Technical Notes for 1973

Scope of Study

The National Science Foundation sponsored its first survey of industrial
research development in 1953. Since then, the scope of the survey has
gradually been expanded and refined in response to an increasing need
for more detailed information on the Nation's R&D effort.

The 1973 industry survey is the 17th 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--73 because of methodological and other differences in the
surveys conducted by the two agencies. In addition, the Census surveys,
beginning in 1957, 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 manpower are not directly comparable with data in
surveys formerly conducted by the Bureau of Labor Statistics. 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 the Bureau of Labor Statistics 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 surveys of the Bureau of
Labor Statistics in which data were provided in terms of scientists and
engineers primarily employed in research and development. Other
variations in the two sets of data may be the result of different
offices in the same company preparing the estimates, or the varying
response rate of the two surveys.

The statistics presented in this report are subject to response and
concept errors caused by differences between survey and industry
concepts and definitions of R&D activities and by variations in company
accounting procedures. Consequently, the accuracy of the data provided
by respondents is subject to some variation.

Since the first industry survey in 1953, the quality of the data has
improved substantially. This results mainly from more accurate and
sophisticated accounting procedures adopted by respondents. In addition,
the Foundation and the Bureau of the Census have continued their efforts
to reduce response and concept errors arising from difficulties in
interpreting or applying survey definitions.

# 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.

*Total 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 (1) as of January and
(2) on a man‑year basis.

*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)

Chemicals and allied 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, 3391, 3399)

Nonferrous metals and products (333‑36, 3392)

Fabricated metal products (34)

Machinery (35)

Office, computing, and accounting machines (357)

Electrical equipment and communication (36, 48)^3^

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 vehicle equipment (371)

Other transportation equipment (373--75, 379)

Aircraft and missiles (372, 19)[^4]

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---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 scientist or engineer for
1957--73 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 excessive­ly high
associated sampling error of estimate; high rate of imputation because
of failure of companies to report; possible disclosure of data of 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.

*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[^5]

The sample used for the 1973 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. All manufacturing companies with 1,000 or more
employees in 1967, as determined from the 1967 Economic Censuses
Enterprise Statistics[^6] multi-unit file, were included in the sample
with certainty. Manufacturing companies with fewer than 1,000 employees
were sampled at rates depending upon their industry and employment size,
based upon the 1967 Economic Censuses Enterprise Statistics multi‑unit
file and the 1967 Census of Manufactures universe file. For selected
nonmanufacturing industries (SIC 7391, 7392, 7397, and 8911) the sample
was drawn from the 1967 Economic Censuses Enterprise Statistics file.
For all other nonmanufacturing industries, the sample was based on the
1966 records of the Social Security Administration.

Approximately 8,000 manufacturing and nonmanufacturing companies are
represented in the 1973 sample. More than 1,800 of the companies
included are certainty companies which accounted for almost 95 percent
of the total R&D performance funds. Appendix table A‑1 shows the
probabilities of selection applied for each industry‑size stratum. The
probabilities of being selected in the survey range from one chance in
200 (.005) to certainty (1.000).

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 1973 survey, the 80 largest companies from the DoD list
and the 50 largest NASA contractors were includ­ed in the sample with
certainty regardless of their industry class and employment size. The 80
largest companies from the DoD list accounted for 93 percent of the
total contract awards of all companies included on the DoD list. The 50
largest companies from the NASA list accounted for 84 percent of the
total contract awards of all companies included on the NASA list.

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.

3\. From three standard errors below to three standard errors above the
derived estimate, almost always.

These values may be interpreted as defining approximate probabilities
that the estimate shown would differ from a complete canvass total by as
much as one, two, or three standard errors, respectively. For example,
if an estimate is shown as 400, with an associated relative standard
error of 2 percent, the chances are roughly two out of three that the
complete canvass total would lie between 392 and 408; the chances are
roughly 19 out of 20 that the complete canvass total would lie between
384 and 416; and it is almost certain that the complete canvass total
would lie between 376 and 424. 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 and for nonresponse. These
nonsampling errors would also occur if a complete canvass were to be
conducted under the same conditions as the survey.

