Research and development (R&D) in the United States is funded and performed by a number of sectors—including the federal government, state governments, businesses, academia, and nonprofit organizations—for a variety of purposes. This fact sheet begins by providing a profile of the U.S. R&D enterprise, including historical trends and current funding by sector and by whether the R&D is basic research, applied research, or development. The final section of this fact sheet includes data on R&D performance by sector.

Historical Trends in U.S. R&D Funding

The United States became a global leader in R&D in the 20^th century, funding as much as 69% of annual global R&D in the period following World War II.¹ Figure 1 shows the growth in total U.S. R&D expenditures from 1956 to 2020 in current dollars.² U.S. R&D in 2020 was 83 times higher than it was in 1956 in current dollars, and more than 11 times higher in constant dollars.³ By sector, business-funded R&D grew the most during this period. However, faster growth in total R&D spending of other nations reduced the U.S. share of global R&D to approximately 30.7% in 2020.⁴

Figure 1. U.S. R&D Expenditures by Source of Funding, 1956-2020 Current dollars, in billions

Source: CRS analysis of National Science Foundation, National Patterns of R&D Resources: 2019–20 Data Update, NSF 22-320, Table 6, February 22, 2022, https://ncses.nsf.gov/pubs/nsf22320. Notes: The data for 2020 are estimates and are likely to be revised later.

Two sectors—business and the federal government—have together accounted for more than 90% of U.S. R&D funding since 1955, though their combined share has fallen from a high of 98% in 1956 to 93% in 2016. Federal R&D expenditures as a share of total U.S. R&D expenditures peaked in 1964 at 66.8%, the same year that business R&D expenditures reached a nadir of 30.8%. Between 1964 and 2000, the federal government's share fell and business's share rose. In 2000, business accounted for 69.4% of U.S. R&D expenditures and the federal government 25.1%. This shift in the composition of R&D funding resulted not from a reduction in federal government R&D expenditures, but rather from faster growth in business R&D expenditures. From 2000 to 2010, business R&D's share declined from 69.4% to 61.0%, and has risen each year since, reaching an all-time high of 73.1% in 2020; from 2010 to 2020, the federal share declined from 31.1% to 19.5%.⁵ (See Figure 2.)

Trends in Federally Funded R&D

Figure 2. Federal and Business Shares of U.S. R&D Expenditures, 1956-2020

Source: CRS analysis of National Science Foundation, National Patterns of R&D Resources: 2019–20 Data Update, NSF 22-320, Table 6, February 22, 2022. Notes: The data for 2020 are estimates and are likely to be revised later.

In current dollars, federal funding for R&D grew from $3.5 billion in 1955 to $137.8 billion in 2020, a compound annual growth rate (CAGR) of 5.3%. In constant dollars, federal R&D grew by a 2.1% CAGR during this period. However, between 2011 and 2014, federal R&D funding, as measured in current dollars, fell for three consecutive years for the first time since such data has been collected; the total decline in federal funding for these years was $8.6 billion (6.8%). In constant dollars, federal R&D declined from 2009 to 2016 by 15.6%; a similar drop occurred from 1987 to 1994, when federal R&D fell by 16.0%.⁶ In FY2017, FY2018, FY2019, and FY2020, federal R&D grew by 1.0%, 4.1%, 1.4%, and 1.8% respectively, in constant dollars. Figure 3 shows federal R&D funding by budget function in constant dollars from 1956 to 2020.

Figure 3. Federal R&D Funding by Budget Function, 1956-2021 Current dollars, in billions

Source: CRS analysis of data from National Science Foundation, Federal R&D Funding, by Budget Function: Fiscal Years 2020–22, (NSF 22-316), Table 23, January 18, 2022, https://ncses.nsf.gov/pubs/nsf22316. Notes: Data from FY1956-FY1994 are from agencies' submissions to the Office of Management and Budget (OMB), Circular A-11, exhibit 44A, "Research and development activities," and from supplemental data obtained from agencies' budget offices. Data from FY1995-FY2021 are from agencies' submissions to OMB per MAX Schedule C, budget justification documents, and supplemental data obtained from agencies' budget offices. Beginning in 2017, OMB ceased including non-experimental development in its national R&D calculations (including Department of Defense budget activity 6.7 and some funding for the National Aeronautics and Space Administration). Data for 2021 (included in the chart but not shown on the axis) are preliminary and may be revised.

Trends in U.S. Business-Funded R&D

Business funding of R&D, measured in current dollars, has grown nearly every year since 1955. In current dollars, business-funded R&D grew from $3.3 billion in 1956 to $517.4 billion in 2020, a CAGR of 8.2%. In constant dollars, business-funded R&D grew by a 4.9% CAGR during this period. In recent years, business-funded R&D has grown at a slower pace. Between 2000 and 2020, business R&D grew by 5.2% CAGR in current dollars, and by 3.3% CAGR in constant dollars.⁷

Current Composition of U.S. R&D Funding

R&D funding can be categorized by the character of the work that it supports: basic research, applied research, and development. (See text box for definitions.) Total estimated U.S. R&D expenditures in 2020 (the most recent year for which data are available) were $708.0 billion. Of this amount, $107.9 billion (15.2%) was for basic research, $139.5 billion (19.7%) was for applied research, and $460.5 billion (65.1%) was for development.⁸

Table 1 shows total U.S. R&D expenditures in 2020 by funding sector and character of work. Notably, federal R&D funding accounts for the largest share of basic research (40.7%) while business accounts for the largest shares of applied research (55.0%) and development (85.5%). Figure 4 shows this information graphically.

Figure 4. U.S. R&D Funding by Character and Sector, 2020

Source: CRS analysis of National Science Foundation, National Patterns of R&D Resources: 2019–20 Data Update, NSF 22-320, Tables 7-9, February 22, 2022. Note: 2020 data are preliminary and may be revised.

Current Composition of U.S. R&D Performance

R&D is often performed by sectors other than the one funding the R&D. For example, the federal government performs some of the research it funds, but also funds research performed by business, universities and colleges, and other organizations. Table 2 provides data on performance of U.S. R&D by sector and character of the work (basic research, applied research, and development).