CHAPTER 2 

 AGENCY SUPPORT OF BASIC RESEARCH IN INDUSTRY 



Federal obligations (current dollars) for support 

 of basic research in industrial firms in FY 1977 

 are estimated at $201 million (see Table 3 and 

 Figure 4 in Introduction). This is only 7.3 percent 

 of the estimated total Federal obligations for basic 

 research in FY 1977. 



Industrial firms, as might be expected given 

 their emphasis on applied and developmental 

 work, have trailed other performers in Federal 

 obligations for basic research. Industry's share of 

 the total Federal basic research activity has 

 dropped from a high of 12.6 percent in 1968 to 7.3 

 percent in 1977. Obligations to industry dropped 

 during the 1968-76 period by an average of 4.4 

 percent annually, but there has been a turnaround 

 since then. Estimated obligations are up 32.2 per- 

 cent in 1977 over 1976 and are projected to rise 

 another 24.4 percent in the 1978 budget. 



Federal agency support of basic research in 

 industry should be looked at in the context of the 

 overall conduct of R&D by industry itself. Ex- 

 penditures for R&D in the United States were 

 expected to reach a level of about $41 billion in 

 1977. About 68 percent of this total ($28 billion) 

 represents R&D performed by industry, industry 

 was the source of 43 percent of the funds expend- 

 ed ($18 billion). Basic research represents only 3 

 percent ($790 million) of total funds expended by 

 industry for R&D in 1977; this is a declining 

 percentage over the years and appears to reflect 

 increasing emphasis on product and process im- 

 provement. 



The trends in the levels of basic research, ap- 

 plied research, and development performed by 

 industry are shown in Figure 2.1. Performance of 

 applied research and development shows an al- 

 most uninterrupted growth since 1965 in terms of 

 current dollars; however, in terms of constant 

 1972 dollars, expenditures for applied research are 

 almost level and drop significantly for develop- 

 ment from a peak in 1969. Conduct of basic re- 

 search reached an estimated total of $790 million 

 (in current dollars) in 1977; there was a decline 

 during the period 1968 to 1972. In constant 1972 

 dollars, a peak of over $800 million for conduct of 

 basic research was reached in 1966; it has been 

 declining since then, reaching a fairly constant 

 level of about $550 million for the period 1975- 

 1977. 



Fund totals (in both current and constant 1972 

 dollars) for basic research, applied research, and 

 development performed by industry during the 

 period 1965-1977 are given in Table 2.1. 



Basic Research Performance by Type 

 of Industry (1975) 



The chemical industry outranked all others in 

 performance of basic research in 1975, expending 

 $276 million out of the industry total of $702 mil- 

 lion (see Appendix E). The two largest compo- 

 nents of basic research in the chemical industry 

 were in industrial chemicals and in drugs and 

 medicines. Other major industrial performers of 

 basic research were in electrical equipment and 

 communication with $193 million; aircraft and 

 missiles with $47 million; petroleum refining and 

 extraction with $36 million; machinery (including 

 office, computing, and accounting machines) with 

 $29 million; food (and kindred products) with $25 



Figure 2.1-lndustrial R&D expenditures, by 

 character of work: 1965-1977 



($ Billions) 



1965 66 67 68 69 70 71 72 73 74 75 76 77 

 Fiscal Year 



Based on GNP implicit price deflator. 



SOURCE: Division of Science Resources Studies/STIA/National 

 Science Foundation. 



AGENCY SUPPORT OF BASIC RESEARCH IN INDUSTRY 253 