The 1973 standard errors of estimates for each industry, for all
companies and for those with fewer than 1,000 employees, are shown in
table A‑2. The forms for the survey were mailed in March 1974, and
nonrespondents were followed up by mail. The basic forms used were Form
RD‑1 and RD‑11, but since total R&D performance funds and total Federal
funds expended by industry for research and development are included in
the Census Bureau's mandatory statistical program, the very few large
companies that did not reply were mailed the Census Form MA‑121, which
collects total R&D and Federal R&D funds. Less than 1 percent of total
R&D funds were obtained in this way and included in this report.

Table A‑3 shows the percent of total research and develop­ment funds for
which a distribution by basic research, applied research, and
development was estimated by the Bureau of the Census in the absence of
respondent-distributed data for 1973.

# 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 form used in filing
current data, the figures for the previous year as reported by the
respondent and as entered on the form by the Census Bureau 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 two consecutive years.

Some measure of the degree of change reflecting these adjustments, in
contrast to an actual change in research and development activity, can
be gained by comparing figures for the same year reported for two
succeeding reporting periods; e.g., 1972 R&D statistics in the final
report of the 1972 survey and the revised 1972 R&D statistics in the
final report of the 1973 survey. 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. When tables covering more than two years
were prepared for this report, it was not considered feasible to carry
most revisions back more than one year.

# Industry Codes for 1963--73[^7]

The industry codes appearing in the tables are based on the 1967
Standard Industrial Classification (SIC) Manual. The SIC classifications
for individual companies for 1963--1967 were originally determined by
data reported in the 1963 Economic Censuses: Between 1963 and 1967, the
SIC code for a company generally remained fixed and reflected that
company's principal activity in 1963. 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 1963 SIC code for
a company could have changed.

Most industry groups were characterized by relatively minor changes in
the SIC codes for companies classified in those groups, and the
tabulated data for such groups remained substantially comparable between
1963 and 1967. Some industry groups, however, were characterized by
significant changes in the SIC codes for companies originally classified
in those groups in 1963. The effect of these changes became most
noticeable toward the end of the 4‑year intercensal period, with the
result that revisions to industry totals resulting from these code
changes tended to reflect disproportionately large fluctuations between
the data for 1967 and the year immediately preceding.

To remedy these apparent discrepancies, the data for affected industries
were adjusted as follows: For companies changing industry codes between
1963 and 1967, the industry data for each of the four years affected
(1964 through 1967) were estimated to have changed at the constant rate
of 25 percent per year. Accordingly, the data for the industry in which
such a company was classified in 1963 were deflated by 25 percent per
year for each of the years 1964--67. Similarly, the data for the
industry in which such a company was classified in 1967 were inflated by
25 percent per year for each of the years 1964--67. The industry code
assigned to a company for 1967 is also used to classify that company's
activities for the years 1968--73.

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 scientist and engineer;
and basic research expenditures. These historical data appear, for
example, in selected tables of the 1973 NSF publication on research and
development in industry. (See tables B‑3, B‑6, B‑9, B‑24, B‑30, B‑36,
B‑37, and B-­43.) No adjustments were made in data for other measures,
nor have similar adjustments been made for any data or for any company
industry code subsequent to 1967.

[^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, Bureau of the Budget, *Standard
    Industrial Classification Manual, 1967* (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
    group of industries.

[^4]: 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.

[^5]: This section was prepared in the Industry Division of the Bureau
    of the Census, Social and Economic Statistics Administration, the
    collecting and compiling agent for the National Science Foundation
    in this survey.

[^6]: U.S. Bureau of the Census, *Enterprise Statistics: 1967*
    (Washington, D.C. 20402: Supt. of Documents, U.S. Government
    Printing Office).

[^7]: For a discussion of industry codes for 1962 and earlier years, see
    National Science Foundation, *Research and Development in Industry,
    1970: Funds, 1970; Scientists & Engineers, January 1971* (NSF
    72‑309) (Washington, D.C. 20402: Supt. of Documents, U.S. Government
    Printing Office, 1972).