The Role of Industry Classification in the Estimation of Research and Development Expenditures

This paper uses data from the National Science Foundation’s surveys on business research and development (R&D) expenditures that have been linked with data from the Census Bureau’s Longitudinal Business Database to produce consistent NAICS-based R&D time-series data based on the main product produced by the firm for 1976 to 2008. The results show that R&D spending has shifted away from domestic manufacturing industries in recent years. This is due in part to a shift in U.S. payrolls away from manufacturing establishments for R&D-performing firms. These findings support the notion of an increasingly fragmented production system for R&D-intensive manufacturing firms, whereby U.S. firms control output and provide intellectual property inputs in the form of R&D, but production takes place outside of the firms' U.S. establishments.