1956 and 1960).

[^2]: Executive Office of the President, Office of Management and
    Budget, *Standard Industrial Classification Manual, 1972*
    (Washington, D.C. 20402: Supt. of Documents, U.S. Government
    Printing Office). Industry group code numbers are shown in
    parentheses.

[^3]: 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
    groups of industries.

[^4]: 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
    groups of industries.

[^5]: Companies primarily engaged in the manufacture of ordnance and
    accessories, including complete guided missiles, are grouped since
    1975 with companies primarily engaged in the manufacture of aircraft
    and parts because of similarities of R&D activities carried out by
    major companies in the two industries.

[^6]: This section was prepared in the Industry Division of the Bureau
    of the Census, the collecting and compiling agent for the National
    Science Foundation in this survey.

[^7]: For a discussion of industry codes for 1966 and earlier years, see
    National Science Foundation, *Research and Development in industry,
    1975. Funds, 1975; Scientists and Engineers, January 1976* (NSF
    77‑324) and *Research and Development in Industry, 1970; Funds,
    1970; Scientists and Engineers, January 1971* (NSF 72‑309)
    (Washington, D.C. 20402: Supt. of Documents, U.S. Government
    Printing Office).