Measuring Research and Development Expenditures in the U.S. Economy (2005) / Chapter Skim
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3 Measuring R&D in Business and Industry
3 Measuring R&D in Business and Industry
Pages 48-90
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From page 48... ...
as the Survey of industrial Research and Development. This survey is also the most sensitive to changes in the procedures for statistical measurement.
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From page 49... ...
Minimal revisions have been implemented to maintain currency, such as the introduction of the North American industry Classification System (NAICS) in 1997 and the more recent changes in questionnaire wording and collection procedures (see Box 3-1)
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From page 50... ...
The predetemmination was limited to companies with reported or estimated R&D expenditures of $1 million or with 1,000 or more employees. Also, the sampling frame for each industry sampling recode stratum was partitioned into large and small companies based on payroll, thereby expanding the use of the more efficient simple random sampling technique for the majority of companies.
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From page 51... ...
Industry Federally Funded Research and Development Centers were not included in the survey estimates. 2003 An R&D check-off item was placed on the Census Bureau's Company Organization Su vey, an annual su vey sent to all multi-unit companies that is used to update the Standard Statistical Establishment List (SSEL)
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From page 52... ...
Although not of serious consequence, these departures indicate that some catch-up work may be needed in order to conform with international standards.3 The he D expenditure data fot the United States ate undetestlmates fat a ntmbet of teasons (1) Reid petfotmed in the yovetrment sector covets only tederal yovetnment achnnes.
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From page 53... ...
It has developed a robust Rc'icD expenditure measurement program. The Industrial Research and Development Suu-ve,v in Canada A survey of research and development performance in commercial enterprises (privately or publicly owned)
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There are five sources: governments (federal or provincial) ; business, including the firm itself; higher education; private nonprofit organizations; and foreign firms and other institutions.
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From page 55... ...
In an effort to maintain a concordance with the definitions collected in federal and academic surveys, as well as with international sources, NSF defines industrial basic research as the pursuit of new scientific knowledge that does not have specific immediate commercial objective, although it may be in fields of present or potential commercial interest; industrial applied research is investigation that may use findings of basic research toward discovering new scientific knowledge that has specific commercial objectives with respect to new products, services, processes, and methods; and industrial development is the systematic use of the knowledge and 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 useful products, materials, devices, and systems (U.S. Census Bureau, 2004)
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From page 56... ...
The distinction between applied research and the two other components of R8`D is especially problematic in the industrial sector. Applied research could well involve original research believed to have commercial applications, and it could include research that applies knowledge to the solution of practical problems (Branscomb and Auerswald, 2002)
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From page 57... ...
The potential lack of understanding of the concepts and definitions in the Survey of industrial Research and Development (often referred to as RD-1, the number on the survey form) is especially troubling.
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From page 58... ...
tax credit; foreign source allocation rules for ROD spending; the preferential capital gains tax rate; accelerated depreciation and investment tax credits for capital equipment; and the treatment of acquisitions, especially as it relates to the valuation of intangibles. The foremost provision of the tax code that defines ROD is the federal research and experimentation tax credit.
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From page 59... ...
Hall (2001) indicates that, in contrast to the tax code, the Federal Accounting Standards Board, which sets the standard for reporting to the Securities and Exchange Commission on the 10K form, defines RED as follows: STex&AccountingSoftuere Corp.
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The Federal Accounting Standards Board is currently considering proposals to capitalize acquired in-process ROD. Obviously, further moves of regulators in the direction of recognizing intangibles as assets will provide valuable information for the surveys.
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From page 61... ...
In summary, tax and accounting standards play an important role in determining the definitions and reporting mechanisms in firms that report on the industry ROD survey. One may speculate that the substantial scrutiny on corporate bookkeeping in recent years has served to give even more impetus to improvement in reporting than was the case a few years ago when Hall and Long concluded that "substantial effort appears to have gone into getting the ROD numbers 'right' in the professional accounting world, by which we mean following the definitions and reporting requirements carefully and systematically" (Hall and Long, 1999:27)
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From page 62... ...
. The Census Bureau Business Register is the foundation of the Bureau's economic programs.
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From page 63... ...
The Company Organization Survey is conducted annually by the Census Bureau to obtain current organization and operating information on multiestablishment firms. The results are used to maintain the Business Register.
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From page 64... ...
Large companies are sampled with probability proportional to size while small companies are selected by stratified simple random sampling. Thus, rotating panels would be straightforward to implement for the small companies while a switch to stratified simple random sampling might be needed for the stratum consisting of large companies.
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From page 65... ...
Nonresponse will, of course, mean that the amount of overlap will not be totally under control, but it can be predicted, at least in an average sense. Supplementation with Special Lists One concern in the industry ROD survey is that small start-ups that are engaged in research and development activities are not quickly captured by the Business Register used as the frame for the survey.
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From page 66... ...
It is not a simple task to align the information provided by individuals with the Business Register information maintained by the Census Bureau; however, the advantage of being able to focus attention on the employers of people with educational credentials suggesting an ROD focus offers possibilities for identifying such employers and stratifying the frames for the purpose of estimating the amount of ROD in industry. There are a number of practical problems to be solved in using one or more supplemental lists.
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From page 67... ...
Later, when the Census Bureau used the annual survey of manufacturers as the sample frame, major activity for a company was based on value added, then on product shipment. Now that the Census Bureau's Business Register is the frame, the assignment is based on payroll.
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From page 68... ...
