Useful Stats: Business R&D continues to consolidate in top states

With federal R&D investments unlikely to keep pace with inflation or international competition based on the administration’s budget request, cuts to existing research grants, and Congress’s inability to pass a budget, business R&D investments become more critical for sustaining the competitiveness of regional innovation economies. Trends evident in new data released by the National Science Foundation point to areas of potential concern or need for state TBED policy attention and potential adjustment: business R&D is growing even more concentrated geographically, and for many areas of the country business investments likely are not growing at a sufficient pace to maintain the regions’ innovation capacity. 

In 2023, just four states comprised 54% of the nation’s domestic business R&D expenditures, a sharp increase from being less than 45% in 2014, SSTI analysis of new Business Enterprise Research and Development (BERD) survey data reveals. The consolidation of BERD expenditures in the top states may lead one to think that less R&D is occurring outside of the largest states, but this is not the case; 24 jurisdictions doubled BERD expenditures in the past decade, with all but one state increasing total expenditures. Adjusted for inflation, however, reveals a more modest nine jurisdictions doubled their business R&D activities, while all but five increased. These trends and more are explored in this edition of Useful Stats.

Refer to the Data Notes section at the end of this article for more details on the data and its limitations.

A state-level overview of BERD survey data 

California, Washington, Massachusetts, and Texas comprised 54% of the nation’s domestic business R&D expenditures in 2023. These same four states accounted for less than 45% of BERD expenditures a decade prior in 2014. In 2023, 22 states accounted for at least 1% of the U.S.’ overall BERD expenditures, down one from 2014; 12 of these states account for less than 2% of the total, which emphasizes just how concentrated the nation’s business R&D investment has grown.

The state with by far the largest BERD value at nearly a quarter billion in 2023, California, contains over a third of the nation's total, amounting to more than the bottom 43 states and Washington, D.C., combined. The state’s leadership in business innovation is also seen in SSTI’s recent articles on the concentration of venture capital investment, particularly in generative AI.

The next closest states are Washington and Massachusetts, each with just over 7% of the nation’s BERD expenditures. Notably, companies within Washington experienced a large jump in share of nearly three percentage points from 2014 to 2023—the second largest increase in share, behind California’s over five percentage point jump, and one of the three states to have increased by over a full percentage point. From 2014 to 2023, just 13 states’ share of national BERD expenditures increased by at least a tenth of a percentage point, while 16 decreased by the same amount. Three states’ shares—Connecticut, Missouri, and Michigan—decreased by just over one percentage point each.  

Figure 1, below, includes donut charts of state shares of BERD expenditures for 2014 and 2023. To ensure readability, only the top five states for each year have values broken down.

Figure 1: State share of domestic R&D paid for by the company and others and performed by the company, 2014 and 2023

To better visualize many of the other jurisdictions, SSTI has prepared a second visual, Figure 2, below, which includes all jurisdictions with at least a 0.10 percentage point difference in their share of BERD values. California, Washington, and Massachusetts were also excluded as to not skew the scale of the Figure.

Figure 2: Change in state share of domestic R&D paid for by the company and others and performed by the company, 2014 to 2023

Figure 3, below, includes a map of BERD expenditures. The data displayed on the map can be adjusted to either 2014 or 2023 (in current or constant 2014 USD) BERD expenditures via the buttons beneath the title. Data is colored by quintiles and has a separate scale for each metric. Hovering over each state and Washington, D.C., reveals a pop-up and displays all three values at once.

Figure 3: Domestic R&D paid for by the company and others and performed by the company, 2014 and 2023

Business R&D expenditures are still increasing across most states despite the consolidation of topline values in the largest states.

A total of 24 jurisdictions’ BERD expenditures increased by over 100%, doubling expenditures over a decade. Of these, four states increased by over 200%: Oklahoma (322%), Nebraska (244%), Washington (240%), and Nevada (235%).

Just one state, Missouri, decreased over the same period, dropping 17%.

Adjusting for inflation, however, reveals less positive trends. Eight states and Washington, D.C., doubled BERD expenditures in real terms, led by Oklahoma with a 228% real increase. Five states decreased: Alaska (2%), Wyoming (10%), Rhode Island (11%), Kentucky (13%), and Missouri (36%).  

To view these trends and more, Figure 4 below includes additional maps which showcase the 10-year percentage change in BERD expenditures, from 2014 to 2023, for both current and inflation-adjusted values.

Figure 4: 10-year percentage change in domestic R&D paid for by the company and others and performed by the company

For SSTI’s coverage of the new 2023 BERD survey data release at the national level, click here.

Data Notes

This edition of Useful Stats uses data from both the new 2023 data release of the BERD survey and the older 2014 Business R&D and Innovation Survey (BRDIS), the precursor to the BERD survey, data release. Refer to the methodologies of each survey for exact differences.

Note that BERD Survey data collection began for data year 2019, the Business Research and Development Survey (BRDS) collected data for 2017–18, BRDIS collected data for 2008–16, and the Survey of Industrial R&D (SIRD) collected data for 1953–2007.

The BERD survey is the primary source of information on R&D expenditures and R&D employees of for-profit, publicly or privately held, nonfarm businesses with 10 or more employees in the U.S. Note that, starting from survey year 2018 onwards, companies that have performed or funded under $50,000 of R&D were excluded from tabulation. While this affects data compatibility before and after this tabulation change, the effects are estimated to be very small. Refer to the BERD survey page for more detail on the data, methodology, and other information.

SSTI used Federal Reserve Bank of Minneapolis Consumer Price Index values to inflation-adjust the data used in this visual. Annual average CPI(-U) to the tenth place was used, which may cause higher inaccuracy than online calculators, which use more specificity. This is especially true for larger values.  

This page was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.