Chemical & Engineering News

September 1, 1997


Copyright © 1997 by the American Chemical Society
Mairin B. Brennan, Janice R. Long, and Pamela S. Zurer
C&EN Washington

Spending on R&D--with emphasis on chemistry and chemical engineering--by the federal government and its various agencies. Distribution of funds among development and basic and applied research.

How much companies, particularly within the chemical industry, spend on R&D. Where industrial chemists work and how much they are paid. Patent activity of U.S. chemical firms.

Sources of academic R&D funds and which schools spent the most for chemistry and chemical engineering. Funding for research equipment. Number of degrees awarded, graduate students, and postdoctoral appointees.

U.S. R&D efforts compared with those in Japan, Germany, France, the U.K., Italy, and Canada. Size of scientific workforce in various countries. Origin of chemical literature and of U.S. chemical and biotechnology patents.

Funding for R&D in the U.S. grew a respectable 3.2% last year, according to National Science Foundation estimates, rising to a total of $184.3 billion in 1996. Although that increase was only 1% when inflation is taken into account, it was still real growth--and better news than many in the science and engineering communities had expected. C&EN projects a similar rate of increase for this year, which would bring total R&D expenditures for 1997 to about $190 billion.

Those observers who had been expecting a gloomier outcome most likely have been focusing on federal R&D funding. The effort to balance the budget has meant that researchers who depend on federal government dollars for support have learned to be thankful if that funding even keeps up with inflation--which it did not do in 1996 and will not do in 1997 either. NSF estimates that total federal spending for R&D dropped 1.0% in 1996 to $61.9 billion--a decline of 3.0% in real terms. The decrease this year will be even greater.

But the federal government has not been the primary source of U.S. R&D funding for almost 20 years. Its share fell below 50% in 1978 and has been declining at varying rates ever since. NSF estimates federal funds made up only one-third of funding available for R&D in the U.S. in 1996.

It's industrial funding of R&D that dominates. Industry now supplies more than 60% of U.S. R&D funds. And with strong increases in the past few years, industry has been providing the only real growth.

The bottom line tells only part of the story, however. For as the predominant source of R&D funds changes, so does the nature of the work: Less truly exploratory basic research is being undertaken. Whether that shift turns out to be a source of problems in the future remains to be seen, but the changing character of R&D in the U.S. is clear now.

The federal government continues to be the largest source of funds for basic research, most of which (about 60%) is carried out at universities and colleges. Industry, on the other hand, puts most of its money into applied research and into development.

Although industry also carries out basic research--23% of the total R&D performed in industry during 1996, according to NSF estimates--less and less is fundamental research aimed at obtaining new knowledge without specific goals. Instead, basic research in industry more often is directed toward understanding problems related to potential products or processes.

And while many academic researchers are looking toward industry to fill the gap caused by decreasing federal funds, that strategy is not without its risks as well as rewards. Issues of conflict-of-interest, free sharing of data and ideas, and peer review remain sources of concern.

Chemical and drug companies contribute a substantial portion of the total industrial funding for U.S. R&D. In 1995, the last year for which NSF has solid figures, the chemical and allied products sector spent $17.3 billion on R&D, 13% of the nation's total funding for industrial R&D. Pharmaceutical companies accounted for $10.2 billion of those funds, up 6.2% from 1994. Industrial and other chemical firms increased their R&D spending a more modest 1.4% to $7.1 billion over the same period. The number of patents issued to major U.S. drug companies increased 26% from 1995 to 1996, according to Patent & Trademark Office data--a reflection of R&D investment in earlier years. In contrast, major chemical firms were issued 8% fewer patents in 1996.

An NSF pilot study of U.S. companies describes the pharmaceutical and chemical industries as above average in innovation. Based on a 1994 survey of 1,000 U.S. firms from all industries, NSF estimates that about one-third are innovators--that is, they either recently introduced a new product or process or had plans to do so. Manufacturers of computer hardware and precision instruments and equipment had the largest percentage of innovators (84% and 74% of companies, respectively), with pharmaceuticals (69%) and chemicals (68%) not far behind. The survey also found that innovative companies are more likely to export products--a major strength of the chemical industry.



INDUSTRY PERFORMED 73% OF TOTAL R&D...

Looking at R&D from a global perspective, the U.S. far outspends other industrialized countries. In 1995--the latest year in which international data from the Organization for Economic Cooperation & Development (OECD) are available--the $179.1 billion spent by the U.S. dwarfs the amounts spent by the two next ranking nations, Japan ($76.0 billion) and Germany ($38.1 billion). In terms of per capita spending, however, Japan--at $607 per person--is not that far behind the U.S., which spent $681 per person in 1995.

Viewed another way--as the share of gross domestic product (GDP) devoted to R&D--Japan's R&D funding is ahead of the U.S.: In 1995, the U.S. spent 2.58% of GDP on R&D, while Japan expended 2.78% of its GDP. The comparable figures for Japan for 1996 are not yet available, but NSF estimates that U.S. spending as a percentage of GDP slipped last year to 2.48%, the smallest share since 1981. OECD's preliminary figure for the U.S. for 1996 is higher--2.54%--but still below 1995. In other words, U.S. R&D spending has not been growing as fast as the economy.

Japan, however, is pursuing a goal of doubling its government spending on R&D. If the expansion continues as Japan now proposes, NSF notes, the Japanese government's R&D investment will reach about $18 billion in 2000. That's roughly twice the amount spent in 1992 in real terms.

The U.S. lead in world science is also slipping by another measure: the number of scientific papers published. The Institute for Scientific Information (ISI) in Philadelphia reports that the U.S.'s share of all scientific research papers indexed by ISI has fallen from 40.5% in 1981 to 36.5% in 1996. The percentage of papers by scientists from the European Union (EU) increased from 30.5% to 36.2% during the same period. (Of course, the number of countries that are members of the EU also rose during those years.) Meanwhile, the share of papers from scientists in the Asia-Pacific region increased strikingly from 12.8% in 1981 to 18.8% in 1996.

Focusing on the chemical literature specifically, Chemical Abstracts Service finds that U.S. authors contributed 27.7% of the total in 1996, up slightly from 27.0% in 1995. Second-ranked Japan dropped a little, from 12.8% in 1995 to 12.5% in 1996.

The U.S. has the largest workforce of R&D scientists and engineers in the world--approximately 963,000 in 1993, the latest year for which NSF has international comparisons. But the proportion of scientific workers was higher in Japan, which had 79.6 scientists and engineers per 10,000 workers in the labor force, than in the U.S., for which the comparable figure was 74.3.

In the U.S., the annual salary survey of the American Chemical Society finds that the pharmaceutical industry continues to be the largest industrial employer of chemists, followed by specialty chemical companies. Salaries for Ph.D. chemists, however, are highest in the petroleum and electronics industries.


SOURCES OF R&D FUNDS...


IN CURRENT DOLLARS, U.S. R&D SPENDING...


PERFORMERS OF R&D...






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