Useful Stats: R&D in nonmanufacturing industries closing gap with manufacturing industries, SSTI analysis of NSF data finds

The 2021 BERD dataset reveals the highest level of business R&D spending on record. Since 2015, R&D expenditures have increased by 69% from $356 to $602 billion, representing an average annual growth of $41 billion or 9%. But what industries are contributing the most to this trend? The growth of business R&D in nonmanufacturing industries has far outpaced that of manufacturing industries since 2016, with an average growth of 15% per annum, compared to 6% for manufacturing industries. Nonmanufacturing R&D expenditures have been driven by massive increases in the information sector, among other industries, while chemicals—specifically pharmaceuticals and medicines—have led manufacturing. While nonmanufacturing industries have higher growth rates in their R&D expenditures, they still lag behind manufacturing industries in actual expenditures, but the gap is rapidly closing.

Department of Defense Approves $30 Million in Grants Under Defense Manufacturing Community Support Program

The Department of Defense recently awarded six Defense Manufacturing Community Support Program (DMCSP) grants totaling approximately $30 million from the Office of Local Defense Community Cooperation (OLDCC). The DMCSP invests long-term in critical skills, facilities, workforce development, research and development, and small business support to strengthen the national security innovation base.

Useful Stats: BERD expenditures jump 12%, topping $600 billion in 2021

Despite the pandemic and accompanying global economic slowdown in 2020 and 2021, U.S. business spending on research and development (R&D) activities increased by nearly $65 billion (12%), rising from $538 billion in 2020 to $602 billion in 2021. This increase was led by a $61 billion, or 13% increase, in R&D paid for by the company, compared to a $3 billion, 5% increase, in R&D paid for by others.

SBA announces awards to support STEM, R&D-focused businesses, and partnerships across national priority areas

SBA recently announced its 2023 Growth Accelerator Fund Competition Stage Two prize winners. The 35 award-winning accelerator partnerships will receive $150,000 each in unrestricted funds.

IRS provides new direction on R&D expenses

The Internal Revenue Service recently published new interim guidance for companies to use when amortizing research or experimental expenditures — a new requirement for tax year 2022 created in the Tax Cuts and Jobs Act. The law’s changeover from allowing deductions to requiring amortization was expected to create significant tax burdens for small businesses, which could prove particularly destructive to newer companies funded primarily through nonfungible grants or contracts. According to an initial analysis by Grant Thorton, the proposed rules provide additional direction to help companies identify the appropriate costs for amortization but also could require further accounting method changes. A notable clarification in the rules seems to state that companies providing research services must amortize only those research expenditures that either entail financial risk to the company or would allow the company to use any resulting product for its business. Congress has proposed legislation allowing companies to return to deducting their research expenses, but these rules have not moved forward despite widespread support.

Federally funded R&D centers increase R&D expenditures by billions

The United States' 42 federally funded research and development centers (FFRDCs) received a record $26 billion in federal government funding in fiscal year 2022 — a nearly 6% increase compared to the previous year. FFRDCs expended $26.5 billion on R&D in FY 2022, marking the ninth consecutive year of nominal growth. On average, FFRDCs have increased R&D expenditures by 1.3% per annum since 2012. Yet when looking at only the three most recent years of available data, from FY 2020-2022, this average drops to just 0.4%.

White House R&D priorities include new focus on regional innovation; other priorities slightly shift

A memo sent out last week by the Office of Management and Budget and the Office of Science and Technology Policy outlines this year’s R&D priorities. Federal science agencies will use this memo to design their budget requests for the fiscal year 2025.

Useful Stats: US leads the world in GDP, falls behind in R&D intensity

With a GDP of over $23 trillion in 2021, the United States has the world's largest economy, according to the latest available data from the World Bank. Yet, the U.S. falls behind such countries as Israel and Korea when it comes to how much is spent on research and development (R&D) in proportion to GDP. For example, Israel and Korea spend 5.56% and 4.93% of their GDP on R&D compared to the U.S.’ 3.46%.

China biting at US heels in R&D spending

A report from ITIF warns that China is catching up with the U.S. in private R&D funding. If this trend continues, China could surpass the U.S. in innovation in nine critical advanced technology sectors: aerospace and defense, electronic and electrical equipment, general industrials, industrial engineering, pharmaceutical and biotechnology, software and computer services, technology and hardware equipment, alternative energy, and automobiles and parts.

GAO examines flexibilities intended to speed up DOD R&D

The Department of Defense (DOD) receives about $95 billion annually to support research and development efforts. But some members of Congress feared that requesting and allocating those funds took too long. It usually takes two years, which hinders response to evolving threats. The Senate addressed this issue in the Senate Report on the National Defense Authorization Act for Fiscal Year 2022, calling for the U.S. Government Accountability Office (GAO) to review DOD research funding flexibilities. GAO reports that service officials responsible for R&D efforts were not familiar with all of the flexibilities available to them.


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