Research and development activities of U.S. multinational companies: preliminary results from the 2004 benchmark survey.

Yorgason, Daniel R.

THE Bureau of Economic Analysis (BEA) has embarked on a long-term effort to provide more extensive economic data and analysis about research and development activity and its effects on the economy. In keeping with this goal, this article on the research and development (R&D) activities of U.S. multinational companies (MNCs) has been prepared to supplement an earlier article summarizing other general results from BEA's 2004 benchmark survey of U.S. direct investment abroad. (1) The benchmark survey is more comprehensive than BEA's annual surveys in its coverage of companies and in the information gathered on R&D activities.

The information presented here complements other BEA research on the effects of R&D activity on economic growth. Last September, BEA released a new R&D satellite account developed in conjunction with the National Science Foundation. (2) The satellite account recognizes that R&D is actually a form of investment--investment that produces an intangible asset, knowledge. In order to measure the effect of R&D activity on investment, saving, and the gross domestic product (GDP), the satellite account modifies the accounting conventions used in GDP accounts and treats R&D spending as investment rather than as an expense. The MNC R&D data, and related BEA research on R&D and other innovation-related activities of MNCs, will assist in the further development of the R&D satellite account. Two goals for this work are to determine how to introduce an international dimension into the satellite account and to assess the extent to which R&D data from U.S. MNCs can be used in improving the estimates of domestic R&D (see the box "Multinational Companies and R&D: Other Issues").

In furtherance of these goals, BEA, the National Science Foundation (NSF), and the Census Bureau (which conducts an R&D survey on behalf of NSF) are currently engaged in a project linking data from their surveys to provide a more complete picture of R&D associated with U.S. and foreign MNCs. Results from this project are scheduled to be published later this year. (3) The data link will provide information on the types of R&D conducted by MNCs (basic research, applied research, and development) and the location, by state, of their R&D conducted in the United States.

In addition to the international aspects, work on the R&D satellite account will continue in several other areas, including improving output measures and input deflators, better identifying the owners and location of use of R&D assets, and estimating capital services for R&D. (4) Work on the satellite account also will examine ways to incorporate aspects of BEA's industry and regional accounts.

Highlights

In 1999-2004, current-dollar R&D expenditures of U.S. MNCs grew at an average annual rate of 4 percent, to $179.9 billion in 2004 (table A, chart 1). (5) This rate of growth for MNCs was about the same as the rate of growth for MNC value added. The roughly equal growth rates reflects the offsetting effects of (1) an increase in the share of MNC R&D expenditures accounted for by foreign affiliates, whose R&D was lower in relation to value added than that of their parents, and (2) more rapid growth of R&D expenditures than of value added for both U.S. parents and their foreign affiliates.

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Of the $179.9 billion in R&D expenditures of U.S. MNCs in 2004, 85 percent was accounted for by U.S. parents and 15 percent was accounted for by their foreign affiliates. The parents' 85-percent share was higher than their 73-percent share of MNC value added. The large R&D share of U.S. parents partly reflects the relative abundance of U.S. scientific and technical resources, including highly educated workers, in the United States. It may also reflect U.S. companies' efforts to limit the diffusion of their strategic technologies in order to preserve their competitive position among international companies. Also, because of scale economies in R&D and because information generated by R&D in one location can often be shared with far-flung operating units at low or zero marginal cost, it may be easier and more efficient for MNCs to concentrate R&D activities in the United States rather than some other activities, such as production or distribution.

The 15-percent share of R&D expenditures accounted for by foreign affiliates was 2 percentage points higher than in 1999 and 3 percentage points higher than in 1994. The rise coincided with a general rise in the importance of foreign affiliates in U.S.MNC operations; the share of MNC value added accounted for by foreign affiliates rose to 27 percent in 2004 from 23 percent in 1999. R&D also became more broadly diffused among affiliates in 1999-2004. The number of affiliates participating in R&D as a share of all affiliates increased by more than a third, and the number of countries hosting R&D-performing affiliates increased from 66 to 73 (for more information on which entities perform R&D, see the appendix "R&D: What Is It and Who Conducts It?").

Other key results of the R&D activities of U.S. multinational companies from the 2004 benchmark survey include the following:

* The 4-percent average annual growth rate of R&D expenditures in 1999-2004 was down from a 7-percent rate in 1994-99; the slower growth coincided with lower value-added growth (4-percent average annual growth in 1999-2004, compared with 8-percent growth in 1994-99).

* R&D employment of MNCs was 998,000 in 2004, up from 770,000 in 1999. (6) The average annual rate of R&D employment growth was 5 percent. U.S. parents, with R&D employment of 819,000, accounted for 82 percent of the total in 2004, compared with 84 percent in 1999.

* R&D by MNCs was performed primarily, and increasingly, for themselves. In 2004, 92 percent of R&D expenditures reflected work performed by the parent or by the affiliate for themselves ("own-account" spending), up from 86 percent in 1999 and 82 percent in 1994.

* The share of R&D performed under contract for affiliated businesses--2 percent--was relatively small. Foreign affiliates performed more R&D under contract for affiliated businesses than did U.S. parents.

* U.S. parents accounted for 73 percent of R&D expenditures by all U.S. businesses in 2004, an increase from the 69-percent share in 1999 but less than the 77-percent share in 1994.

* R&D expenditures by foreign affiliates were highest in the United Kingdom, Germany, and Canada. Expenditures by foreign affiliates in these three countries totaled $12.9 billion or 47 percent of all R&D spending by all affiliates. This share fell from 50 percent in 1999, reflecting an increase in the geographic dispersion of affiliates' R&D.

The remainder of this article is composed of two sections and an appendix. The first section focuses on the R&D expenditures and R&D employment of U.S. parents in 2004. The second section examines the R&D expenditures and R&D employment of their majority-owned foreign affiliates. The appendix provides additional detail on the types of activities included in R&D, and compares selected characteristics of MNCs that conduct R&D with those of MNCs that do not.

R&D by U.S. Parents

In 2004, R&D expenditures by U.S. parents were $152.4 billion, up from $126.3 billion in 1999. Of the 2004 total, $141.9 billion, or 93 percent, was own-account spending, $6.0 billion, or 4 percent, was for projects funded by the Federal Government, $2.6 billion, or 2 percent, was for projects funded by other unaffiliated entities, and $1.8 billion, or 1 percent, was spending for projects funded by the parents' foreign affiliates. The 93-percent share of own-account spending was 5 percentage points higher than in 1999 and 10 percentage points higher than in 1994. The declines in non-own-account spending largely reflect declines in the share of federally funded R&D; the 4-percent share was down from 6 percent in 1999 and 15 percent in 1994.

Just as U.S. parents performed some R&D for others, they also had some R&D performed for them by others. R&D performed for parents by others totaled $6.3 billion. Of total R&D funded by MNCs, the share performed by others was 4 percent, only half the share in 1999. (7) R&D performed by others typically supplemented rather than replaced R&D performed by parents for themselves; only 11 out of 2,267 parents had R&D performed for them but were not themselves also R&D performers.

U.S. parents constitute a major portion of all R&D performance in the United States; in 2004, they accounted for 73 percent of the R&D performed by all U.S. businesses. The importance of parents in R&D is attributable partly to their industry distribution; for example, parents account for a particularly large share of U.S economic activity in manufacturing, an industry sector with relatively high levels of R&D. Size may also contribute; companies with overseas operations tend to be larger than other U.S. businesses. The share of U.S.-business R&D accounted for by parents rose from that in 1999 but was still smaller in 2004 than in 1994. MNCs' share of R&D performed for the Federal Government was much smaller--30 percent of all federally funded R&D--and was smaller than it was in 1999 and 1994.

R&D expenditures: Industry distribution and intensity

R&D by U.S. parents tends to be highly concentrated in specific industries. This concentration partly results from the definition of R&D; R&D only includes certain activities within the set of all innovative or knowledge-generating activities (see the appendix "R&D: What is It and Who Conducts It?"). Industry characteristics such as type of product or industry maturity may also be factors.

R&D expenditures in three industry sectors--manufacturing ($120.9 billion), information ($14.0 billion), and professional, scientific, and technical services ($12.8 billion)--accounted for 97 percent of all R&D expenditures by U.S. parents in 2004 (tables B and 1, chart 2). Manufacturing accounted for 79 percent of all R&D expenditures. Within the three sectors, R&D expenditures were unevenly distributed. In manufacturing, three industries--chemicals, computers and electronic products, and transportation equipment--accounted for 84 percent of R&D expenditures, well above their 48-percent share of value added (chart 3). In information, R&D expenditures were concentrated in publishing industries, mostly because of the software publishing subindustry. In professional, scientific, and technical services, they were concentrated in computer systems design and related services.

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The concentration of U.S.-parent R&D expenditures in the three major R&D-performing sectors closely matched the concentration of R&D of all U.S. businesses (95 percent). (8) However, the distribution of parent R&D expenditures among these three sectors differed somewhat from that of R&D expenditures by all U.S. businesses. U.S.-parent R&D expenditures were more concentrated in manufacturing (parents' 82 percent of all-U.S.-business R&D in manufacturing was significantly higher than their 73-percent share at the all-industries level) and were less concentrated in information (62 percent of all-U.S-business R&D) and in professional, scientific, and technical services (45 percent).

Among other industries, the proportion of all-U.S.-business R&D accounted for by U.S. parents varied widely, ranging from close to zero (for example, in construction) to over 100 percent (for example, in computers and peripheral equipment). (9) Parents' R&D spending was particularly notable, both in absolute and relative terms, in pharmaceuticals and medicines in chemicals manufacturing and in "motor vehicles, bodies and trailers, and parts" in transportation equipment manufacturing. In pharmaceuticals and medicines, R&D expenditures accounted for 99 percent of the all-U.S.-business total, and in "motor vehicles, bodies and trailers, and parts," parents' spending accounted for 94 percent of the all-U.S.-business total.

R&D expenditures relate to the accumulation of intangible assets; charts 2 and 3 also show data on parents' capital expenditures--that is, expenditures for property, plant and equipment--which relate to the accumulation of tangible assets. The R&D expenditures of U.S. parents were approximately half those of their capital expenditures ($308.7 billion), but the size of R&D expenditures relative to capital expenditures varied markedly across sectors. In both manufacturing and professional, scientific, and technical services, U.S. parents' R&D expenditures exceeded their capital expenditures. In most other industries, however, R&D expenditures were markedly smaller than capital expenditures.

Table 1 not only documents the industry concentration of parents' R&D expenditures discussed above, but it also provides information on the "intensity" of those expenditures--measured as the ratio of the level of R&D expenditures to the level of value added. (10) This measure allows the propensities of firms in different industries that conduct R&D to be examined, abstracting from differences in industry size (see also chart 4). By this measure, the intensity of U.S.-parent R&D expenditures was 7 percent. (11)

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For the three major R&D-performing industry sectors--manufacturing; information; and professional, scientific, and technical services--parents' R&D intensities were 12 percent, 5 percent, and 11 percent, respectively. Within manufacturing, intensities were particularly high in semiconductors and other electronic components (41 percent), communications equipment (36 percent), pharmaceuticals and medicines (33 percent), computers and peripheral equipment (30 percent), and motor vehicles, bodies and trailers, and parts (18 percent). In information, the intensity was particularly high in publishing industries (22 percent, mostly due to the software publishing subindustry). In professional, scientific, and technical services, the intensity was particularly high in computer systems design and related services (20 percent).

Industry patterns of U.S.-parent R&D expenditures have changed since the 1999 survey. The share of the information sector in U.S.-parent R&D expenditures rose to 9 percent in 2004 from 5 percent in 1999, primarily because of sharply higher spending by parents in publishing industries. The share of professional, scientific, and technical services rose to 8 percent from 7 percent. The share of manufacturing fell to 79 percent from 83 percent, primarily because of a decrease in spending by parents in transportation equipment (and despite an increase in pharmaceuticals).

Overall, the R&D expenditure intensity for U.S. parents increased only slightly from 1999 to 2004--from 6.6 percent to 6.9 percent. However, there were sizable changes in intensity in several industries. In semiconductors and other electronic components manufacturing and in publishing industries, the intensity nearly doubled. In "other" chemicals, in contrast, the intensity fell sharply.

