C&EN Washington

Make hay while the sun shines, the saying goes. By investing more and more in R&D, that's what U.S. industry has been doing while the country's economy has been enjoying strong growth and low inflation.

For 1998--and for the fourth year in a row--expenditures for R&D in the U.S. will grow faster than the economy as a whole, rising 7.3% to $220.6 billion, according to National Science Foundation estimates. Industry doesn't put up all that money, of course; the $143.7 billion it's projected to spend in 1998 will account for 65% of the total. The federal government's share of R&D funding is expected to drop to a low of 30% this year, however, so industry alone can be thanked for the strong growth R&D has been experiencing.

But good times and sunny skies don't last forever. The unstable global economy, paired with a Congress that's spinning its wheels over President Bill Clinton's possible impeachment, makes for an uncertain forecast. The science policy report released last month by Rep. Vernon D. Ehlers (R-Mich.) notes that companies need to consider that the future business climate is likely to be unsettled (C&EN, Sept. 28, page 10, and Oct. 12, page 31).

"When corporations post record profits in a robust overall economy, the resources necessary to make [research] investments are clearly available," Ehlers' report says. "Because periods of particularly strong economic growth do not last forever, it is imperative to seize the opportunity to invest in research that these periods of prosperity bring."

Furthermore, the increasing dependence of the U.S. R&D enterprise on industrial funds has implications for the nature of the work being undertaken: Industry places more emphasis on development work than on the fundamental research the government is likely to support. NSF's "Science and Engineering Indicators 1998," the biennial report to Congress from the National Science Board, notes that "there is some cause for concern that short-term R&D may be displacing the longer term quest for new knowledge and breakthrough discoveries."

From a global perspective, the U.S. far outspends any other nation on R&D. "Science and Engineering Indicators" notes that in 1995 the U.S. spent nearly as much on R&D ($183.0 billion) as the rest of the "Group of Seven" major industrial countries--Japan, Germany, France, the U.K., Italy, and Canada--did combined. A noteworthy qualitative difference between the R&D spending of the U.S. and the other major industrialized countries is the much larger portion spent on defense R&D in the U.S.

Chemical and drug companies are among the largest performers of R&D in the U.S., spending $17.5 billion in 1996, the latest year for which NSF has solid data. Although that figure amounted to 12% of the nation's total for that year, it is a smaller share than the chemical and allied products industry sector captured in 1995 (13%).

As "Science and Engineering Indicators" points out, industrial chemical firms did not contribute to the healthy growth of industrial R&D expenditures in the 1990s. In fact, the small increase in R&D spending registered by industrial chemical companies in the first half of the decade did not even keep up with the low rate of inflation over the same period.

In contrast, NSF data show that pharmaceutical firms' contributions to R&D nearly tripled between 1986 and 1996, growing from $3.7 billion to $9.8 billion. In 1986, industrial and other chemical firms spent $5.0 billion on R&D, but by 1996 these companies fell behind the drug firms, spending $7.7 billion.

Employment of research personnel in the chemical enterprise also does not track with the pattern of growth in U.S. industry as a whole. NSF estimates that U.S. industry employed 885,700 full-time-equivalent scientists and engineers as of January 1997, up 6.4% from a year earlier. The total for the chemical and allied products sector dropped 5.6% from 94,300 to 89,000 in the same year, however.

The annual salary survey of the American Chemical Society finds that the pharmaceutical industry continues to be the largest employer of chemists, followed by specialty chemical companies. Salaries for Ph.D. chemists, however, are highest in the petroleum industry.

The bulk of the data for C&EN's annual look at R&D are garnered from publications of NSF's Division of Science Resources Studies that are available on the Internet (http://www.nsf.gov:80/sbe/srs/stats.htm). The latest projections for U.S. R&D spending are taken from "National Patterns of R&D Resources: 1998," a forthcoming publication by NSF's Steven Payson that will be posted on the web before the end of 1998.

The totals for federal government support of R&D listed in one section of this C&EN special report may not match the amounts given in another. That's because the federal government has two ways of keeping track of the money it spends. One is outlays--money actually spent in any given year. The other is obligations--money the government commits itself to spend. That commitment can be for one or more years.

For example, in January 1996 a researcher gets a three-year $150,000 grant from the National Institutes of Health. NIH's fiscal 1996 books would carry an obligation of $150,000 for that grant, but it would actually pay out only $50,000 that first year. That's one reason obligations for any given year are quite often higher than corresponding outlays and why numbers quite often differ between surveys. Continuing with the same example, NIH reports its obligation of $150,000 to the researcher at XYZ University on NSF's annual survey of federal funds. But XYZ University reports only $50,000 on NSF's annual survey of academic R&D expenditures because that's how much money it actually got.

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