**TECHNICAL NOTES FOR 1971**

**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 expanded and refined in response to an increasing
need for more detailed information on the Nation's R&D effort.

The 1971 industry survey is the 15th 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 surveys are not directly comparable with the Census figures
for 1957--71 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.

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 is due mainly to 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*---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 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)

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

> Radio and TV receiving equipment (365)
>
> Communication equipment and electronic components (366--67, 48)
>
> Other electrical equipment (361--64 and 369)

Motor vehicles and other transportation equipment (371, 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 manufactures (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 four 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; and 10,000 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--71 is the arithmetic mean of the numbers of R&D scientists and
engineers reported in each industry for January in 2 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 1971 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 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 Census 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 1971 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. 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 1971 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 85 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 for non­response. These nonsampling errors would also occur if
a complete canvass were to be conducted under the same conditions as the
survey.

The 1971 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 1972, and nonrespondents
were followed up by mail. The basic forms used were forms RD‑1 and RD‑2,
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 statistical program, the very few large companies that did not
reply were mailed the census mandatory form MA‑121. 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 1971.

# Comparability of Data Over a Period of Several Years^5^

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 them 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., 1970 R&D statistics in the final
report of the 1970 survey and the revised 1970 R&D statistics in the
final report of the 1971 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 2 years were prepared for this report, it
was not considered feasible to carry most revisions back more than 1
year.

# Industry Codes for 1963--71[^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. 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 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. However, some industry groups 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 with substantial R&D expen­ditures changing
industry codes between 1963 and 1967, the industry data for each of the
4 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 had been classified in 1963 were
deflated by 25 percent per year for each of the years 1964--1967.
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--71.

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 1971 NSF publication on research and
development in industry. (See tables B‑3, B‑7, B‑9, B‑23, B‑29, B‑32,
B‑39, B‑41, and B‑48.) 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).

[^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).