Small Companies Spend More on R&D
Small companies spend proportionally more of their revenues on research and development than large ones, says a new government report.
The National Science Foundation and the Census Bureau released preliminary findings on Wednesday from their January 2009 survey of 40,000 U.S. companies on innovation efforts. (The plan is for the survey to be conducted annually from now on.)
U.S. research and development spending at home and abroad totalled $330 billion in calendar year 2008, according to the report, officially called the "Business R&D and Innovation Survey." (The figures don't include company-performed research paid for by others.) In 2008, companies with fewer than 500 employees accounted for 11 percent of worldwide sales for all U.S. companies, but 19 percent of research spending. Companies with more than 25,000 employees accounted for 42 percent of global sales, but just 36 percent of research outlays.
Very small companies (those with 5 to 24 employees) spent $3 billion – or at least 50 percent more than all other small firms (those with fewer than 500 employees) – paying others to do research. The tiniest of companies also had the most research ($5 billion worth) paid for by others.
The survey is more extensive than most R&D surveys because it accounts for spending both at home and abroad. The final report – scheduled to be released in early 2011 – will reveal how much innovation is contracted out to independent labs or is funnelled into collaborations with other companies. The report also will aim to answer the question of whether and how much research spending has been heading abroad.
Preliminary data says that of the $330 billion spent by U.S. firms, $234 billion – nearly 75 percent – was spent in the companies' own facilities at home. Another $58 billion was spent at company facilities abroad. Of the $64 billion small companies funnelled into innovation, nearly all of it ($63 billion) was spent at home.
Perhaps not surprisingly, pharmaceutical companies and computer and electronic products makers spent the most of all manufacturing industries on research and development: about $70 billion apiece. The medicine industry also spent far more than any other on hiring outsiders to do research: $17 billion, or 25 percent. The next biggest spender on outsourced research – the motor vehicles, trailers, and parts industry – spent just $4 billion.
Among nonmanufacturing industries, software publishers were the top R&D spenders, with $35 billion.
Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.