Useful Stats

Business R&D activity has been historically concentrated in a few states and became even more so in 2017, according to a National Science Foundation issue brief on the latest Business Research & Development and Innovation Survey (BRDIS). Despite finding total business R&D surpassed $400 billion in 2017, reflecting a 6.8 percent increase over 2016 results, NSF’s data also reveals R&D activity in five states alone – California, Massachusetts, Michigan, Washington and Texas – captured well over half of all of the nation’s business R&D investment in 2017. These top states represented 55.2 percent of the total in 2017, while five years earlier their share was “only” 49.4 percent of the reported results.

For years, there have been arguments back and forth on which companies are the greatest job creators. The argument began with advocates for small businesses saying that small businesses were the engine of job creation. In recent years, others have argued that it’s not the size of the business that’s significant so much as the age of the business and that it’s young businesses that create most of the jobs.

Analysis by SSTI of Census Bureau’s Business Employment Dynamics (BDM) data finds a more nuanced picture when examining states’ shares of net job creation by firm age.

Home to the Research Triangle Park and top-tier research universities like Duke University and the University of North Carolina at Chapel Hill, the Durham-Chapel Hill metropolitan area led all regions in per capita NIH funding in FY 2018 and placed sixth in total funding that year, according to a new analysis by SSTI. This edition of Useful Stats looks at all NIH awards at the regional level over the five-year period between FY 2014 and FY 2018. Boston led all regions in total NIH funding in FY 2018, while NIH funding in the Washington, D.C., region increased by the greatest percentage over the five-year period among major metropolitan areas.

As the largest public funder of biomedical research in the world, NIH awards are of particular importance to the technology-based economic development community. Including new data for FY 2017 and FY 2018, this edition of Useful Stats serves as an update to an August 2017 article highlighting NIH awards by state over the past decade. In FY 2018, NIH awarded a total of $28.3 billion in funds to the 50 states and territories. Of the total amount awarded in 2018, slightly less than two thirds (65.3 percent) went to the top 10 states. This share is slightly lower than in 2017 (65.6 percent), the same as in 2014 (65.3 percent) and slightly higher than in 2009 (66.1 percent).

This month, SSTI research has examined changes in total R&D and total R&D intensity for each state over a 15-year period from 2002 to 2016. In this final installment of the series, this article looks at how the performance of R&D in the states changed over time. In half of the states (25 states), the share of total R&D performed by colleges and universities increased more than any performer (e.g., industry, federal government) from 2002 to 2016. Meanwhile, 20 states saw industry’s share of total R&D performance increase more than any other performer. The share of total R&D performed by industry increased the most in Wyoming (32.7 percentage point increase), followed by Iowa (19.6 percentage point increase) and Missouri (18.5 percentage point increase).

How has the intensity of research and development (R&D) performance changed across states and over time? As a follow up to an article in last week’s Digest that examined changes in total R&D expenditures for each state over the 15-year period from 2002 to 2016, this week’s Useful Stats focuses on R&D intensity. Overall R&D intensity is defined as total R&D expenditures (the sum of all R&D performed by industry, federal labs and agencies, colleges and universities, and other research institutions in a state) as a share of each state’s gross domestic product in a given year.  Notably, five states stand out for exceeding the national average in both R&D intensity and increases in R&D intensity from 2002 to 2016: Oregon, Delaware, California, Maryland, and Massachusetts.

Despite its limitations, publicly available data on research and development (R&D) expenditures remains one of the best metrics for measuring state progress in the innovation economy. Defined as the sum of multiple National Science Foundation (NSF) measures – including business and industry R&D, higher education R&D, and R&D at federally funded centers – total R&D has skyrocketed nationwide over the past 15 years, though some states have experienced an outsized portion of this growth. Where has total R&D performance increased the most over the past 15 years? How has the composition of total R&D performance changed over this time? Perhaps most importantly, how has the intensity of R&D performance changed? Over the next three weeks, the Digest will explore the answers to these questions and more.

