Title  : U.S. R&D Spending Will Not Pick Up in '95
Type   : 1995 Data Briefs
NSF Org: SBE / SRS
Date   : October 5, 1995
File   : sdb95335



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U.S. R&D Spending Will Not Pick Up in '95

__________________

Inflation-adjusted
decline in U.S. R&D
spending reflects
worldwide pattern
of constrained R&D
support.
__________________


by John E.
Jankowski, Jr.

Total expenditures for research and development (R&D) performed in the
United States are expected to reach $171 billion in 1995, 1 percent more
than the revised total for 1994 ($169 billion).  After adjusting for
expected inflation, however, this 1995 figure represents a 2-percent
decrease in spending.  As a proportion of gross domestic product (GDP),
R&D will account for an estimated 2.4-percent share in 1995, slightly
lower than that estimated for 1994 (2.5 percent).  Approximately 17
percent of the Nation's 1995 R&D total is to be expended on basic
research activities, 23 percent on applied research, and 60 percent
on development.  These and other R&D statistics are taken from the
National Patterns of R&D Resources series and are analyzed in the
forthcoming report, Science & Engineering Indicators--1995.


1995 R&D Funding Patterns

Industry and the Federal Government provide, by far, the lion's share
of the Nation's R&D support.  In 1995, industry will account for an
estimated 59 percent ($102 billion) of total, most of which
($99.3 billion) is used to finance R&D performed in-house or
under contract to other firms. The remaining $2.4 billion goes
to support research activities undertaken at uni-versities and
nonprofit organizations (table 1).  The Federal Government is
expected to account for 36 percent ($61 billion) of the U.S.
1995 R&D expenditure total. This Federal total includes funds
spent in intramural labs and Federally Funded Research and
Development Centers (FFRDCs) ($25 billion), industry
($20 billion), and universities and colleges ($13 billion).
Overall, industry support is expected to increase 2 percent in
1995 and Federal support to decline by 1 percent.  In constant-dollar
terms, both industrial and Federal support are expected to decline,
by 1 percent and 3 percent, respectively.  State Governments,
universities and colleges, and other nonprofit organizations
account for the remaining 5 percent ($9 billion) of the U.S.
1995 R&D funding total.  Their combined support is estimated
to increase 3 percent in 1995 and would remain flat after
adjusting for expected inflation.


1995 R&D Performance Patterns

In terms of performance, industry accounts for 70 percent
($120 billion) of the Nation's estimated 1995 R&D effort,
Federal labs--including all FFRDCs--for 14 percent ($25 billion),
 universities and colleges for 13 percent ($22 billion),
and other nonprofit organizations for 3 percent
($5 billion).  Academia is the only sector in which
inflation-adjusted R&D performance is expected to
increase in 1995, although by a mere 0.4 percent.
Industry's R&D performance will decline 1 percent, as a
result of slow growth in industry self-funding and
reductions in Federal support to industry. R&D spending
by Federal Government performers will decline an estimated
5 percent in real terms.

Table 1. National expenditures for research and
development, by performing sector and source
of funds: 1995
                            ------Sources of R&D funds---------
                                               Universi- Other
                                               ties      non-     Percent
                                      Federal  and       profit-  distri-
                                      Govern-  col-      insti-   bution,
R&D performers       Total  Industry  ment     leges 1/  tutions  performers

                     -------------Millions of dollars----------
   Total.............171,000 101,650   60,700     5,500   3,150  100.0%
Industry.............119,600  99,300   20,300        --      --   69.9
Industry-administered
    FFRDCs..........   1,800      --    1,800        --      --    1.1
Federal Government... 16,700      --   16,700        --      --    9.8
Universities and
  colleges........... 21,600   1,500   13,000     5,500   1,600   12.6
University-admini-
  stered FFRDCs......  5,300      --    5,300        --      --    3.1
Other nonprofit
  institutions.......  5,100     850    2,700        --   1,550    3.0
Nonprofit-admini-
  stered FFRDCs......    900      --      900        --      --    0.5
Percent distri-
  bution, sources....  100.0%   59.4%    35.5%      3.2%    1.8%

    1/ Includes an estimated $1.6 billion in State and local government funds
provided to university and college performers

KEY:  FFRDC = Federally funded research and development center;
      "--" = Unknown but assumed to be negligible

SOURCE: NSF/SRS, National Patterns of R&D Resources, annual series


U.S. R&D Expenditure Trends

The estimated reductions in 1995 R&D expenditures in the
United States represent a continuation in the patterns of
R&D leveling and decline that have developed during the
past decade.  In the early 1980s R&D spending grew by
almost 7 percent per year after adjustment for inflation.
Strong funding support was provided both by industry and
Federal agencies. Increases in R&D support tapered off
substantially in the mid- to late-1980s, before turning
negative in the early 1990s (chart 1). Most of the
national decline in inflation-adjusted R&D support stems
from reductions in Federal spending, but growth in
industry R&D support also slackened considerably.

(Chart 1., Rates of change in U.S. R&D support, appears here in
printed and Adobe Acrobat versions)


International R&D Spending

The slowdown in R&D spending has not been confined to the
United States; R&D growth stagnated worldwide during the
early 1990s. Notably, the dual effects of economic
recession and general government budgetary constraint
have adversely impacted R&D support in both Japan and
Germany--the two largest R&D-performing countries
following the United States.  Although the timing and
magnitude of changes within these three R&D-leading
nations differ slightly, in each the R&D/GDP ratio has
fallen from recent peaks to current lows (chart 2).
The drop is most pronounced for the United States
(2.4 percent, down from 2.8 percent) and Germany
(2.5 percent, down from 2.9 percent) and reflects relative
reductions in both defense and nondefense R&D.
Even in Japan, however, R&D as a share of overall
economic activity has been reduced somewhat, declining
from a high of 2.9 percent in 1990 to 2.7 percent in
1993, the most recent year for which such international
data are available.


User Notes

U.S. national R&D expenditures data were assembled
from a number of NSF surveys.  Estimates for 1995
are based on data provided by Federal R&D funding
agencies, an independent survey of industrial R&D
performers, and time series modeling techniques.

(Chart 2., U.S., Japanese, and German R&D/GDP
ratios: Selected years, appears here in printed
and Acrobat versions)


Foreign R&D expenditure data are derived from national
and international sources. For more information,
contact--

John E. Jankowski, Jr.
Research and Development Statistics Program
Division of Science Resources Studies
National Science Foundation
4201 Wilson Boulevard, Suite 965
Arlington, VA 22230

phone: 703-306-1772 ext. 6930
Internet:  jjankows@nsf.gov

For free printed copies of SRS Data Briefs call
703-306-1773 or e-mail to databrief@nsf.gov.
See "Electronic Dissemination" for electronic
versions.

--end--