R&D employment: Industry distribution and intensity

R&D employment is one aspect of MNC R&D activity for which data are collected only in the benchmark survey. U.S. parents employed 819,000 R&D workers in 2004 (table 1). In conjunction with total R&D expenditures, this R&D employment total implies that R&D spending per R&D employee was approximately $186,000 (table C). In the industries with high intensity of R&D expenditures, R&D spending per R&D employee was particularly high in chemicals (approximately $251,000), and it was particularly low in professional, scientific, and technical services (approximately $153,000). (12)

Industry distributions of R&D employment were similar to those of R&D expenditures. Together, the three major R&D-performing industry sectors--manufacturing (633,000 R&D employees), professional, scientific, and technical services (84,000), and information (67,000)--accounted for about the same share of R&D employment (96 percent) as the share of R&D expenditures (97 percent).

In 2004, 4 percent of U.S. parents' employees worked in R&D (this share can also be viewed as an "intensity" as shown for 2004 in the right column of table 1). The share of employees employed in R&D was relatively high in manufacturing (8 percent) and professional, scientific, and technical services (9 percent).

The combined share of R&D employment by parents in the three major industry sectors increased, rising 2 percentage points from 1999 to 2004. The share of parents in manufacturing rose to 77 percent in 2004 from 75 percent in 1999, and the share in information edged up to just over 8 percent from just under 8 percent. However, the share of parents in professional, scientific, and technical services edged down to 10 percent from 11 percent.

R&D by Foreign Affiliates

In 2004, R&D expenditures by the foreign affiliates of U.S. parents was $27.5 billion, or 15 percent of R&D expenditures by MNCs. In 1999, affiliate spending was $18.1 billion, or 13 percent of MNC expenditures. In 2004, the intensity of R&D expenditures by foreign affiliates, at 3 percent, was less than the 7-percent intensity of their parents. R&D expenditures of foreign affiliates were also small relative to their capital expenditures. The value of the R&D expenditures of foreign affiliates was less than a fourth of the value of their capital expenditures ($123.1 billion); for parents, the value of R&D expenditures was half of that of their capital expenditures.

Of all the affiliate R&D performed in 2004, $24.5 billion, or 89 percent, was own-account R&D, $2.5 billion, or 9 percent, was for affiliated businesses, and $0.6 billion, or 2 percent, was for unaffiliated entities. The affiliate share of own-account R&D was a little lower than the parent share (93 percent). It increased 16 percentage points from 1999 to 2004. The 9-percent share of R&D for affiliated businesses--consisting of the U.S. parent and other foreign affiliates of the U.S. parent--was substantially larger than the 1-percent share of parent R&D conducted for their foreign affiliates. However, foreign affiliates may often benefit, directly or indirectly, from the R&D conducted by their parents, even if they are not funding or directing that R&D work. In dollar terms, the $2.5 billion in R&D expenditures by foreign affiliates for affiliated businesses exceeded the spending by U.S. parents ($1.8 billion) for their foreign affiliates. (13) R&D expenditures for affiliated businesses were particularly high for foreign affiliates in the publishing industry and in the computers and electronics products manufacturing industry, especially in computers and peripheral equipment and in semiconductors and other electronic components.

As with U.S. parents, the 2004 R&D performed for foreign affiliates by others ($1.5 billion) was less than the R&D performed for others by the affiliates ($2.1 billion). Of the total R&D funded by foreign affiliates, 6 percent was performed by others, compared with the 4-percent share of parent-funded R&D performed by others.

R&D expenditures: Industry distribution and intensity

By industry of U.S. parent, foreign affiliates' share of MNC R&D expenditures was slightly higher in manufacturing (17 percent) than the 15-percent share of all industries (table B). Within manufacturing, the foreign-affiliate share of MNC R&D expenditures was particularly high in transportation equipment--especially in motor vehicles, bodies and trailers, and parts where the $7.3 billion of expenditures represented a third of the MNC total.

By industry of foreign affiliate, the three sectors--manufacturing; professional, scientific, and technical services; and information--that accounted for nearly all (97 percent) of R&D expenditures by U.S parents accounted for 95 percent of R&D expenditures by foreign affiliates (table 2, chart 5). Affiliates' expenditures were highest in manufacturing ($23.3 billion), followed by professional, scientific, and technical services ($2.1 billion), and information ($0.8 billion). Manufacturing alone accounted for 85 percent of total foreign affiliate R&D expenditures. At a more detailed level, affiliates in one subindustry in manufacturing--motor vehicles, bodies and trailers, and parts--had R&D expenditures of $7.2 billion, or 30 percent of the all-industry total (chart 6).

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In contrast to the parents' R&D expenditures, affiliates' R&D expenditures in wholesale trade ($1.2 billion) were larger than those in information, mainly because wholesale trade is a more important industry for foreign affiliates than for their parents; this industry accounted for 15 percent of foreign affiliates' value added, compared with only 5 percent of the parents' value added. The R&D expenditures by wholesale trade affiliates may also reflect secondary activities of these affiliates in industries, such as manufacturing, that are more typically associated with R&D activity.

The concentration of R&D expenditures is also evident in the intensity of R&D expenditures. Affiliates' R&D intensity in manufacturing (6 percent) and in professional, scientific, and technical services (5 percent) exceeded the 3-percent intensity at the all-industry level (chart 7). In all the other sectors, including information (with the next largest intensity of 2 percent), intensities were less than 3 percent.

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As noted, the 3-percent affiliate intensity at the all-industry level was less than the 7-percent parent intensity. Affiliate intensities were also generally lower at more detailed industry levels. For example, in the computers and electronic products manufacturing industry, affiliate intensities for all but one subindustry were less than 9 percent, but parent intensities for all the subindustries shown in chart 4 were at least 21 percent. (14)

The industry pattern of affiliate R&D expenditures has changed since the 1999 benchmark survey. The share of these expenditures accounted for by manufacturing declined in 1999-2004, to 85 percent from 90 percent. The shares rose for wholesale trade; information; and professional, scientific, and technical services. In information, shares roughly tripled (though from a small base), rising to 3 percent in 2004 from 1 percent in 1999. In wholesale trade, shares were up by over half.

The average intensity of R&D expenditures of foreign affiliates increased only minimally (0.1 percentage point) in 1999-2004. In information, however, the intensity increased 1.5 percentage points. At a more disaggregated level, in computers and electronic products manufacturing, the intensity was up, particularly because of an increase in communications equipment. Despite the small increase at the aggregate level, intensities for all of the large R&D-performing sectors increased. The small increase in intensity at the aggregate level may have partly reflected a shift in the sectoral composition of value added away from manufacturing, which had the highest intensity in both 1999 and 2004, and toward other sectors in which R&D was less significant. (15)

As foreign affiliates' share of MNC value added increased from 1999 to 2004 (rising to 27 percent from 23 percent), so did their share of the R&D activities of MNCs in several industries. (16) In particular, in both information and wholesale trade, foreign affiliates' shares of MNC R&D expenditures were up strongly. In information, affiliates' share of R&D expenditures more than doubled, growing to 5.7 percent from 2.3 percent.

R&D employment: Industry distribution and intensity

In 2004, foreign affiliates had 179,000 R&D employees, or 2 percent of total employment by foreign affiliates. These workers represent 18 percent of all R&D workers employed by MNCs. By industry of affiliate, affiliates' shares of MNC R&D employment were particularly high in wholesale trade (32 percent) and were particularly low in information (7 percent). R&D expenditures per R&D employee was approximately $154,000, roughly $32,000 less than the $186,000 per employee for parents (table C). (17) R&D spending per R&D employee was particularly high in pharmaceuticals ($285,000) and was particularly low in communications equipment ($129,000).

Manufacturing affiliates employed 151,000 R&D workers, or 84 percent of all affiliate R&D workers. Within manufacturing, transportation equipment accounted for the most of the employees--56,000, or nearly a third of all R&D workers of foreign affiliates.

The share of R&D employment of affiliates in manufacturing declined in 1999-2004, to 84 percent from 88 percent in 1999, similar to the drop in these affiliates' share of R&D expenditures. Like their shares of R&D expenditures, affiliates' employment shares rose in wholesale trade, information, and professional, scientific, and technical services.

At the aggregate level, R&D employment intensity increased to 2.1 percent from 1.6 percent. That increase was larger than the increase in expenditure intensity. In manufacturing, R&D employment intensity rose to 3.6 percent from 2.5 percent.

R&D expenditures: Geographic distribution and intensity

Of the foreign affiliates' $27.5 billion in R&D expenditures in 2004, $18.1 billion (66 percent) was by affiliates in Europe, $4.9 billion (18 percent) was by affiliates in Asia and Pacific, and $2.7 billion (10 percent) was by affiliates in Canada (table 3). Europe's leading position reflected both its relative importance in production by foreign affiliates and its relatively high R&D expenditure intensity (4 percent); among major regions, only the Middle East (11 percent) had a higher intensity, reflecting R&D in Israel.

By country, the largest affiliate R&D expenditures were in the United Kingdom ($5.5 billion), Germany ($4.7 billion), and Canada ($2.7 billion) (chart 8). Expenditures also exceeded $1.0 billion in France, Japan, and Sweden. R&D expenditure intensities in all of these countries except Canada were greater than the 3-percent worldwide intensity (chart 9). Germany's intensity was 6 percent, and Sweden's was 14 percent. Among the other countries shown in chart 8, intensities were particularly high in Israel (35 percent) and in Singapore, Switzerland, and China (5 percent in each). In Israel, much of the R&D expenditures were in computers and electronic products manufacturing--particularly in computer and peripheral equipment and communications equipment--and in professional, scientific, and technical services.

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The shares of R&D expenditures accounted for by affiliates in Europe fell 1 percentage point to 66 percent in 2004, and their share of R&D employment fell 3 percentage points to 64 percent. Balancing the fall in the European share, R&D expenditure shares of Canada and the Middle East both rose slightly, to 10 percent and 3 percent, respectively.

The share of R&D expenditures accounted for by affiliates in the United Kingdom, the top R&D-performing country, fell 2 percentage points in 1999-2004, to 20 percent. Shares of affiliates in Germany, France, and Japan also fell. R&D activities became somewhat more broadly dispersed during this period, as the combined R&D expenditure share of the top six R&D-performing countries--using the 2004 rankings--fell 7 percentage points to 65 percent.

R&D employment: Geographic distribution and intensity

For R&D employment, the 2004 ranking of the top six countries--the United Kingdom, Germany, Canada, France, Japan, and Sweden--was the same as the ranking by R&D expenditures. However, Israel, with over 6,000 R&D employees, was seventh, ahead of Ireland and Switzerland. Israel also had the highest R&D employment intensity (R&D employment as a share of total employment), 18 percent. Sweden's employment intensity (9 percent) was also relatively high.

Appendix R&D: What Is It and Who Conducts It?

R&D, as generally defined and as used in this article covers many, but not all, innovative activities. This appendix compares several popular definitions of R&D with a particular emphasis on the definition used in this article. It then discusses the characteristics of U.S. MNCs that conduct R&D.

R&D: What is it?

The Frascati Manual, one of two international standards for R&D statistics, provides the following basic definition of R&D:

 Research and experimental development (R&D)
 comprise creative work undertaken on a systematic
 basis in order to increase the stock of knowledge,
 including knowledge of man, culture and society,
 and the use of this stock of knowledge to devise
 new applications. (18)

The Frascati Manual provides additional specific guidance in identifying which activities constitute R&D and which do not, and it includes the requirement that R&D activities be classified as basic research, applied research, or development. The other international standard is the System of National Accounts 1993 (SNA). (19) Broadly, this standard differs from that in the Frascati Manual by placing less emphasis on novelty or the resolution of scientific or technological uncertainty and more emphasis on activities that result in products being brought to market. The SNA definition of R&D includes some activities excluded by the Frascati definition (for example, market research and quality control) and excludes others included by the Frascati definition (for example, activities that increase knowledge without affecting economic activity).

The National Science Foundation (NSF) is primarily responsible for data collection on U.S. domestic R&D, and in its surveys, it closely follows the Frascati definition of R&D. (20) BEA has adopted the NSF definition for its surveys of MNCs. In practice, the definitions used in the NSF and BEA surveys are somewhat more restrictive than the Frascati definition, focusing on work in the natural sciences and engineering and excluding work in the social sciences and humanities.

The three types of R&D activities are described in the instructions for BENs benchmark survey of U.S. direct investment abroad as follows:

Basic research is the pursuit of new scientific knowledge or understanding that does not have specific immediate commercial objectives, although it may be in fields of present or potential commercial interest.

Applied research applies the findings of basic research or other existing knowledge toward discovering new scientific knowledge that has specific commercial objectives with respect to new products, services, processes, or methods.

Development is the systematic use of the knowledge or understanding gained from research or practical experience directed toward the production or significant improvement of useful products, services, processes, or methods, including the design and development of prototypes, materials, devices, and systems. (21)

R&D: Who conducts it?

