Small and medium-sized businesses improve their R&D investment efforts
In October 2022, the United States Census Bureau published its 2020 installment of the Research and Development – R&D (i) map in the U.S. It shows that in 2020 small and medium-sized businesses that employ between 10 and 499 employees invested $77,3 billion in research and development. In 2019, their investment was in the amount of $70.6 billion. The 2020 investment amount represents an increase of 10% compared to 2020.
Most of the funds, $66.37 billion (86%), is from small businesses’ own sources. During that period, they employed more than half a million workers in their research and development department.
Breakdown by Category of R&D
Most of the $538 billion that businesses invested in R&D in 2020 was geared toward development work. A breakdown of the investment is as follows:
- Basic research: $36 billion (7%)
- Applied research: $76 billion (14%)
- Development: $426 billion (79%).
The breakdown of businesses investment in R&D in 2019 is similar to the 2020 breakdown with 7% of the investments on basic research, 15% on applied research and 78% on development.
Breakdown by Industry
The manufacturing industry is a major investor in R&D with more than half of the 2020 total spending :
- Manufacturing industries: $308 billion, that is 57% of the total investment
- Non-manufacturing industries: $229 billion, that is 43% of the total investment.
Businesses in the manufacturing sector used their owned funds to cover 86% of the R&D expense. Those in the non-manufacturing sector coverage rate is 88%.
The manufacturing sector includes:
- The chemical sector: $101 billion spent on R&D
- The computer and electronic products sector: $99.5 billion spent on R&D
- The pharmaceutical sector: $91.8 billion spent on R&D
- The transportation equipment sector: $48.8 billion spent on R&D
The non-manufacturing sector includes:
- The information sector: $129 billion spent on R&D including $35 billion spent on software development
- Professional, scientific, and technical services: $54.4 billion spent on R&D.
The federal government is the main source of external funding for R&D across all industries. It accounted for $29 billion (40%) of the $71 billion of external funding for R&D. It supports the R&D efforts essentially in three industries:
- Aerospace products and parts: $13 billion
- Professional, scientific, and technical services: $7 billion
- Computer and electronic products sector: $6 billion.
The $538 billion that businesses invested in R&D in 2020 accounted for 4.8% of their 2020 revenue.
California is by far the state where most of the domestic research is performed with 36% of the total spending in R&D in 2020. Washington and Massachusetts follow its lead with 8% and 6% respectively of R&D spending. New York state accounts for 4% of the total domestic R&D spending in 2020.
Regardless of their size, in 2020 businesses spent $538 billion in research and development in the United States, up from $493 billion (9.1%) the previous year. The proportion of businesses’ own sources of financing increased by 8.7% at $466 billion in 2020.
Third party contributions to businesses’ research and development effort amounted to $71 billion, an increase of 11.7% compared to 2019. These increases are significant because they follow a two-year period of double-digit annual growth during a period of low inflation rate. Businesses anticipate continuing investing even more in R&D.