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.

This edition of Useful Stats uses the new 2021 release of Business Enterprise Research and Development (BERD) Survey data to analyze by state the new 2021 data and five-year changes in BERD expenditures by source for 2017-2021.

The BERD survey is an annual survey of U.S. businesses with 10 or more employees that performed or funded at least $50,000 of R&D. The survey collects data on R&D expenditures and employment to assess trends in the funding and performance of business R&D. More information about the BERD survey can be found here.

Trends in 2021 domestic R&D expenditures

Figure 1: Interactive map shows sources of funds for R&D

As shown in Figure 1, companies in California spent the most on R&D, both paid for by the company and others, totaling $212 billion. With a national total of just over $600 billion, California companies alone accounted for over one-third of all domestic R&D expenditures in 2021.

Washington, the state with the next highest expenditures on R&D by its companies, saw much lower, albeit still very high, values at $49 billion. Massachusetts followed at $40 billion, leading Texas at $28 billion, New York at $26 billion, and New Jersey at $25 billion.

On the other end of the spectrum, companies in Wyoming spent the least at $93 million. Alaska and South Dakota followed at $207 and $221 million, respectively.

Notably, companies in New Hampshire and Alabama had over half of their R&D expenditures paid for by others, at 54% and 53% respectively.

5-Year trends in R&D expenditures, 2017-2021

Business R&D spending may fluctuate from year to year due to a variety of factors. Companies must consider economic conditions, industry trends, strategic priorities, availability of funding, and success of prior R&D projects. However, by examining longer-term trends, the impacts of these fluctuations can be mitigated.

Figure 2, below, visualizes business R&D expenditures over the 5-year period from 2017–2021. This set of years is centered on the pre-pandemic years of 2017-2019 as the economic was growing and 2020 and 2021 with the onset and extension of the pandemic. The data provides high-level insight into state-level trends on how the companies have changed R&D expenditures in response to impetuses like federal grants, subsidies, and uncertain economic conditions.

Overall, domestic R&D performed by companies in the United States increased from 2017 to 2021. However, there was significant variation across states and by source of funds.

The largest numeric and percentage increase in domestic R&D expenditures was company-financed, with 49 of 50 states and D.C. having all experienced any increase over the five-year period.

BERD expenditures paid for by others, although having increased overall, saw decreases in 15 states.

Figure 2: Interactive map showing five-year trend from 2017-2021

Some additional interesting insights to be gained from the interactive map in Figure 2 are:

• Between 2017 and 2021, total BERD expenditures increased 51%, from $400 to $602 billion.
• A total of five states saw BERD values increase by over 100%: West Virginia at 146%, Hawaii at 142%, New Hampshire at 134%, Washington at 129%, and New Mexico at 111%.
• Of the remaining states, 21 had increases of at least 50%, but below 100%; 18 additional had double digit increases, while four had single digit increases, and Georgia remained unchanged.
• Just two states, Connecticut (-3%) and Alaska (-77%) experienced decreases in their companies’ total expenditures on R&D over the five-year period.

Implications for innovation

The rise in R&D spending shows a positive trend in research investment by U.S. companies, suggesting a continued focus on innovation. By allocating more resources towards R&D, companies are positioning themselves to drive technological advancements, create new products and services, and ultimately contribute to economic growth.

Click here for the data used in this article and here for SSTI’s coverage of last year’s 2020 BERD data.