R&D is performed by a subset of U.S. parents and foreign affiliates. However, these firms tend to be among the largest in the MNC data set. Additionally, R&D performance tends to be persistent (that is, individual firms tend to maintain their status as R&D performers or as nonperformers). The following details are based on data from the 2004 benchmark survey of U.S. direct investment abroad and changes since the 1999 benchmark survey.

Incidence of R&D performance. Only about a third of U.S. parents, and an even smaller share of foreign affiliates, performed R&D in 2004.

* In 2004, 34 percent of parents and 9 percent of affiliates performed R&D.

* Parents and affiliates both performed R&D in 17 percent of MNCs, only parents performed R&D in 17 percent of MNCs, and only affiliates performed R&D in 3 percent of MNCs.

* In manufacturing, 52 percent of U.S. parents and 21 percent of foreign affiliates performed R&D. Parents and affiliates both performed R&D in 29 percent of the manufacturing MNCs, only parents performed R&D in 23 percent, and only affiliates performed R&D in 4 percent.

Size of R&D performers. R&D activity tends to be concentrated among the larger firms. However, among R&D-performing firms, a relation between R&D intensity and firm size is more difficult to confirm; the differences in size among firms grouped by their R&D intensities are small and may be positive or negative, depending on the indicator used for size.

* The average value added of R&D-performing parents was 232 percent of the average value added of nonperforming parents.

* Of R&D-performing parents, the average value added of the half with the highest R&D employment intensities was 124 percent of the average value added of R&D-performing parents with the lowest intensities. (22) However, most of this difference is attributable to the largest parents tending to be high-intensity R&D performers; the difference between the average value added of low-intensity performers and high-intensity performers substantially narrows when the top 1 percent of value-added-generating parents are excluded from the analysis. (23)

* Using a different indicator of size--ranking by average value-added percentile rather than average amount of value added--the results change somewhat. (24) By this alternative measure, R&D performers ranked substantially above nonperformers, but high-intensity performers were similar to low-intensity performers. Parents with no R&D were, on average, in the 44th percentile of value added. R&D performing parents were ranked much higher on average; high-intensity parents were in the 67th percentile, and low-intensity parents were in the 69th. (25)

* The average value added of R&D-performing affiliates was 436 percent of the average value added of nonperforming affiliates.

* The average value added of R&D-performing affiliates with high-intensity performance was 116 percent of that of R&D-performing affiliates with low-intensity performance. Like the parents, the difference between the two groups is largely driven by the top 1 percent of value-added-generating affiliates.

* The average ranking by value-added percentile of affiliates with no R&D employment was 25 points less than that of both affiliates with high R&D employment intensities and affiliates with low intensities.

Persistence of R&D performance. MNCs that perform R&D tend to continue performing; firms that do not perform tend to continue not performing. (26)

* Of the MNCs that reported in both the 1999 and 2004 benchmark surveys, 33 percent performed R&D in both years, 55 percent performed no R&D in either year, 6 percent performed R&D only in 1999, and 7 percent performed R&D only in 2004.

* Of the U.S. parents that reported in both the 1999 and 2004 benchmark surveys, 31 percent performed R&D in both years, 57 percent performed no R&D in either year, 7 percent performed R&D only in 1999, and 5 percent performed R&D only in 2004.

Key Terms

The following key terms are used to describe U.S. multinational companies (MNCs). (1)

U.S. multinational company (U.S. MNC). The U.S. parent and its foreign affiliates. (In this article, an MNC is defined as the U.S. parent and its majority-owned foreign affiliates.)

U.S. parent. A person, resident in the United States, that owns or controls 10 percent or more of the voting securities, or the equivalent, of a foreign business enterprise. "Person" is broadly defined to include any individual, branch, partnership, associated group, association, estate, trust, corporation, or other organization (whether or not organized under the laws of any state), or any government entity. If incorporated, the U.S. parent is the fully consolidated U.S. enterprise consisting of (1) the U.S. corporation whose voting securities are not owned more than 50 percent by another U.S. corporation and (2) proceeding down each ownership chain from that U.S. corporation, any U.S. corporation whose voting securities are more than 50 percent owned by the U.S. corporation above it. A U.S. parent comprises the domestic operations of a U.S. MNC, covering operations in the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, and all other U.S. areas.

U.S. direct investment abroad. The ownership or control, directly or indirectly, by one U.S. person of 10 percent or more of the voting securities of an incorporated foreign business enterprise or the equivalent interest in an unincorporated business enterprise.

Foreign affiliate. A foreign business enterprise in which there is U.S. direct investment, that is, in which a U.S. person owns or controls (directly or indirectly) 10 percent or more of the voting securities or the equivalent. Foreign affiliates comprise the foreign operations of a U.S. MNC over which the parent is presumed to have a degree of managerial influence.

This article focuses on the operations of majority-owned foreign affiliates of U.S. parents; for these affiliates, the combined ownership of all U.S. parents exceeds 50 percent. In 2004, these affiliates accounted for 86 percent of the employment of all foreign affiliates of U.S. MNCs, up from 84 percent in 1999.

(1.) For a more comprehensive discussion of the terms and the concepts used to describe U.S. MNCs and their operations, see Raymond J. Mataloni Jr., "A Guide to BEA Statistics on U.S. Multinational Companies," SURVEY 75 (March 1995): 38-55. Data on the operations of U.S. MNCs cover the survey respondent's fiscal year ending in the reference year of the data.

RELATED ARTICLE: Multinational companies and R&D: other issues.

The benchmark and annual surveys of U.S. direct investment abroad are the primary resources for assessing the size and scope of research and development (R&D) activities of U.S. multinational companies (MNCs). The main text of this article addresses several basic issues related to MNCs and R&D, such as the division of performance between U.S. parents and foreign affiliates, parents' performance relative to that of all U.S. businesses, the geographic (for foreign affiliates) and industry distributions of R&D performers, and the extent to which MNCs perform R&D for others or fund R&D by others. However, it leaves several other issues unaddressed. (1) Some of these other issues might be addressed by more detailed or technical analyses of data collected in the benchmark and annual surveys, and others might require data from other sources or data that are not currently available. Several issues of particular interest are grouped below according to whether they relate to firm-level behavior and performance, measurement of R&D, or the effect of R&D on national economic performance:

R&D and the firm

* What factors lead an MNC to conduct R&D?

* Does R&D lead a company to grow more quickly than it otherwise would? How does R&D affect other measures of parent and affiliate performance, such as productivity and profitability?

* Does R&D by a company's competitors put it at a relative disadvantage?

* How does an MNC determine whether to conduct its R&D in the United States or abroad? If abroad, what determines the particular location? To what extent do factors such as taxes or protection of intellectual property rights affect MNC decisions on where within the MNC to locate the ownership of R&D results?

* To what extent can U.S.-parent R&D spending complement, or be substituted for, foreign-affiliate R&D spending?

* How does R&D by parents affect the productivity and other measures of foreign-affiliate performance?

* To what extent are R&D findings shared with the various entities of an MNC? Are the findings of parents more readily shared than those of affiliates? Does the location of an affiliate determine whether it receives R&D output from the parent or other affiliates or how much it receives?

Measurement of R&D

* How are R&D results valued by MNCs, and how should they be valued by statistical agencies (for example, for use in satellite accounts)? Are market values available, or are cost-based estimates the only option?

* To what extent, if any, should R&D capital be viewed as accruing to R&D performers rather than, or in addition to, R&D funders?

* To what extent should the lags and risks associated with R&D affect the measurement of R&D capital?

* How quickly does R&D capital depreciate, and are there important differences in depreciation rates over industries and countries?

R&D and national performance

* What role does R&D by MNCs play in generating spillovers (externalities) in the United States, in the host countries of R&D-performing affiliates, or in the host countries of R&D-using affiliates?

* Does the increasing share of R&D performed by foreign affiliates imply that the United States is losing its comparative advantage in R&D?

* What factors promote the selection of affiliates located in low-wage host countries to perform R&D?

(1.) However, these other issues may have been (or may be currently being) addressed by other research, but most of the questions listed continue to be largely unresolved. For recent examples of research touching on some of these issues, see United Nations Conference on Trade and Development, World Investment Report 2005: Transnational Corporations and the Internationalization of R&D (New York and Geneva: United Nations, 2005), or Jerry Thursby and Marie Thursby, National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, Here or There? A Survey of Factors in Multinational R&D Location (Washington DC: The National Academies Press, 2006).

RELATED ARTICLE: Availability of data on U.S. direct investment abroad.

BEA collects two broad sets of data on U.S. direct investment abroad: (1) Financial and operating data of U.S. multinational companies (MNCs) and (2) international transactions and direct investment position data. The first data set provides a picture of the overall activities of foreign affiliates and U.S. parent companies, using a variety of indicators of their financial structure and operations. The second data set covers a foreign affiliate's transactions with its U.S. parent(s), focusing on the U.S. parent's share, or interest, in its affiliate rather than on the affiliate's size or level of operations. (1)

The preliminary estimates of the worldwide research and development (R&D) activities of MNCs for 2004--one aspect collected among many in the financial and operating data set--are presented in this article. Preliminary estimates related to other aspects of the operations of MNCs for 2004 and final estimates for 2003 were published in November 2006. (2) These estimates, along with more detailed estimates of MNC R&D activities, are available on BEA's Web site. The estimates are based on the 2003 Annual Survey of U.S. Direct Investment Abroad and the 2004 Benchmark Survey of U.S. Direct Investment Abroad.

The final estimates of U.S. MNC operations for 1977 and for 1982-2003, along with international transactions and direct investment position data, are available in publications or in fries that can be downloaded for free from BEA's Web site at <www.bea.gov>. For more information on these products and how to obtain them, go to <www.bea.gov/bea/ai/iidguide.htm>.

BEA has also recently launched a free service on its Web site that allows users to access interactively detailed data on the operations of U.S. multinational companies, on the operations of foreign-owned companies in the United States, and on other aspects of U.S. direct investment abroad and foreign direct investment in the United States. For an introductory guide to this service, see Ned G. Howenstine, "Primer: Accessing BEA Direct Investment Data Interactively," SURVEY 86 (May 2006): 61-64.

(1.) Jennifer L. Koncz and Daniel R. Yorgason, "Direct Investment Positions for 2005: Country and Industry Detail" SURVEY 86 (July 2006); and Jeffrey H. Lowe, "U.S. Direct Investment Abroad: Detail for Historical-Cost Position and Related Capital and Income Flows, 2003-2005," SURVEY 86 (September 2006): 87-129.

(2.) Raymond J. Mataloni Jr. and Daniel R. Yorgason, "Operations of U.S. Multinational Companies: Preliminary Results From the 2004 Benchmark Survey" SURVEY 86 (November 2006): 37-68.

(1.) A MNC comprises a U.S. parent company and its foreign affiliates. This analysis of R&D activities of U.S. MNCs focuses exclusively on data for majority-owned foreign affiliates (MOFAs) rather than on data for all foreign affiliates because the data items necessary for this analysis are only collected for MOFAs. Conceptually, many data users prefer the data for majority-owned affiliates because such affiliates are unambiguously under U.S. control; foreign affiliates that are minority owned by a U.S. resident could also be under the influence or control of foreign investors. In addition, most foreign affiliates are majority owned. For example, in 2004, MOFAs accounted for 86 percent of the employment by all nonbank foreign affiliates.

Raymond J. Mataloni Jr. and Daniel R. Yorgason, "Operations of U.S. Multinational Companies: Preliminary Results From the 2004 Benchmark Survey," SURVEY OF CURRENT BUSINESS 86 (November 2006): 37-68. For more information on the benchmark survey, see the appendix to that article.

(2.) The full release is accessible on BEA's Web site at <www.bea.gov/bea/ newsrelarchive/2006/rdspend06.htm>. An article 3 months later discusses the same topic: Sumiye Okubo, Carol A. Robbins, Carol E. Moylan, Brian K. Sliker, Laura I. Schultz, and Lisa S. Mataloni, "BEA's 2006 Research and Development Satellite Account: Preliminary Estimates of R&D for 1959-2002 and Effect on GDP and Other Measures," SURVEY 86 (December 2006): 14-44.

(3.) A report examining the feasibility of this data link project is available on BEA's Web site at <www.bea.gov/bea/di/FinalReportpublic.pdf>.

(4.) Okubo, et al., 22-23.

