Useful Stats: Business R&D consolidates further within top states, 2013-2022

As business R&D expenditures continue to increase nationwide, disparities between states deepen, an SSTI analysis of new Business Enterprise Research and Development (BERD) survey data reveals. States with the largest BERD values, including California, Washington, and Massachusetts, have all increased their share of overall domestically performed BERD values almost every year since 2013. Nearly 50% of the nation’s domestic business R&D expenditures occurred within the borders of these three states in 2022, up from 39% just a decade prior in 2013. California contained over a third of the nation's total value in 2022, totaling more than the bottom 43 states and Washington, D.C. combined.

Figure 1 illustrates this trend, showing the five states with the largest values in 2013 and 2022, alongside the summative value of the remaining BERD dollars. Note that undistributed funds are included in the “All Others” slice of the charts; in 2013 undistributed funds accounted for approximately $12.7 billion, which decreased to $765 million in 2022. Undistributed funds include reported data not allocated to a specific state by multi-establishment companies.

Figure 1: Domestic BERD values by selected state and year.

While a certain amount of concentration is expected in large economies such as California, BERD survey data reveals a disproportionate share.

In terms of growth, while the national BERD value increased 114% (approximately $369 billion), or an inflation-adjusted 71% (approximately $228 billion), there was a large variance in the growth of each jurisdiction.

A massive portion of the national growth is due to a small subset of states. The five states with the largest dollar increase—California (+$146 billion), Washington (+$42 billion), Massachusetts (+$32 billion), New York (+$20 billion), and Texas (+$16 billion)—were responsible for nearly 70% of the nation's domestic BERD increase from 2013 to 2022. The top three alone accounted for 60%, and California by itself for 40%.

Many of these states should be expected to have the largest dollar growth due to their size. Looking instead at relative growths provides a better perspective on how states fared over the past decade.

On the high end of relative growth, there were not only rural states like Alaska and Montana, with 359% and 339% increases from 2013 to 2022, respectively, but also larger states like Washington with a 286% increase. Two states, Missouri (-24%) and Kentucky (-18%), saw decreases in domestic BERD values over the past decade.

A total of 20 states’ relative increases outperformed the national value from 2013 to 2022, while the remaining 30 states and Washington, D.C. either had smaller relative increases or had decreased.

Adjusting for inflation, an additional state, Rhode Island, had a real decrease in business R&D within its borders, dropping 11% or $66 million in constant 2013 dollars.

Figure 2 illustrates the relative changes of each state and Washington, D.C.

Figure 2: 10-year percentage change in current and inflation-adjusted BERD values by state.

Additional context can be gathered by exploring the composition of each state’s BERD funders. BERD can be separated into two major categories: that paid for by the company and that paid for by others. In this context, “others” may include federal dollars, or those from organizations such as higher education institutions, state government agencies, and laboratories, among other sources.

Nationally, in 2022, companies made up approximately 88% of domestic BERD while others paid the remaining 12%. Many states, however, have very different proportions.

Idaho, Oregon, and Washington have the largest proportion of overall domestic BERD values paid for by companies, at 98%, 98%, and 97% respectively. Idaho steadily increased its percentage from 73% in 2013, with jumps from 2013 to 2014 (+11 percentage points) and 2017 to 2018 (+6 percentage points), while Oregon and Washington had maintained their already high values of 96% and 94% in 2013 across the decade.

On the other hand, some states, including New Hampshire and Alabama, receive less than 50% of their overall domestic BERD values from company dollars while others, such as Tennessee, Delaware, and Maryland, have percentages in the 60s. These states, alongside many of the others with a lower proportion of dollars paid for by the company, have a large federal presence or strong higher education institutions that play large roles in local business R&D.

Below, Figure 3 maps the percentage of BERD values paid for by companies in each state and Washington, D.C. The data is separated into five quintiles, with each color representing an equal share of the data. Each year operates on a different scale to allow for better comparison between states for each year.

Figure 3: Percentage of BERD paid by companies in each state and Washington, D.C.

This article 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.