Microbusinesses performed $5.6 billion of US R&D in 2020

Microbusinesses (businesses with 1-9 domestic employees) spent $7.5 billion in both domestic and foreign R&D expenditures or costs in 2020, of which $6.7 billion was in the U.S. Of this total, $5.6 billion was performed by microbusinesses themselves, according to the National Center for Science and Engineering Statistics (NCSES) and data from the Annual Business Survey (ABS). The $5.6 billion performed by U.S. microbusinesses in 2020 shows over a $1 billion increase in domestic R&D performed by microbusinesses themselves as compared to 2018.

The survey found that microbusiness R&D was highly concentrated in a few industries, with selected nonmanufacturing industries accounting for $5 billion alone. Just three NAICS  industries accounted for more than two thirds (69%) of all microbusiness R&D performance: architectural, engineering, and related services (NAICS 5413); computer systems design and related services (NAICS 5415); and scientific research and development services (NAICS 5417).

The R&D performed by microbusinesses in 2020 is broken into three categories: basic, applied and development. Development or experimental development was the largest type of R&D, with over $2.9 billion performed by microbusinesses in 2020; applied research reached almost $2.3 billion and basic research reached $353 million.

According to NCSES, government funding for the scientific R&D services industry declined between 2019 and 2020 from 74% to 53% of all government funding, respectively. The data provided by ABS in the graph below shows over three-fourths (76%) of microbusiness R&D performance in 2020 was contributed by microbusinesses themselves. Another 15% was funded by the federal government, with an additional 7% from state or local governments. Other funding for microbusiness R&D comes from: 25% from a foreign owner; about 5% from U.S. Universities or colleges; 4% from another U.S. company; about 3% from U.S. nonprofit organizations; less than half a percent from other businesses outside of the U.S.; and less than half a percent from all other organizations outside of the U.S.