(5.) Data on R&D expenditures are collected on both a performer basis and funder basis in the benchmark survey. In the annual surveys, expenditure data are only collected on a performer basis. Unless otherwise noted, in this article, "R&D expenditures" are the expenditures for R&D that is performed by the MNC rather than for the R&D that is funded by the MNC. This treatment is consistent with the performance-based estimates published by NSF and with the data from BEA's annual surveys.

(6.) In the text, employment data are rounded to the nearest thousand. In the tables, they are rounded to the nearest hundred.

(7.) The estimates of R&D expenditures of U.S. MNCs on a funder basis follow financial accounting standards and are typically treated as an expense on firms' income statements. If a change were to be made to follow the definitions underlying the R&D satellite account, R&D expenditures on this basis would be capitalized, and the depreciation of the R&D stock would be treated as an expense. This alternative treatment would raise the estimates of value added by MNCs.

(8.) The similarity of industry concentration is not surprising given U.S. parents' 73-percent share of R&D expenditures by all U.S. businesses.

(9.) Differences in industry classification and geographic coverage of the BEA data for MNCs and the NSF data for all U.S. businesses may partly explain instances in which the proportion exceeds 100 percent. For instance, Puerto Rico is excluded in NSF's surveys of R&D, but it is included in BEA's surveys of direct investment.

(10.) This measure is also used by the NSF in many of its studies of R&D and allows analysts to focus on the output originating in firms in a specific industrial sector by subtracting the cost of services and materials purchased from other firms in that sector or in other sectors. Nonetheless, other measures of R&D intensity are also useful in the analysis of R&D, including the ratio of R&D expenditures to sales, the ratio of R&D employment to total employment, or either of these intensity measures computed just for R&D-performing firms. Other measures may relate more closely to the results of R&D, such as the number of patent applications or the number of patents granted. In some cases, the conclusions reached may differ, depending on the particular measure used.

(11.) An alternative measure of R&D expenditure intensity is shown in table 1--the ratio of R&D expenditures to the value added of R&D-performing parents. Because a minority of parents (and affiliates) had R&D expenditures, the ratio of expenditures to value added was substantially different, at both the all-industry level and at the detailed-industry level, depending on which of these two measures is used. Thus, this alternative is useful in showing the impact of nonperformers on detailed industry and higher level ratios. In the aggregate, this measure is nearly twice as high as the measure discussed in the text (13 percent versus 7 percent), but for individual industries, its size relative to that of the measure discussed in the text varies substantially. For example, it is only slightly higher in manufacturing (13 percent versus 12 percent), but it is much higher in information (21 percent versus 5 percent), reflecting particularly high R&D intensity by a number of software publishers.

(12.) For several industries with low intensities, spending per R&D employee was below $153,000.

(13.) Information on R&D expenditures for affiliated businesses was collected for the first time on the 2004 benchmark survey, so no comparison can be made with data for earlier years.

(14.) The one exception, communications equipment, had an affiliate intensity of 55 percent. Very high intensities such as this can result from situations where value added--the denominator in the intensity calculation--is unusually low, which might occur when startups constitute a large segment of a particular industry. In such situations, the share of employees in R&D may be a more informative intensity measure for many purposes.

(15.) Affiliates in manufacturing were responsible for 56 percent of foreign affiliates' value added in 1999 but for only 47 percent in 2004.

(16.) Note that these shares differ from those shown in table B, because affiliates are classified by their own industry, but, in table B, they are classified by the industry of their U.S. parent.

(17.) By comparison, average employee compensation for each worker was $20,000 less for affiliates than for parents ($38,000 versus $58,000).

(18.) Organisation for Economic Co-operation and Development (OECD), Frascati Manual 2002: Proposed Standard Practice for Surveys on Research and Experimental Development (Paris: OECD Publications, 2002): 30.

(19.) Commission of the European Communities--Eurostat, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, and World Bank, System of National Accounts 1993 (Brussels/Luxembourg, New York, Paris, Washington, DC, 1993). The revised SNA, due out in 2008, will likely recommend the capitalization of R&D in satellite accounts, as noted in United Nations, "Report of the Inter-secretariat Working Group on National Accounts" (E/CN.3/2007/7, distributed December 19, 2006). BEA recently released several different estimates of the capitalized value of domestic expenditures on R&D, and demonstrated the effect of these estimates on GDP, in its R&D satellite account (Okubo, et al.).

(20.) As noted, the Census Bureau collects the data on behalf of NSF.

(21.) The survey is available on BEA's Web site at <www.bea.gov/surveys/ diasurv.htm>. Data on the three types of R&D are not collected separately in BEA's surveys, but a breakout will be available for U.S. parents in the forthcoming project linking BEEs and NSF's R&D data. For more information on the linking project, see the introduction to this article and footnote 3.

(22.) R&D employment intensity is defined as R&D employment as a share of total employment. R&D employment intensities are used here rather than R&D expenditure intensities because the expenditure intensity calculation uses value added in its denominator. Because value added--particularly at the firm level--can be very small (or negative) relative to R&D expenditures, generating meaningful firm-level intensity comparisons is difficult. Nonetheless, if expenditure intensities are used, the results are similar.

(23.) "High-intensity group" (or variants of this term) refers to the half of R&D performers with the highest R&D employment intensities, and "low-intensity group" refers to the half of R&D performers with the lowest R&D employment intensities.

(24.) There are multiple similar, but not identical, definitions of percentile. The value-added percentiles used here are constructed by ranking the parents according to their value added and dividing the set of parents into 100 groups, each with equal numbers of parents. The group consisting of the parents with the highest levels of value added are in the 100th percentile and the group consisting of the parents with the lowest levels of value added are in the 1st percentile.

(25.) Slightly more sophisticated calculations that excluded parents or affiliates in industries with little R&D or that adjusted for parent or affiliate industry (or that did both) did not considerably change the results.

(26.) The unit of observation is the MNC or the U.S. parent. Foreign affiliates are not considered as units of observation because verifying the continuity of a given affiliate from one benchmark survey to the next is more problematic for an individual foreign affiliate than it is for an individual parent or for a group of all affiliates of the same parent.

Tables 1-3 follow.

Table A. R&D Expenditures of Nonbank U.S. Multinational Companies
for 1994,1999, and 2004

 R&D performed by U.S. MNCs

 MNC U.S. MOFAs
 total parents

 (1) (2) (3)

 Millions of dollars

 1994

 Total 103,451 91,574 11,877

Type:
 For themselves 84,574 75,673 8,901
 For others (2) 18,876 15,900 2,976
 Of which:
 For the Federal Government n.a. 13,267 n.a.
Addendum: Performed by others on
 behalf of the MNC 7,105 5,561 1,544

 1999

 Total 144,435 126,291 18,144

Type:
 For themselves 124,252 111,008 13,244
 For others (2) 20,183 15,283 4,900
 Of which:
 For the Federal Government n.a. 7,810 n.a.
Addendum: Performed by others on
 behalf of the MNC 11,726 10,344 1,382

 2004

 Total 179,914 152,384 27,529

Type:
 For themselves 166,330 141,877 24,453
 For affiliated businesses (3) 4,313 1,835 2,479
 For unaffiliated entities 9,270 8,673 597
 Of which:
 For the Federal Government n.a. 6,049 n.a.
Addendum: Performed by others on
 behalf of the MNC 7,794 6,338 1,456

Addenda Percent

 1994

 Total 100.0 100.0 100.0

Type:
 For themselves 81.8 82.6 74.9
 For others (2) 18.2 17.4 25.1
 Of which:
 For Federal Government n.a. 14.5 n.a.

 1999
 Total 100.0 100.0 100.0
Type:
 For themselves 86.0 87.9 73.0
 For others (2) 14.0 12.1 27.0
 Of which:
 For the Federal Government n.a. 6.2 n.a.

 2004

 Total 100.0 100.0 100.0

Type:
 For themselves 92.4 93.1 88.8
 For affiliated businesses (3) 2.4 1.2 9.0
 For unaffiliated entities 5.2 5.7 2.2
 Of which:
 For the Federal Government n.a. 4.0 n.a.

 Addenda

 Ratio of U.S. MOFAs as a
 parent R&D percentage
 expenditures to of MNC total
 R&D expenditures ((column 3 /
 of all U.S. column 1)
 businesses x 100)
 (percent)

 (4) (5)

 Percent

 1994

 Total 76.6 11.5

Type:
 For themselves n.a. 10.5
 For others (2) n.a. 15.8
 Of which:
 For the Federal Government 59.1 n.a.
Addendum: Performed by others on
 behalf of the MNC n.a. 21.7

 1999

 Total 69.1 12.6

Type:
 For themselves n.a. 10.7
 For others (2) n.a. 24.3
 Of which:
 For the Federal Government 34.7 n.a.
Addendum: Performed by others on
 behalf of the MNC n.a. 11.8

 2004

 Total 73.2 15.3

Type:
 For themselves n.a. 14.7
 For affiliated businesses (3) n.a. 57.5
 For unaffiliated entities 6.4
 Of which:
 For the Federal Government 29.9 n.a.
Addendum: Performed by others on
 behalf of the MNC n.a. 18.7

Addenda

 1994

 Total ... ...

Type:
 For themselves ... ...
 For others (2) ... ...
 Of which:
 For Federal Government ... ...

 1999

 Total ... ...

Type:
 For themselves ... ...
 For others (2) ... ...
 Of which:
 For the Federal Government ... ...

 2004

 Total ... ...

Type:
 For themselves ... ...
 For affiliated businesses (3) ... ...
 For unaffiliated entities ... ...
 Of which:
 For the Federal Government ... ...

n.a. Not available

(1.) These estimates are computed using data from the National
Science Foundation's Web site at <http://www.nst.gov/
statislicstinfbriet/nsfO7304/>.

(2.) Information of the portion of R&D performed by the MNC
for affiliated and for unaffiliated entities was separately
collected in 2004, but this split was not collected in 1994
and 1999.

(3.) In the case of U.S, parents, affiliated businesses
consist of their foreign affiliates. In the case of

MOFAs, affiliated businesses consist of the U.S. parent
and all other foreign affiliates belonging to the same U.S. parent.

MNC Multinational company

MOFA Majority-owned foreign affiliate R&D Research and development

Table B. R&D Expenditures of Nonbank U.S. Multinational Companies
and All U.S. Businesses by Selected Industry of U.S. Parent, 2004 (1)

 R&D expenditures
 (millions of dollars)

 MNC U.S. MOFAs
 total parents

 All industries (3) 179,913 152,384 27,529

Manufacturing 145,122 120,851 24,271
 Of which:
 Petroleum and coal products 1,326 1,251 75
 Chemicals 47,274 40,270 7,004
 Of which:
 Basic chemicals 2,075 1,881 194
 Resins and synthetic
 rubber, fibers,
 and filaments 2,681 2,392 289
 Pharmaceuticals and
 medicines 37,000 31,046 5,954
 Machinery 6,656 5,780 876
 Computers and electronic
 products 41,468 35,810 5,658
 Of which:
 Computers and
 peripheral equipment 7,562 7,371 191
 Electrical equipment,
 appliances, and
 components 1,476 1,266 210
 Transportation equipment 33,862 25,795 8,067
 Of which:
 Motor vehicles, bodies
 and trailers, and parts 21,954 14,662 7,292
 Miscellaneous manufacturing 4,975 4,397 578

Information 15,193 14,003 1,190

Professional, scientific, and
 technical services 14,438 12,787 1,651
 Of which:
 Architectural, engineering,
 and related services (D) 91 (D)
 Computer systems design and
 related services 10,087 8,689 1,398

Other (4) 5,160 4,743 417
 Of which:
 Construction 3 3 0
 Retail trade 57 53 4

 MOFA share R&D expen- Ratio of
 of total ditures U.S.-
 MNC of all parent R&D
 (percent) U.S. R&D expendi-
 businesses tures
 (millions to R&D of
 of expendi-
 dollars) tures all
 (2) U.S.
 businesses
 (percent)

 All industries (3) 15.3 208,301 73.2

Manufacturing 16.7 147,288 82.1
 Of which:
 Petroleum and coal products 5.7 1,603 78.0
 Chemicals 14.8 (D) (D)
 Of which:
 Basic chemicals 9.4 2,393 78.6
 Resins and synthetic
 rubber, fibers,
 and filaments 10.8 2,096 114.1
 Pharmaceuticals and
 medicines 16.1 31,477 98.6
 Machinery 13.2 6,579 87.9
 Computers and electronic
 products 13.6 48,296 74.1
 Of which:
 Computers and
 peripheral equipment 2.5 5,734 128.6
 Electrical equipment,
 appliances, and
 components 14.2 2,664 47.5
 Transportation equipment 23.8 (D) (D)
 Of which:
 Motor vehicles, bodies
 and trailers, and parts 33.2 15,677 93.5
 Miscellaneous manufacturing 11.6 4,388 100.2

Information 7.8 22,593 62.0

Professional, scientific, and
 technical services 11.4 28,709 44.5
 Of which:
 Architectural, engineering,
 and related services (D) 4,265 2.1
 Computer systems design and
 related services 13.9 11,575 75.1

Other (4) 8.1 9,711 48.8
 Of which:
 Construction 0 1,481 0.2
 Retail trade 7.0 1,596 3.3

(D) Suppressed to avoid disclosure of data of individual companies.

