Friday, February 17, 2012

Intensity of R&D in different sectors

In the previous post we have shown the structure of business R&D in USA economy (2008) and the strong concentration of these activities in a few subsectors. In this post we concentrate on the intensity of business R&D, defined as R&D performed and pais by the companies, in different business sectors. A certain contribution to R&D can be achieved by a large sector with an average intensity, or the same contribution can be achieved by a small sector with a very high intensity of R&D. The usual measure of R&D intensity is the ratio between R&D performance value and sales or income. For instance, National Science Foundation gives estimates of this ratio (see table 4-16 of Science and Engineering Indicators). In the previous post, we have used a similar, but different, ratio: R&D performed versus receipts. 
Now we will prefer a more structural indicator, more related to the macro variables of an economy - so we use the ratio of R&D performance versus value added of the sector (the contribution of the sector to national GDP). An alternative indicator, also considered, is the amount of R&D performed by capita in the sector.
The first table shows the share of business R&D, value added (GDP) and employment for the three top R&D contributors at the 2-digits NAICS sectors, that together mean 95% of business R&D (2008) . Manufacturing contributes with 71% of R&D, but manufacturing only has a 10% share of employment and the value added of manufacturing activities contributes only with 13% to GDP. Others (non manufacturing) activities have a strong structural footprint (near
70% of GDP, around 80% of employment) but its contribution to R&D is residual. We can properly say that most of the economic activities have a marginal role in R&D. Of course this is a very different picture from the popular one, that suggests that the average american business is very much committed to “invest” in R&D activities. Last two columns in the table are intensity indicators. Manufacturing contributes for R&D with 10% of its value added, but other non manufacturing sectors (not including information and professional services) only contribute with 0.1%. R&D per capita is specially high in manufacturing and information services (14k and 11k USD per employee), when compared with the others (less than 0.2k per capita). 

Next table summarizes the data for manufacturing subsectors. The four subsectors with largest volume of R&D only share 3.3% of employment and 18% of GDP, but contribute with 61% of R&D performance. These four subsectors also have higher R&D intensities (last two columns). 

Both indicators of R&D intensity are related (see next figure for 2-digits NAICS sectors), but the relationship is non linear (plot is log-log). In this figure, the size of the bubble is related with the R&D volume.

Previous table includes data for two industry sectors that were missing in previous post, because of restrictions by statistical secrecy. Due to problems of disclosure in the "petroleum and coal products" (NAICS 324), disclosure of "miscelaneous manufacturing" is also affected. We tried to estimate both numbers for business R&D performance. Using data from previous years, published by US Census (see table 805, Statistical Abstract of US: 2012), we can see that R&D intensity is petroleum and coal products has been very stable, and we can estimate its R&D performance to be around 8.2 bUSD, which makes R&D for miscellaneous manufacturing class (NAICS 329) to be around 0.3 bUSD. This allows us to complete the table. The petroleum and coal industries contribute with 3.5% for total business R&D, which makes it one medium tier contributor. But with a very high R&D intensity: the highest R&D per capita (higher, but close, to chemicals sector) and around 10% of its value added contribution to GDP. These numbers are coherent with the 325 NAICS sector (chemicals, as should be expected).
Miscellaneous manufacturing is a residual sector with marginal performance. Inclusion of data from these two sectors does not change the overall picture and conclusion previously drafted. But it includes petroleum and cola products as a top high intensity R&D sector, together with chemicals, and computer and electronic products.

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