Data on total research and development stems from the NSF’s National Center for Science and Engineering Statistics’ (NCSES) National Patterns of R&D Resources series. In this article, SSTI has analyzed the available data for the most recent 15-years.

Although North Dakota’s per capita gross domestic product (GDP) has declined since 2013, the energy boom in earlier years gave the state the fastest increase over the past 10- and 20-year periods, according to an SSTI analysis of recently updated state GDP data from the Bureau of Economic Analysis. Beyond North Dakota, the 10 years from 2008 to 2018 benefitted per capita GDP in states with a prominent knowledge economy, led by New York, California, Washington and Massachusetts. In general, per-capita gross product serves as a useful metric because it can show a state’s relative economic performance against its peers and over time. This article examines state GDP per capita over the past 20 years.*

During each year from 1998 to 2018, Washington, D.C., had, by far, the highest levels of GDP per capita, reaching $176,534 in 2018. States ranking the highest for GDP per capita in 2018 include New York ($73,531 per person), Massachusetts ($72,653), and Alaska ($70,936). The map below shows GDP per capita by state for 2018, as well as changes over the one-, five-, 10-, and 20-year periods.

Many regional economic development strategies emphasize employment in manufacturing or high-tech, as these industries tend to provide well-paying jobs. Through an analysis of American Community Survey five-year data for 2013-2017, SSTI assessed state-level employment concentration within these sectors.

The portion of a state’s employment based high-tech sectors ranged from 3.8 percent to 13.6 percent (or 14.4 percent for D.C.), from 2013-2017 (see “methodology” for a detailed description of what industries are included). Nationally, approximately 8.2 percent of the public is employed in high-tech industries.

The distribution of states is slightly skewed, with 35 states below the national benchmark and 16 states (and D.C.) above 8.2 percent. Washington (13.6 percent), Massachusetts (13.1 percent), Virginia (12.3 percent), and Colorado (12.0 percent) are at the high end of the spectrum. The concentration of state employment share in the high-tech sector is visible in the map, below.

The U.S. unemployment rate is near its 50-year low, but the portion of the population in the labor force is also near a 40-year low. Because business expansion is difficult during periods of extremely low unemployment, a key economic development question is how much the labor force participation rate may increase — bringing more potential employees to the job market and easing the hiring crunch for employers.

An SSTI analysis of American Community Survey (ACS) data from 2013-2017 suggests that there may not be much potential growth for the labor force, at least among those in the prime working ages of 25-54. The participation rate for this group is approximately 82 percent across the country, according to the analysis, and only an additional one percent consider themselves willing to work in the near future (e.g., after a “temporary illness” or have been looking too long to counted as unemployed).

Outside of the private sector, colleges and universities perform the vast majority of R&D in the United States – but where do these funds come from? An SSTI analysis of data from the National Science Foundation’s National Center for Science and Engineering Statistics (NSF NCSES) finds that, across the country, the federal government was the source of more than half (53.5 percent) of all R&D performed at colleges and universities in 2017. Institutional funds (25.1 percent), nonprofit organizations (6.8 percent), businesses (5.9 percent), state and local governments (5.6 percent), and other sources (3.0 percent) comprised the remaining sources of higher education R&D funding. The interactive chart below shows the breakdown of funding sources for research and development at colleges and universities for each state.

Nearly three-quarters of all research and development was performed by the private sector in fiscal year 2016, though this share differed greatly across the states, according to an SSTI analysis of recently released data from the National Science Foundation’s National Center for Science and Engineering Statistics (NSF NCSES). Delaware showed the greatest concentration of business R&D (90.5 percent of all R&D in the state), while Tennessee had the most diversified R&D portfolio with a roughly even distribution of R&D performed by businesses, higher education and federally funded R&D centers (FFRDC’s). The interactive chart below shows the breakdown of performers of research and development for each state.

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