(1.) In this table, MOFA's R&D expenditures are classified by the
industry of their U.S. parent. In table 2, MOFA's R&D expenditures
are classified by their own industry.

(2.) Data are from the National Science Foundation's Web site
at <httPJ/wwwnsf.gov/statistics/ infbrief/nsf07304/>.

(3.) "All industries" includes agricultural industries in the
benchmark survey of U.S. direct investment abroad. In NSF's survey
of all U.S. businesses, agricultural industries are excluded.

(4.) "Other" in this table is a catch-all category and does not
correspond to the "other industries' category used in other tables
in this article or in other reports on the results from BA's surveys
of MNCs by industry. "Other" also includes agricultural industries
for the survey of U.S. direct investment abroad but not for the
survey of all U.S. businesses. See footnote 3.

MNC Multinational company

MOFA Majority-owned foreign affiliate

R&D Research and development

Table C. R&D Expenditures Per R&D Employee by
Selected Industry, 2004

[Dollars]

 U.S. parents MOFAs

 All industries 186,129 153,518

Manufacturing 191,080 154,455
 Chemicals 251,243 233,019
 Of which:
 Pharmaceuticals and medicines 258,232 284,518
 Computers and electronic products 179,786 132,707
 Of which:
 Computers and peripheral equipment 149,879 205,329
 Communications equipment 159,839 128,908
 Semiconductors and other electronic
 components 199,694 132,591
 Transportation equipment 168,656 137,359
 Motor vehicles, bodies and trailers,
 and parts 170,432 138,303
 Other 166,372 126,674
Information 208,806 179,300
 Of which:
 Publishing industries 239,160 188,570
Professional, scientific, and technical
 services 152,700 139,396
 Of which:
 Computer systems design and related
 services 160,678 130,763
 Other 179,036 155,812

MOFAs Majority-owned foreign affiliates

R&D Research and development

Table 1. R&D Expenditures, Employment, and Intensities
of Nonbank U.S. Parents by Industry, 1999 and 2004

 R&D expenditures
 (millions of dollars)

 1999 2004

 All industries 126,291 152,384
Mining 212 (D)
 Oil and gas extraction 53 (D)
 Other 159 447
Utilities 81 18
Manufacturing 104,842 120,851
 Food 934 1,400
 Beverage and tobacco products 501 452
 Textiles, apparel, and leather products 275 102
 Wood products 31 105
 Paper 1,478 1,336
 Printing and related support activities 129 220
 Petroleum and coal products 990 1,251
 Chemicals 28,198 40,270
 Basic chemicals 1,627 1,881
 Resins and synthetic rubber, fibers,
 and filaments 2,784 2,392
 Pharmaceuticals and medicines 18,382 31,046
 Soap, cleaning compounds, and toilet
 preparations 1,957 2,584
 Other 3,449 2,368
 Plastics and rubber products 1,031 925
 Nonmetallic mineral products 371 426
 Primary and fabricated metals 1,320 1,211
 Primary metals 760 472
 Fabricated metal products 560 739
 Machinery 5,252 5,780
 Agriculture, construction, and mining
 machinery 1,340 1,722
 Industrial machinery 1,250 1,652
 Other 2,662 2,405
 Computers and electronic products 30,298 35,810
 Computers and peripheral equipment 5,659 7,371
 Communications equipment 13,276 10,473
 Audio and video equipment 407 433
 Semiconductors and other electronic
 components 8,997 12,369
 Navigational, measuring, and other
 instruments 1,579 (D)
 Magnetic and optical media 381 (D)
 Electrical equipment, appliances,
 and components 2,958 1,266
 Transportation equipment 29,162 25,795
 Motor vehicles, bodies and trailers,
 and parts 17,513 14,662
 Other 11,649 11,133
 Furniture and related products 90 106
 Miscellaneous manufacturing 1,826 4,397
Wholesale trade 4,000 (D)
 Of which:
 Professional and commercial equipment and
 supplies 2,635 (D)
 Petroleum and petroleum products (D) (D)
Information 6,763 14,003
 Of which:
 Publishing industries 4,050 11,018
 Telecommunications (D) 283
Finance (except depository institutions) and
 insurance 315 350
 Finance, except depository institutions 240 183
 Securities, commodity contracts, and other
 intermediation (D) (D)
 Other finance, except depository
 institutions (D) (D)
 Insurance carriers and related activities 75 167
Professional, scientific, and technical services 8,522 12,787
 Architectural, engineering, and related
 services 49 91
 Computer systems design and related services 7,453 8,689
 Management, scientific, and technical
 consulting (D) 580
 Advertising and related services (D) 1
 Other 716 3,427
Other industries 1,556 1,028
 Agriculture, forestry, fishing, and hunting 2 32
 Construction (D) 3
 Retail trade (D) 53
 Transportation and warehousing 26 (*)
 Real estate and rental and leasing (D) (D)
 Real estate 0 0
 Rental and leasing (except real estate) (D) (D)
 Management of nonbank companies and
 enterprises 0 0
 Administration, support, and waste management 6 (D)
 Health care and social assistance (D) 32
 Accommodation and food services 25 9
 Accommodation 0 0
 Food services and drinking places 25 9
 Miscellaneous services 15 163

 R&D employment
 (thousands of
 employees)

 1999 2004

 All industries 646.8 818.7
Mining 3.1 3.2
 Oil and gas extraction 0.3 0.1
 Other 2.8 3.1
Utilities 1.6 0.2
Manufacturing 485.9 632.5
 Food 21.7 9.2
 Beverage and tobacco products 2.4 2.6
 Textiles, apparel, and leather products 2.7 1.2
 Wood products 0.2 0.9
 Paper 9.2 8.6
 Printing and related support activities 1.3 2.0
 Petroleum and coal products 8.1 7.2
 Chemicals 112.9 160.3
 Basic chemicals 12.7 9.5
 Resins and synthetic rubber, fibers,
 and filaments 13.6 14.9
 Pharmaceuticals and medicines 61.2 120.2
 Soap, cleaning compounds, and toilet
 preparations 9.9 7.4
 Other 15.4 8.3
 Plastics and rubber products 8.2 6.8
 Nonmetallic mineral products 3.2 2.2
 Primary and fabricated metals 9.7 13.6
 Primary metals 3.8 8.2
 Fabricated metal products 5.9 5.4
 Machinery 34.9 32.2
 Agriculture, construction, and mining
 machinery 7.4 8.3
 Industrial machinery 8.7 5.0
 Other 18.9 19.0
 Computers and electronic products 132.7 199.2
 Computers and peripheral equipment 24.5 49.2
 Communications equipment 68.7 65.5
 Audio and video equipment 2.1 2.6
 Semiconductors and other electronic
 components 25.9 61.9
 Navigational, measuring, and other
 instruments 9.8 19.7
 Magnetic and optical media 1.7 0.2
 Electrical equipment, appliances,
 and components 23.9 8.5
 Transportation equipment 99.7 152.9
 Motor vehicles, bodies and trailers,
 and parts 62.8 86.0
 Other 36.9 66.9
 Furniture and related products 1.6 1.1
 Miscellaneous manufacturing 13.7 24.0
Wholesale trade 26.3 17.0
 Of which:
 Professional and commercial equipment and
 supplies 15.3 (D)
 Petroleum and petroleum products 0.2 0.5
Information 50.6 67.1
 Of which:
 Publishing industries 25.1 46.1
 Telecommunications 7.3 (D)
Finance (except depository institutions) and
 insurance 2.7 8.2
 Finance, except depository institutions (D) (D)
 Securities, commodity contracts, and other
 intermediation 0.1 (D)
 Other finance, except depository
 institutions (D) 0.1
 Insurance carriers and related activities (D) (D)
Professional, scientific, and technical services 68.1 83.7
 Architectural, engineering, and related
 services 0.4 (D)
 Computer systems design and related services 45.1 54.1
 Management, scientific, and technical
 consulting (D) (D)
 Advertising and related services 0.2 (*)
 Other (D) 19.1
Other industries 8.5 6.9
 Agriculture, forestry, fishing, and hunting (') 0.4
 Construction (D) (*)
 Retail trade (D) 0.7
 Transportation and warehousing 0.2 (D)
 Real estate and rental and leasing 0.1 0.1
 Real estate 0.0 0.0
 Rental and leasing (except real estate) 0.1 0.1
 Management of nonbank companies and
 enterprises 0.0 0.0
 Administration, support, and waste management 0.1 (D)
 Health care and social assistance 0.1 0.2
 Accommodation and food services 0.3 (*)
 Accommodation 0.0 0.0
 Food services and drinking places 0.3 (*)
 Miscellaneous services 0.1 1.4

 R&D intensity
 (percent)

 Ratio of R&D
 expenditures
 to value added

 1999 2004

 All industries 6.6 6.9
Mining 1.1 (D)
 Oil and gas extraction 0.6 (D)
 Other 1.6 2.5
Utilities 0.1 (*)
Manufacturing 11.3 12.0
 Food 1.9 1.9
 Beverage and tobacco products 1.1 0.8
 Textiles, apparel, and leather products 1.5 0.9
 Wood products 0.9 1.1
 Paper 3.2 3.7
 Printing and related support activities 1.2 1.8
 Petroleum and coal products 1.2 1.0
 Chemicals 21.0 22.9
 Basic chemicals 8.6 10.4
 Resins and synthetic rubber, fibers,
 and filaments 14.6 13.2
 Pharmaceuticals and medicines 32.8 33.0
 Soap, cleaning compounds, and toilet
 preparations 10.8 12.2
 Other 15.9 9.8
 Plastics and rubber products 4.4 4.0
 Nonmetallic mineral products 2.7 3.0
 Primary and fabricated metals 2.9 2.2
 Primary metals 3.3 1.6
 Fabricated metal products 2.4 2.9
 Machinery 10.3 11.0
 Agriculture, construction, and mining
 machinery 10.6 12.4
 Industrial machinery 17.8 24.8
 Other 8.5 7.6
 Computers and electronic products 28.6 32.3
 Computers and peripheral equipment 29.0 29.5
 Communications equipment 38.4 35.5
 Audio and video equipment 7.4 18.4
 Semiconductors and other electronic
 components 23.0 40.7
 Navigational, measuring, and other
 instruments 25.3 (D)
 Magnetic and optical media 30.3 (D)
 Electrical equipment, appliances,
 and components 9.4 7.9
 Transportation equipment 12.3 12.8
 Motor vehicles, bodies and trailers,
 and parts 13.3 17.9
 Other 11.1 9.3
 Furniture and related products 1.2 1.3
 Miscellaneous manufacturing 8.1 11.5
Wholesale trade 5.0 (D)
 Of which:
 Professional and commercial equipment and
 supplies 11.9 (D)
 Petroleum and petroleum products (D) (D)
Information 2.7 5.4
 Of which:
 Publishing industries 10.2 21.9
 Telecommunications (D) 0.2
Finance (except depository institutions) and
 insurance 0.3 0.2
 Finance, except depository institutions 0.5 0.3
 Securities, commodity contracts, and other
 intermediation (D) (D)
 Other finance, except depository
 institutions (D) (D)
 Insurance carriers and related activities 0.1 0.2
Professional, scientific, and technical services 8.9 11.1
 Architectural, engineering, and related
 services 0.7 0.6
 Computer systems design and related services 17.7 20.0
 Management, scientific, and technical
 consulting (D) 4.9
 Advertising and related services (D) (*)
 Other 2.5 9.6
Other industries 0.5 0.2
 Agriculture, forestry, fishing, and hunting 0.2 1.8
 Construction (D) (*)
 Retail trade (D) (*)
 Transportation and warehousing (*) (*)
 Real estate and rental and leasing (D) (D)
 Real estate 0.0 0.0
 Rental and leasing (except real estate) (D) (D)
 Management of nonbank companies and
 enterprises 0.0 0.0
 Administration, support, and waste management (*) (D)
 Health care and social assistance (D) 0.1
 Accommodation and food services 0.1 (*)
 Accommodation 0.0 0.0
 Food services and drinking places 0.1 (*)
 Miscellaneous services 0.2 1.0