For these good reasons, a 1997 NRC workshop report concluded that the industry R8cD survey should be administered to business units (a firm's activities associated with a given product market) and should collect "ROD expenditures, composition of ROD (process versus product; basic research, applied research and development)
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From page 69... ...
The Bureau of Economic Analysis, in its foreign direct investment surveys, requrres global companies to do the same. And at the Census Bureau, when the Company Organization Survey is sent out, the target is the domestic part of the company, and the same distinction is made when enterprise statistics data are compiled and published.
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From page 70... ...
The result was that the Financial Accounting Standards Board issued its Statement of Financial Accounting Standard (SEAS) 14.8 The Bureau of Economics at the FTC was interested in standard measures of industrial organization performance variables: sales, assets, profits, advertising and other marketing expense, and Rc°iD expense.
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From page 71... ...
drugs, is striking. The industry definition is at the finest level of detail in the FTC list, being part of a 4-digit Standard industrial Classification (SIC)
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From page 72... ...
The case went to trial, the FTC won the case, and the program was put into operation. Data were collected for 1974-1977, but support for the program began to wane, due to business opposition and political pressure against data collection programs.
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From page 73... ...
. IRIICIM5 Business Segment Reporting Starting in 1993 and continuing through 1998, the industrial Research Institute (IRI)
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From page 74... ...
The survey sampled 3,240 labs and received 1,478 responses, yielding an unadjusted response rate of 46 percent and an adjusted response rate of 54 percent.ll Cohen and associates asked Rc°iD unit or lab managers to answer questions with reference to the "focus industry" of their Rc°iD lab or unit, defined as the principal industry for which the unit was conducting its Rc°~D. Thus, respondents identified the industry for which the lab conducts research.
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From page 75... ...
The latter information might be quite useful for checking against the survey responses on the number of employees devoted to ROD activities. Can RIBALD Line-of-Business Data Be Collected; It is Intuitive that the business unit is the appropriate unit of collection, if it is possible to collect data at the business unit level.
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From page 76... ...
. Since the publication of the previous NRC recommendation, NSF and the Census Bureau have taken the significant step of collecting RED data in the Company Organization Survey.
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From page 77... ...
We urge NSF and the Census Bureau to evaluate the results of the initial collection of ROD data in the Company Organization Survey to determine the long-term feasibility of collecting these data (Recommendation 3 4) NSF and the Census Bureau should test the ability to collect some disaggregated data by more detailed NAICS codes.
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From page 78... ...
Also in 2002, the Census Bureau began to use the last 4 years of reported R8cD survey data to assign the probability of selection. Companies that reported at least once in the 4year period were divided into three strata: all cases were taken when reported R8`D exceeded $3 million; probability proportionate to size constrained by industry and state methods were used for those reporting up to $3 million; and simple random sampling was used when no R8`D was previously reported.
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From page 79... ...
One survey, which has existed from the earliest days of the data collection, is a survey of the companies thought to have the largest ROD expenditures. These companies can be characterized in statistical methodology terms as a "certainty stratum.
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From page 80... ...
Furthermore, extensive use is made of information from the Business Register to supplement reporting and reduce redundant data collection. Despite this increase in sample size in the early 1990s, response rates stayed relatively high because, in addition to expanding the survey, the survey was bifurcated into two distinct operations, nearly unique among federal surveys (Table 3-5)
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From page 81... ...
The form has a screening item for respondents to indicate that they do no RED. Those firms that do no RED are able to complete their reporting requirements by usrng a toll-free touch-tone data entry (TDE)
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From page 82... ...
Need for a Consultative Sample During the course of its deliberations, the panel found the interaction with senior staff of a large industrial ROD performer and the membership of the industrial Research institute's Financial Network and the Research on Research Committee to be Invaluable as sources of practical information and advice. We note that fairly elaborate consultation takes place with advisory bodies and workshops assembled in support of the federal funds and academic spending surveys.
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From page 83... ...
This law permits the Census Bureau, BEA, and Bureau of Labor Statistics to share
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From page 84... ...
Nonprofit organizations are excluded by definition from the industry survey and are not included in the Census Bureau's frame from which the sample is drawn. Some are included in the survey of ROD expenditures at colleges and universities, but the vast majority are not covered.
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From page 85... ...
Finally, periodic surveys of this sort often are plagued by low response rates because the collections are unfamiliar to the respondents and many fail to appreciate the usefulness of the data that result from the collection. The final response rate for the 1996-1997 survey exemplifies these problems: only 40 percent (adjusted for out-of-business and nontraceable nonrespondents)
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From page 86... ...
Survey Design The basic sampling frame is the Business Register, previously known as the Standard Statistical Establishment List. This list, used since 1976, has problems in coverage and currency.
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From page 87... ...
If no response was received and no current-year data reported, several data items are imputed. The data collection procedures employed by the Census Bureau for the industry survey stand in stark contrast to the more technologically advanced procedures employed in the smaller federal and academic surveys, which, for the most part, are web-based and have more intensive education, response control, and follow-up schemes.
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From page 88... ...
It is difficult to assess the scope and impact of the problem of nonresponse, since no item nonresponse rates are given
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From page 89... ...
In a skewed distribution, they will be very different from nonresponse rates. NSF could make a significant contribution to understanding the quality of the data by ensuring clear definitions and regular reporting of item nonresponse rates.
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From page 90... ...
, data entry procedures produced little error, but the editing process was replete with potential for error. That potential starts with the observation that there is no written description of the editing process, including the process in which an analyst supplies data codes.
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