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News Release 96-022

Major Shifts in World Economy Confront U.S. Status as Industrial Leader, Says New S&E Indicators Report

May 20, 1996

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Recent shifts in industrial research and development (R&D) in the United States and abroad--especially in Asia--are narrowing the margin of technological advantage of U.S. firms, according to a new government report. The U.S. remains the leading performer of R&D by a wide margin, accounting for about 44 percent of the industrial world's investment, although America's share has declined over the last two decades.

These observations are among hundreds of trends and statistics in the just-released National Science Board report, Science and Engineering Indicators 1996. The Board oversees the National Science Foundation, which produces the biennial compendium of vital statistics to help decision-makers assess the performance of the nation's science and engineering (S&E) enterprise.

"The health of the science-technology enterprise of the United States is the main thing that stands between us and a lower-wage future," says Robert M. Solow, winner of the 1987 Nobel prize in economic science, an economist at the Massachusetts Institute of Technology, and a member of the National Science Board.

In referring to the S&E Indicators report, Solow says, "This fat volume is the prime source of basic data about the whole system, from the education of students to society's gain from R&D investment. It should be studied, thought about, and acted upon."

Cora B. Marrett, assistant director for the National Science Foundation's Directorate for Social, Behavioral and Economic Sciences, says "Science and economic growth have become increasingly integrated and global. We prepared the Science and Engineering Indicators report to meet the needs of leaders for relevant and reliable data to assess international opportunities and to make informed decisions affecting our nation's future."

According to S&E Indicators, while U.S. industrial R&D expenditures are greater than all industrial sectors of the European Union combined, and twice the industrial R&D performed in Japan, major shifts in the U.S. and abroad threaten to narrow America's margin of technological advantage. In the 1990s industry funding in real dollars generally was flat and federal funding fell (In the U.S., industry now funds about 60% of R&D; the federal government, 36%).

Other major data reported in S&E Indicators include:

  • After 16 years of continuous growth during the late 1970s and throughout the 1980s, industrial investment in R&D fell in the first half of the 1990s at about 1.5 percent a year in constant dollars--largely due to defense spending cutbacks by the federal government.

  • U.S. industry is spending less on basic research and relying more on universities and government laboratories for this work. In the past few years industry has moved from basic research in central laboratories and toward applied R&D to confront increased international competition.

  • Academia is the only R&D-performing sector not to have declined in constant-dollar R&D spending during the 1990s, thanks mostly to increased federal investment.

  • Japan and Germany invest relatively more of their economies in non-defense R&D than does the U.S. Japan invested 2..percent of its Gross Domestic Product on non- defense R&D in 1993, while Germany invested 2.4 percent--considerably exceeding the U.S. investment of 2.0 percent. However, in absolute dollars, the U.S. spent much more on non-defense R&D than did any single country; in fact, the U.S. nondefense R&D ($106 billion in 1993) was comparable to the combined total spent by France, Germany, Japan and the U.K. ($119 billion).

  • An increasingly global economy has compelled U.S. industry to expand overseas. From 1985 to 1993, U.S. firms increased their investment in R&D abroad three times faster than domestically. There is little evidence, however, that much of this overseas investment is meant to displace domestic R&D; rather, R&D tends to follow already established overseas production.

  • While the overall number of S&E jobs in industry increased by about 2.5 percent between 1990 and 1993, employment in most S&E occupations declined. Computer and math-related jobs were the main factors contributing to the increase in total S&E employment. These jobs accounted for 28 percent of industrial S&E employment in 1993, up from 21 percent in 1990.

S&E Indicators also contains data on elementary and secondary school science and mathematics education, higher education's role in S&E, and public attitudes and understanding of science and technology. Required by law, S&E Indicators is submitted by the National Science Board to the president of the United States, who delivers it to Congress.

The Committee on Science and Engineering Indicators, chaired by Phillip A. Griffiths, oversaw preparation of the report for the National Science Board.


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The National Science Foundation (NSF) is an independent federal agency that supports fundamental research and education across all fields of science and engineering. In fiscal year (FY) 2019, its budget is $8.1 billion. NSF funds reach all 50 states through grants to nearly 2,000 colleges, universities and other institutions. Each year, NSF receives more than 50,000 competitive proposals for funding and makes about 12,000 new funding awards.

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