 R&D intensity
 (percent)

 Ratio of R&D
 expenditures
 to value added
 of R&D-performing
 U.S. parents

 1999 2004

 All industries 10.8 12.8
Mining 1.8 (D)
 Oil and gas extraction 1.2 (D)
 Other 2.1 4.9
Utilities 0.2 0.1
Manufacturing 12.2 13.1
 Food 2.0 2.1
 Beverage and tobacco products 1.2 1.0
 Textiles, apparel, and leather products 2.8 2.1
 Wood products 1.4 1.1
 Paper 3.3 5.1
 Printing and related support activities 2.0 2.6
 Petroleum and coal products 1.3 1.2
 Chemicals 21.7 23.4
 Basic chemicals 9.3 10.6
 Resins and synthetic rubber, fibers,
 and filaments 14.7 13.2
 Pharmaceuticals and medicines 32.9 33.2
 Soap, cleaning compounds, and toilet
 preparations 11.5 12.5
 Other 16.6 10.7
 Plastics and rubber products 4.7 4.4
 Nonmetallic mineral products 3.2 3.8
 Primary and fabricated metals 3.4 2.7
 Primary metals 3.8 1.9
 Fabricated metal products 2.9 3.8
 Machinery 11.4 11.7
 Agriculture, construction, and mining
 machinery 11.3 12.7
 Industrial machinery 20.3 28.4
 Other 9.6 8.1
 Computers and electronic products 29.5 33.3
 Computers and peripheral equipment 29.6 29.6
 Communications equipment 38.6 37.8
 Audio and video equipment 7.5 19.1
 Semiconductors and other electronic
 components 24.2 41.7
 Navigational, measuring, and other
 instruments 28.1 (D)
 Magnetic and optical media 34.9 (D)
 Electrical equipment, appliances,
 and components 10.2 8.6
 Transportation equipment 12.8 13.1
 Motor vehicles, bodies and trailers,
 and parts 13.9 19.1
 Other 11.5 9.3
 Furniture and related products 1.3 1.4
 Miscellaneous manufacturing 9.3 12.1
Wholesale trade 10.0 (D)
 Of which:
 Professional and commercial equipment and
 supplies 19.4 (D)
 Petroleum and petroleum products (D) (D)
Information 5.5 20.8
 Of which:
 Publishing industries 20.0 43.5
 Telecommunications (D) 1.2
Finance (except depository institutions) and
 insurance 3.4 1.0
 Finance, except depository institutions 9.4 2.8
 Securities, commodity contracts, and other
 intermediation (D) (D)
 Other finance, except depository
 institutions (D) (D)
 Insurance carriers and related activities 1.1 0.6
Professional, scientific, and technical services 19.4 23.0
 Architectural, engineering, and related
 services 2.4 2.7
 Computer systems design and related services 20.3 22.1
 Management, scientific, and technical
 consulting (D) 11.4
 Advertising and related services (D) 0.5
 Other 28.7 44.8
Other industries 3.3 3.7
 Agriculture, forestry, fishing, and hunting 0.4 2.1
 Construction (D) 1.8
 Retail trade (D) 0.8
 Transportation and warehousing 0.2 (*)
 Real estate and rental and leasing (D) (D)
 Real estate 0.0 0.0
 Rental and leasing (except real estate) (D) (D)
 Management of nonbank companies and
 enterprises 0.0 0.0
 Administration, support, and waste management 0.2 (D)
 Health care and social assistance (D) 1.3
 Accommodation and food services 0.3 0.2
 Accommodation 0.0 0.0
 Food services and drinking places 0.3 0.2
 Miscellaneous services 2.0 7.3

 R&D intensity
 (percent)

 Ratio of R&D
 employment to
 total employment

 1999 2004

 All industries 2.8 3.8
Mining 2.8 1.7
 Oil and gas extraction 1.6 0.5
 Other 3.1 1.9
Utilities 0.4 0.1
Manufacturing 5.4 8.0
 Food 3.4 1.3
 Beverage and tobacco products 0.9 1.1
 Textiles, apparel, and leather products 0.7 0.7
 Wood products 0.5 1.2
 Paper 2.1 2.8
 Printing and related support activities 0.8 1.1
 Petroleum and coal products 2.9 3.4
 Chemicals 11.5 17.3
 Basic chemicals 8.7 7.9
 Resins and synthetic rubber, fibers,
 and filaments 10.7 15.8
 Pharmaceuticals and medicines 17.7 28.2
 Soap, cleaning compounds, and toilet
 preparations 6.8 6.6
 Other 6.9 4.9
 Plastics and rubber products 2.7 2.6
 Nonmetallic mineral products 2.1 1.5
 Primary and fabricated metals 1.6 2.6
 Primary metals 1.3 3.0
 Fabricated metal products 1.8 2.1
 Machinery 5.2 5.4
 Agriculture, construction, and mining
 machinery 4.8 6.4
 Industrial machinery 11.2 6.4
 Other 4.3 4.9
 Computers and electronic products 13.2 21.1
 Computers and peripheral equipment 12.9 23.3
 Communications equipment 20.8 29.7
 Audio and video equipment 3.7 10.4
 Semiconductors and other electronic
 components 7.8 27.0
 Navigational, measuring, and other
 instruments 11.1 7.7
 Magnetic and optical media 16.4 6.4
 Electrical equipment, appliances,
 and components 5.3 4.2
 Transportation equipment 4.5 8.2
 Motor vehicles, bodies and trailers,
 and parts 5.4 8.9
 Other 3.5 7.5
 Furniture and related products 1.2 0.9
 Miscellaneous manufacturing 4.5 6.7
Wholesale trade 2.9 2.1
 Of which:
 Professional and commercial equipment and
 supplies 6.6 (D)
 Petroleum and petroleum products 0.6 0.9
Information 2.6 3.8
 Of which:
 Publishing industries 7.7 14.3
 Telecommunications 0.9 (D)
Finance (except depository institutions) and
 insurance 0.2 0.7
 Finance, except depository institutions (D) (D)
 Securities, commodity contracts, and other
 intermediation (*) (D)
 Other finance, except depository
 institutions (D) 0.1
 Insurance carriers and related activities (D) (D)
Professional, scientific, and technical services 6.7 8.7
 Architectural, engineering, and related
 services 0.3 (D)
 Computer systems design and related services 11.5 15.1
 Management, scientific, and technical
 consulting (D) (D)
 Advertising and related services 0.2 6.8
 Other (D)
Other industries 0.1 0.1
 Agriculture, forestry, fishing, and hunting 0.1 1.6
 Construction (D) (*)
 Retail trade (D) (*)
 Transportation and warehousing (*) (D)
 Real estate and rental and leasing 0.1 (*)
 Real estate 0.0 0.0
 Rental and leasing (except real estate) 0.1 (*)
 Management of nonbank companies and
 enterprises 0.0 0.0
 Administration, support, and waste management (*) (D)
 Health care and social assistance (*) 0.1
 Accommodation and food services (*) (*)
 Accommodation 0.0 0.0
 Food services and drinking places (*) (*)
 Miscellaneous services 0.1 0.4

D Suppressed to avoid disclosure of data of
individual companies.

(*) Less than $500,000, fewer than 50 employees, or
less than 0.05 percent R&D Research and development

Table 2. R&D Expenditures, Employment, and Intensities of Nonbank
Majority-Owned Foreign Affiliates by Industry, 1999 and 2004 (1)

 R&D expenditures
 (millions of
 dollars)

 1999 2004

 All industries 18,144 27,529
Mining 8 8
 Oil and gas extraction 4 3
 Other 4 4
Utilities (*) 2
Manufacturing 16,388 23,288
 Food 367 634
 Beverage and tobacco products 32 23
 Textiles, apparel, and leather products 37 68
 Wood products 2 1
 Paper 265 88
 Printing and related support activities 3 11
 Petroleum and coal products 66 43
 Chemicals 4,340 6,254
 Basic chemicals 106 147
 Resins and synthetic rubber, fibers,
 and filaments 173 242
 Pharmaceuticals and medicines 3,578 5,302
 Soap, cleaning compounds, and toilet
 preparations 135 186
 Other 348 377
 Plastics and rubber products 216 293
 Nonmetallic mineral products 38 378
 Primary and fabricated metals 151 197
 Primary metals 27 40
 Fabricated metal products 124 157
 Machinery 748 791
 Agriculture, construction, and mining
 machinery 168 230
 Industrial machinery 216 118
 Other 364 443
 Computers and electronic products 3,773 5,283
 Computers and peripheral equipment 356 479
 Communications equipment 2,403 3,179
 Audio and video equipment 146 (D)
 Semiconductors and other electronic
 components 644 1,057
 Navigational, measuring, and other
 instruments 224 500
 Magnetic and optical media 0 (D)
 Electrical equipment, appliances,
 and components 214 551
 Transportation equipment 5,669 7,741
 Motor vehicles, bodies and trailers,
 and parts 5,385 7,161
 Other 284 579
 Furniture and related products (D) 44
 Miscellaneous manufacturing (D) 887
Wholesale trade 515 1,205
 Of which:
 Professional and commercial equipment and
 supplies 272 724
 Petroleum and petroleum products (D) (*)
Information 161 843
 Of which:
 Publishing industries 132 781
 Telecommunications 1 42
Finance (except depository institutions) and
 insurance 1 1
 Finance, except depository institutions 0 1
 Securities, commodity contracts, and other
 intermediation 0 1
 Other finance, except depository
 institutions 0 0
 Insurance carriers and related activities 1 (*)
Professional, scientific, and technical services 1,040 2,120
 Architectural, engineering, and related
 services (D) 152
 Computer systems design and related services 305 888
 Management, scientific, and technical
 consulting (D) 97
 Advertising and related services 0 0
 Other 519 982
Other industries 31 64
 Agriculture, forestry, fishing, and hunting 5 (D)
 Construction (*) 8
 Retail trade 1 4
 Transportation and warehousing 0 (*)
 Real estate and rental and leasing 1 2
 Real estate 0 0
 Rental and leasing (except real estate) 1 2
 Management of nonbank companies and
 enterprises 16 (D)
 Administration, support, and waste management 0 5
 Health care and social assistance (*) 0
 Accommodation and food services (*) (*)
 Accommodation 0 0
 Food services and drinking places (*) (*)
 Miscellaneous services 8 7

 R&D employment
 (thousands of
 employees)

 1999 2004

 All industries 123.5 179.3
Mining 0.1 0.1
 Oil and gas extraction 0.0 0.1
 Other 0.1 (*)
Utilities (*) (*)
Manufacturing 108.5 150.8
 Food 3.3 3.4
 Beverage and tobacco products 0.3 0.2
 Textiles, apparel, and leather products 0.4 0.5
 Wood products (*) (*)
 Paper 1.9 0.7
 Printing and related support activities 0.0 0.1
 Petroleum and coal products 0.5 0.4
 Chemicals 25.4 26.8
 Basic chemicals 1.5 1.6
 Resins and synthetic rubber, fibers,
 and filaments 2.0 2.0
 Pharmaceuticals and medicines 17.1 18.6
 Soap, cleaning compounds, and toilet
 preparations 1.4 1.9
 Other 3.5 2.7
 Plastics and rubber products 1.9 2.2
 Nonmetallic mineral products 1.7 0.6
 Primary and fabricated metals 1.4 1.9
 Primary metals 0.3 0.5
 Fabricated metal products 1.2 1.4
 Machinery 6.4 6.7
 Agriculture, construction, and mining
 machinery 1.3 1.5
 Industrial machinery 1.3 1.1
 Other 3.8 4.1
 Computers and electronic products 22.8 39.8
 Computers and peripheral equipment 2.1 2.3
 Communications equipment 12.8 24.7
 Audio and video equipment 1.2 0.5
 Semiconductors and other electronic
 components 5.1 8.0
 Navigational, measuring, and other
 instruments 1.7 4.1
 Magnetic and optical media 0.0 0.3
 Electrical equipment, appliances,
 and components 3.8 5.5
 Transportation equipment 35.5 56.4
 Motor vehicles, bodies and trailers,
 and parts 32.7 51.8
 Other 2.8 4.6
 Furniture and related products 0.2 0.4
 Miscellaneous manufacturing 2.9 5.2
Wholesale trade 4.0 7.9
 Of which:
 Professional and commercial equipment and
 supplies 2.0 5.0
 Petroleum and petroleum products 0.1 (*)
Information 1.2 4.7
 Of which:
 Publishing industries 0.8 4.1
 Telecommunications (*) 0.4
Finance (except depository institutions) and
 insurance 0.0 (*)
 Finance, except depository institutions 0.0 (*)
 Securities, commodity contracts, and other
 intermediation 0.0 (*)
 Other finance, except depository
 institutions 0.0 0.0
 Insurance carriers and related activities 0.0 (*)
Professional, scientific, and technical services 9.5 15.2
 Architectural, engineering, and related
 services (D) 1.3
 Computer systems design and related services 2.6 6.8
 Management, scientific, and technical
 consulting 0.1 0.8
 Advertising and related services 0.0 0.0
 Other (D) 6.3
Other industries 0.2 0.7
 Agriculture, forestry, fishing, and hunting 0.1 0.3
 Construction 0.0 0.1
 Retail trade (*) (*)
 Transportation and warehousing 0.0 (*)
 Real estate and rental and leasing (*) (*)
 Real estate 0.0 0.0
 Rental and leasing (except real estate) (*) (*)
 Management of nonbank companies and
 enterprises 0.1 0.1
 Administration, support, and waste management 0.0 0.1
 Health care and social assistance (*) 0.0
 Accommodation and food services (*) (*)
 Accommodation 0.0 0.0
 Food services and drinking places (*) (*)
 Miscellaneous services 0.1 0.1

