Foreign-owned R&D Growing in United States

Research and development (R&D) spending in the US by foreign-owned companies has increased to more than $17 billion annually and accounts for nearly 15 percent of total company-funded R&D in the United States, according to Globalizing Industrial Research and Development — Update, a new report released by the US Department of Commerce Office of Technology Policy.



Furthermore, the study found that during the past seven years, R&D expenditures by foreign-owned businesses in the US have increased faster than total R&D expenditures by US firms. In the high-technology sector, R&D expenditures by foreign companies account for one out of every four dollars spent on industrial R&D in the US. The growth in R&D spending by foreign companies can largely be attributed to the expansion of R&D expenditures by the US affiliates of multinational companies from six countries: Switzerland, Japan, the United Kingdom, Germany, France, and the Netherlands.



In a complementary trend, the US industrial base is expanding its overseas R&D operations. R&D expenditures by US multinational companies have more than tripled in the past decade, increasing to $14 billion, and represent nearly eleven percent of R&D performed in the US. More than half of US R&D expenditures abroad are accounted for by five countries: Germany, the United Kingdom, Canada, France, and Japan. However, several studies show that, while US R&D investment abroad has increased, leading-edge R&D on a company’s core technology almost inevitably is still performed inside the US.



In regards to industry sectors, the drug industry showed the most global trend, with a ratio of 30 percent of US R&D abroad to 49 percent of R&D performed by foreign companies in the US. The US auto industry performs nearly 25 percent of R&D in Europe to develop cars and diesel engines for the European market, but the foreign share of US R&D is only five percent.



The report concludes that the real challenge for future US R&D will be to compete with low-cost innovators. To do so, US policymakers must make a strong, strategic and sustained commitment to investment in science and technology, develop the means to rapidly integrate new knowledge and technologies into products, and gain access to growing global sources of innovation.



Copies of Globalizing Industrial Research and Development — Update are available on the web at http://www.ta.doc.gov/Reports.htm