 R&D intensity
 (percent)

 Ratio of R&D
 expenditures
 to value added

 1999 2004

 All industries 3.2 3.3
Mining (*) (*)
 Oil and gas extraction 0.1 (*)
 Other 0.1 (*)
Utilities (*) (*)
Manufacturing 5.2 6.0
 Food 2.0 2.6
 Beverage and tobacco products 0.1 0.1
 Textiles, apparel, and leather products 1.0 2.0
 Wood products 0.1 (*)
 Paper 3.0 0.8
 Printing and related support activities 0.3 0.7
 Petroleum and coal products 0.1 0.1
 Chemicals 7.4 8.2
 Basic chemicals 1.2 1.3
 Resins and synthetic rubber, fibers,
 and filaments 3.7 3.9
 Pharmaceuticals and medicines 14.0 15.5
 Soap, cleaning compounds, and toilet
 preparations 1.5 1.6
 Other 3.2 3.0
 Plastics and rubber products 2.6 2.7
 Nonmetallic mineral products 1.0 6.6
 Primary and fabricated metals 1.2 1.3
 Primary metals 0.6 0.6
 Fabricated metal products 1.6 1.9
 Machinery 4.0 3.8
 Agriculture, construction, and mining
 machinery 4.7 4.3
 Industrial machinery 9.9 5.5
 Other 2.8 3.3
 Computers and electronic products 10.0 13.5
 Computers and peripheral equipment 2.7 4.0
 Communications equipment 38.3 54.8
 Audio and video equipment 43.1 (D)
 Semiconductors and other electronic
 components 4.8 7.4
 Navigational, measuring, and other
 instruments 6.2 9.5
 Magnetic and optical media 0.0 (D)
 Electrical equipment, appliances,
 and components 2.9 5.2
 Transportation equipment 11.6 14.0
 Motor vehicles, bodies and trailers,
 and parts 11.6 13.8
 Other 11.0 17.0
 Furniture and related products (D) 2.7
 Miscellaneous manufacturing (D) 5.9
Wholesale trade 0.7 1.0
 Of which:
 Professional and commercial equipment and
 supplies 1.0 2.2
 Petroleum and petroleum products (D) (*)
Information 0.8 2.3
 Of which:
 Publishing industries 2.6 7.0
 Telecommunications (*) 0.4
Finance (except depository institutions) and
 insurance (*) (*)
 Finance, except depository institutions 0.0 (*)
 Securities, commodity contracts, and other
 intermediation 0.0 (*)
 Other finance, except depository
 institutions 0.0 0.0
 Insurance carriers and related activities (*) (*)
Professional, scientific, and technical services 3.3 4.6
 Architectural, engineering, and related
 services (D) 4.7
 Computer systems design and related services 1.9 3.5
 Management, scientific, and technical
 consulting (D) 1.5
 Advertising and related services 0.0 0.0
 Other 15.5 15.7
Other industries 0.1 0.1
 Agriculture, forestry, fishing, and hunting 0.9 (D)
 Construction (*) 0.3
 Retail trade (*) (*)
 Transportation and warehousing 0.0 (*)
 Real estate and rental and leasing (*) (*)
 Real estate 0.0 0.0
 Rental and leasing (except real estate) (*) (*)
 Management of nonbank companies and
 enterprises n.m. (D)
 Administration, support, and waste management 0.0 (*)
 Health care and social assistance (*) 0.0
 Accommodation and food services (*) (*)
 Accommodation 0.0 0.0
 Food services and drinking places (*) (*)
 Miscellaneous services 0.2 0.2

 R&D intensity
 (percent)

 Ratio of R&D
 expenditures
 to value added
 of R&D-
 performing MOFAs

 1999 2004

 All industries 9.2 11.0
Mining 0.1 0.2
 Oil and gas extraction 0.1 0.1
 Other 1.3 1.2
Utilities 0.5 2.0
Manufacturing 9.5 11.3
 Food 3.1 3.9
 Beverage and tobacco products 0.3 0.2
 Textiles, apparel, and leather products 3.7 5.4
 Wood products 1.1 0.3
 Paper 5.9 1.9
 Printing and related support activities 1.0 9.7
 Petroleum and coal products 0.3 0.2
 Chemicals 11.3 13.6
 Basic chemicals 3.0 3.0
 Resins and synthetic rubber, fibers,
 and filaments 4.7 4.6
 Pharmaceuticals and medicines 17.3 20.9
 Soap, cleaning compounds, and toilet
 preparations 3.0 4.6
 Other 5.9 6.0
 Plastics and rubber products 7.5 4.7
 Nonmetallic mineral products 4.0 17.0
 Primary and fabricated metals 3.1 2.5
 Primary metals 1.1 0.9
 Fabricated metal products 5.1 4.7
 Machinery 7.2 7.8
 Agriculture, construction, and mining
 machinery 7.3 7.2
 Industrial machinery 17.1 13.7
 Other 5.3 7.2
 Computers and electronic products 19.1 22.1
 Computers and peripheral equipment 6.2 12.7
 Communications equipment 44.6 64.6
 Audio and video equipment n.m. (D)
 Semiconductors and other electronic
 components 9.5 9.5
 Navigational, measuring, and other
 instruments 12.0 14.7
 Magnetic and optical media 0.0 (D)
 Electrical equipment, appliances,
 and components 5.0 7.5
 Transportation equipment 16.9 20.6
 Motor vehicles, bodies and trailers,
 and parts 16.8 20.1
 Other 19.8 28.8
 Furniture and related products (D) 4.7
 Miscellaneous manufacturing (D) 10.0
Wholesale trade 5.0 7.7
 Of which:
 Professional and commercial equipment and
 supplies 5.3 8.8
 Petroleum and petroleum products (D) 1.8
Information 11.2 14.2
 Of which:
 Publishing industries 11.0 14.2
 Telecommunications 12.7 31.1
Finance (except depository institutions) and
 insurance n.m. 0.6
 Finance, except depository institutions 0.0 5.5
 Securities, commodity contracts, and other
 intermediation 0.0 5.5
 Other finance, except depository
 institutions 0.0 0.0
 Insurance carriers and related activities n.m. (*)
Professional, scientific, and technical services 22.3 140.0
 Architectural, engineering, and related
 services (D) 72.9
 Computer systems design and related services 7.9 6.4
 Management, scientific, and technical
 consulting (D) 171.2
 Advertising and related services 0.0 0.0
 Other 114.7 97.3
Other industries 2.4 3.5
 Agriculture, forestry, fishing, and hunting 4.2 (D)
 Construction (*) 6.4
 Retail trade 1.4 1.1
 Transportation and warehousing 0.0 (*)
 Real estate and rental and leasing 1.1 1.6
 Real estate 0.0 0.0
 Rental and leasing (except real estate) 1.1 1.6
 Management of nonbank companies and
 enterprises 23.3 (D)
 Administration, support, and waste management 0.0 1.0
 Health care and social assistance n.m. 0.0
 Accommodation and food services 0.1 0.1
 Accommodation 0.0 0.0
 Food services and drinking places 0.1 0.1
 Miscellaneous services 1.1 3.9

 R&D intensity
 (percent)

 Ratio of R&D
 employment to
 total employment

 1999 2004

 All industries 1.6 2.1
Mining 0.1 0.1
 Oil and gas extraction 0.0 0.1
 Other 0.1 (*)
Utilities (*) (*)
Manufacturing 2.5 3.5
 Food 1.0 0.9
 Beverage and tobacco products 0.2 0.2
 Textiles, apparel, and leather products 0.3 0.4
 Wood products 0.1 (*)
 Paper 1.4 0.6
 Printing and related support activities 0.1 0.3
 Petroleum and coal products 1.2 1.0
 Chemicals 4.5 4.8
 Basic chemicals 1.9 2.2
 Resins and synthetic rubber, fibers,
 and filaments 5.0 4.7
 Pharmaceuticals and medicines 8.5 9.2
 Soap, cleaning compounds, and toilet
 preparations 1.1 1.4
 Other 3.0 2.4
 Plastics and rubber products 1.1 1.3
 Nonmetallic mineral products 2.5 0.8
 Primary and fabricated metals 0.6 0.8
 Primary metals 0.4 0.4
 Fabricated metal products 0.8 1.1
 Machinery 1.8 1.9
 Agriculture, construction, and mining
 machinery 2.2 2.0
 Industrial machinery 3.7 3.4
 Other 1.5 1.7
 Computers and electronic products 3.0 6.2
 Computers and peripheral equipment 0.9 1.7
 Communications equipment 12.9 19.1
 Audio and video equipment 2.4 1.4
 Semiconductors and other electronic
 components 1.6 3.0
 Navigational, measuring, and other
 instruments 3.3 6.1
 Magnetic and optical media 0.0 3.4
 Electrical equipment, appliances,
 and components 1.4 2.2
 Transportation equipment 4.1 6.0
 Motor vehicles, bodies and trailers,
 and parts 4.0 5.8
 Other 6.8 9.6
 Furniture and related products 0.5 1.3
 Miscellaneous manufacturing 1.7 2.9
Wholesale trade 0.6 1.1
 Of which:
 Professional and commercial equipment and
 supplies 0.8 1.7
 Petroleum and petroleum products 0.2 0.2
Information 0.4 1.5
 Of which:
 Publishing industries 1.4 5.4
 Telecommunications (*) 0.5
Finance (except depository institutions) and
 insurance 0.0 (*)
 Finance, except depository institutions 0.0 (*)
 Securities, commodity contracts, and other
 intermediation 0.0 (*)
 Other finance, except depository
 institutions 0.0 0.0
 Insurance carriers and related activities 0.0 (*)
Professional, scientific, and technical services 2.4 3.2
 Architectural, engineering, and related
 services (D) 3.4
 Computer systems design and related services 1.7 2.9
 Management, scientific, and technical
 consulting 0.1 1.6
 Advertising and related services 0.0 0.0
 Other (D) 6.6
Other industries 0.0 (*)
 Agriculture, forestry, fishing, and hunting 0.1 0.6
 Construction 0.0 0.4
 Retail trade (*) (*)
 Transportation and warehousing 0.0 (*)
 Real estate and rental and leasing (*) (*)
 Real estate 0.0 0.0
 Rental and leasing (except real estate) (*) (*)
 Management of nonbank companies and
 enterprises 0.7 0.3
 Administration, support, and waste management 0.0 (*)
 Health care and social assistance (*) 0.0
 Accommodation and food services (*) (*)
 Accommodation 0.0 0.0
 Food services and drinking places (*) (*)
 Miscellaneous services 0.1 0.1

(*) Less than $500,000, fewer than 50 employees, or less than 0.05
percent (+/-).

D Suppressed to avoid disclosure of data of individual companies.

n.m. Not meaningful

(1.) In this table, MOFA's R&D expenditures are classified by their
own industry. In table B, their R&D expenditures are classified by
the industry of their U.S. parent. MOFAs Majority-owned foreign
affiliates R&D Research and development

Table 3. R&D Expenditures, Employment, and Intensities of Nonbank
Majority-Owned Foreign Affiliates by Country, 1999 and 2004

 R&D expenditures
 (millions of dollars)

 1999 2004

 All countries 18,144 27,529
Canada 1,681 2,702
Europe 12,217 18,148
 Austria 82 134
 Belgium 375 628
 Czech Republic 6 20
 Denmark 57 143
 Finland 59 106
 France 1,452 1,854
 Germany 3,377 4,693
 Greece 6 8
 Hungary 13 25
 Ireland 251 876
 Italy 504 727
 Luxembourg (D) 101
 Netherlands 374 533
 Norway 26 33
 Poland 34 38
 Portugal 14 9
 Russia 1 17
 Spain (D) 327
 Sweden 1,036 1,525
 Switzerland 231 868
 Turkey 6 12
 United Kingdom 4,000 5,462
 Other 1 14
Latin America and Other Western Hemisphere 613 882
 South America 366 394
 Argentina 26 23
 Brazil 288 340
 Chile 4 9
 Columbia 6 4
 Ecuador (*) 0
 Peru 2 2
 Venezuela 40 14
 Other (*) 1
 Central America 240 (D)
 Costa Rica 2 5
 Honduras 0 1
 Mexico 238 (D)
 Panama (*) (*)
 Other (*) (*)
 Other Western Hemisphere 6 (D)
 Barbados (*) (D)
 Bermuda 1 0
 Dominican Republic 1 (*)
 United Kingdom Islands, Caribbean 4 0
 Other 0 1
Africa 18 36
 Egypt 3 3
 Nigeria 0 (*)
 South Africa 14 30
 Other 1 2
Middle East 389 826
 Israel 389 824
 Saudi Arabia (*) (*)
 United Arab Emirates 0 2
 Other 0 0
Asia and Pacific 3,226 4,934
 Australia 294 471
 China 319 622
 Hong Kong 214 220
 India 20 163
 Indonesia 1 4
 Japan 1,523 1,742
 Korea, Republic of 101 246
 Malaysia 161 301
 New Zealand 9 25
 Philippines 31 44
 Singapore 426 711
 Taiwan 122 363
 Thailand 7 23
 Other (*) (*)

 R&D employment
 (thousands of
 employees)

 1999 2004

 All countries 123.5 179.3
Canada 7.9 18.4
Europe 83.1 113.8
 Austria 0.6 0.8
 Belgium 2.2 2.4
 Czech Republic 0.1 (*)
 Denmark 0.5 0.8
 Finland 0.5 0.9
 France 10.8 10.5
 Germany 25.3 32.6
 Greece 0.1 (*)
 Hungary 0.2 (*)
 Ireland 1.3 4.7
 Italy 3.8 5.9
 Luxembourg 0.7 0.8
 Netherlands 3.8 4.1
 Norway 0.2 (*)
 Poland 0.1 (*)
 Portugal 0.1 (*)
 Russia (*) (*)
 Spain 1.8 2.3
 Sweden 1.7 8.6
 Switzerland 1.5 4.1
 Turkey (*) (*)
 United Kingdom 27.7 33.5
 Other 0.1 (*)
Latin America and Other Western Hemisphere 9.0 8.3
 South America 6.3 5.1
 Argentina 0.3 (*)
 Brazil 5.4 4.6
 Chile (*) (*)
 Columbia 0.1 (*)
 Ecuador (*) 0.0
 Peru 0.1 (*)
 Venezuela 0.4 (*)
 Other (*) 0.0
 Central America 2.7 3.3
 Costa Rica (*) (*)
 Honduras 0.0 (*)
 Mexico 2.7 3.0
 Panama 0.0 (*)
 Other (*) (*)
 Other Western Hemisphere (*) (*)
 Barbados 0.0 (*)
 Bermuda 0.0 0.0
 Dominican Republic (*) (*)
 United Kingdom Islands, Caribbean (*) 0.0
 Other 0.0 0.0
Africa 0.2 (*)
 Egypt (*) (*)
 Nigeria 0.0 (*)
 South Africa 0.1 (*)
 Other (*) (*)
Middle East 2.6 6.4
 Israel 2.6 6.4
 Saudi Arabia (*) (*)
 United Arab Emirates 0.0 (*)
 Other 0.0 0.0
Asia and Pacific 20.8 32.0
 Australia 3.2 3.5
 China 2.0 6.2
 Hong Kong 1.2 1.2
 India 0.2 1.6
 Indonesia (*) (*)
 Japan 7.5 9.3
 Korea, Republic of 1.0 2.1
 Malaysia (D) 3.2
 New Zealand 0.1 (*)
 Philippines 0.5 0.7
 Singapore 2.6 3.1
 Taiwan 0.9 0.6
 Thailand 0.1 (*)
 Other (D) (*)

 R&D intensity
 (percent)

 Ratio of R&D
 expenditures
 to value added

 1999 2004

 All countries 3.2 3.3
Canada 2.6 2.9
Europe 3.8 3.9
 Austria 2.4 2.9
 Belgium 2.8 3.4
 Czech Republic 0.5 0.7
 Denmark 1.9 2.6
 Finland 2.6 3.7
 France 3.9 3.9
 Germany 5.5 6.3
 Greece 0.6 (*)
 Hungary 1.1 1.1
 Ireland 1.7 3.2
 Italy 2.3 2.5
 Luxembourg (D) n.m.
 Netherlands 2.0 1.9
 Norway 0.4 (*)
 Poland 2.9 0.8
 Portugal 0.6 (*)
 Russia 0.9 0.6
 Spain (D) 2.2
 Sweden 16.7 13.8
 Switzerland 2.6 4.9
 Turkey 0.3 (*)
 United Kingdom 3.9 4.1
 Other 0.1 (*)
Latin America and Other Western Hemisphere 1.0 1.1
 South America 1.1 1.0
 Argentina 0.4 (*)
 Brazil 1.7 1.9
 Chile 0.1 (*)
 Columbia 0.3 (*)
 Ecuador (*) 0.0
 Peru 0.1 (*)
 Venezuela 1.3 (*)
 Other (*) (*)
 Central America 1.2 (D)
 Costa Rica 0.4 0.7
 Honduras 0.0 (*)
 Mexico 1.4 (D)
 Panama (*) (*)
 Other (*) (*)
 Other Western Hemisphere 0.1 (*)
 Barbados (*) (D)
 Bermuda 0.1 0.0
 Dominican Republic 0.1 (*)
 United Kingdom Islands, Caribbean 0.2 0.0
 Other 0.0 (*)
Africa 0.2 (*)
 Egypt 0.3 (*)
 Nigeria 0.0 (*)
 South Africa 0.8 0.7
 Other (*) (*)
Middle East 7.3 10.8
 Israel 23.4 35.4
 Saudi Arabia (*) (*)
 United Arab Emirates 0.0 (*)
 Other 0.0 0.0
Asia and Pacific 3.2 3.1
 Australia 1.5 1.6
 China 8.1 4.7
 Hong Kong 2.7 2.6
 India 1.8 4.1
 Indonesia (*) (*)
 Japan 5.0 3.7
 Korea, Republic of 3.1 3.6
 Malaysia 3.4 4.6
 New Zealand 0.4 0.8
 Philippines 1.1 1.4
 Singapore 4.3 5.3
 Taiwan 2.0 6.1
 Thailand 0.2 (*)
 Other (*) (*)

 R&D intensity (percent)

 Ratio of R&D expenditures
 to value added of R&D-
 performing MOFAs

 1999 2004

 All countries 9.2 11.0
Canada 6.8 9.9
Europe 9.6 12.0
 Austria 9.8 10.7
 Belgium 15.1 14.8
 Czech Republic 5.1 3.6
 Denmark 11.4 13.1
 Finland 11.0 14.7
 France 8.9 11.6
 Germany 11.6 12.2
 Greece 3.0 5.7
 Hungary 3.4 6.0
 Ireland 3.9 6.8
 Italy 8.9 8.2
 Luxembourg (D) 17.1
 Netherlands 5.7 7.7
 Norway 0.9 1.2
 Poland 10.1 5.9
 Portugal 4.1 1.9
 Russia n.m. 4.5
 Spain (D) 6.1
 Sweden 45.6 37.1
 Switzerland 7.8 14.1
 Turkey 2.7 5.2
 United Kingdom 9.0 14.5
 Other 1.7 1.2
Latin America and Other Western Hemisphere 4.4 4.9
 South America 4.0 3.6
 Argentina 2.2 1.0
 Brazil 4.2 4.7
 Chile 3.7 3.2
 Columbia 1.5 0.8
 Ecuador 0.3 0.0
 Peru 2.1 1.6
 Venezuela 7.5 3.7
 Other 0.2 0.7
 Central America 5.3 (D)
 Costa Rica n.m. 2.8
 Honduras 0.0 2.9
 Mexico 5.3 (D)
 Panama 1.0 1.0
 Other 1.0 (*)
 Other Western Hemisphere 6.1 (D)
 Barbados n.m. (D)
 Bermuda n.m. 0.0
 Dominican Republic 26.1 2.6
 United Kingdom Islands, Caribbean 3.6 0.0
 Other 0.0 1.3
Africa 3.6 1.4
 Egypt 2.6 8.1
 Nigeria 0.0 (*)
 South Africa 4.5 3.5
 Other 1.0 1.9
Middle East 6.5 51.0
 Israel 60.3 53.2
 Saudi Arabia 0.2 (*)
 United Arab Emirates 0.0 3.6
 Other 0.0 0.0
Asia and Pacific 11.0 10.1
 Australia 4.5 6.9
 China 23.6 18.0
 Hong Kong 32.1 20.3
 India 6.3 15.6
 Indonesia 0.4 2.1
 Japan 14.9 7.1
 Korea, Republic of 11.1 9.0
 Malaysia 11.9 15.9
 New Zealand 1.3 2.1
 Philippines 3.1 5.9
 Singapore 9.2 25.9
 Taiwan 9.9 24.8
 Thailand 3.4 2.5
 Other 1.2 1.3

 R&D intensity (percent)

 Ratio of R&D
 employment to
 total employment

 1999 2004

 All countries 1.6 2.1
Canada 0.6 1.7
Europe 2.4 2.9
 Austria 1.8 2.3
 Belgium 1.8 2.0
 Czech Republic 0.2 (*)
 Denmark 1.6 2.2
 Finland 3.5 4.7
 France 2.0 1.9
 Germany 3.9 5.4
 Greece 0.4 (*)
 Hungary 0.4 (*)
 Ireland 1.5 5.7
 Italy 2.0 2.5
 Luxembourg 7.4 7.7
 Netherlands 2.3 2.3
 Norway 0.5 1.0
 Poland 0.2 (*)
 Portugal 0.2 (*)
 Russia (*) (*)
 Spain 1.1 1.2
 Sweden 2.3 8.5
 Switzerland 2.8 6.1
 Turkey 0.1 (*)
 United Kingdom 2.6 2.9
 Other 0.2 (*)
Latin America and Other Western Hemisphere 0.6 0.5
 South America 1.0 0.8
 Argentina 0.3 (*)
 Brazil 1.5 1.3
 Chile 0.1 (*)
 Columbia 0.3 (*)
 Ecuador 0.5 0.0
 Peru 0.3 (*)
 Venezuela 0.7 (*)
 Other (*) 0.0
 Central America 0.3 (*)
 Costa Rica 0.1 (*)
 Honduras 0.0 0.8
 Mexico 0.3 (*)
 Panama 0.0 (*)
 Other (*) (*)
 Other Western Hemisphere (*) (*)
 Barbados 0.0 (*)
 Bermuda 0.0 0.0
 Dominican Republic 0.1 (*)
 United Kingdom Islands, Caribbean 0.1 0.0
 Other 0.0 0.0
Africa 0.1 (*)
 Egypt 0.3 (*)
 Nigeria 0.0 (*)
 South Africa 0.2 (*)
 Other (*) (*)
Middle East 4.9 11.8
 Israel 7.8 17.6
 Saudi Arabia (*) (*)
 United Arab Emirates 0.0 (*)
 Other 0.0 0.0
Asia and Pacific 1.4 1.7
 Australia 1.3 1.3
 China 0.8 1.5
 Hong Kong 1.3 1.0
 India 0.3 1.0
 Indonesia (*) (*)
 Japan 3.6 4.1
 Korea, Republic of 2.2 2.6
 Malaysia (D) 3.3
 New Zealand 0.3 (*)
 Philippines 0.6 0.8
 Singapore 2.3 2.8
 Taiwan 1.2 0.8
 Thailand 0.1 (*)
 Other (D) (*)

(*) Less than $500,000, fewer than 50
employees, or less than 0.05 percent (+/-).

D Suppressed to avoid disclosure of
data of individual companies.

n.m. Not meaningful

MOFAs Majority-owned foreign affiliates
R&D Research and development