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2012 GFF Globe ImageIn the next sections we examine, through survey and secondary data, five technology-intensive industries chosen for their overall importance in terms of U.S. corporate R&D, U.S. federal R&D, and global industry R&D. Besides these industries, a more diverse set of manufacturing firms and industries—including automotive, heavy equipment, consumer products, and food—also perform significant R&D activities in the U.S. We provide a snapshot of the R&D investment level of these manufacturers, but limit it to leading public companies for which R&D investment data are available. The U.S. is also home to key private companies that are R&D leaders such as General Atomics and Chrysler Group, LLC. To highlight the significance of R&D within U.S. and global manufacturing (including information and communication technologies, or ICT), the chart on the opposite page portrays the 50 largest public companies in global R&D spending.

Key Diverse Manufacturers 2009 2010 Q1-Q3 2011
Top U.S. R&D Expenditures Millions, U.S.$
General Motors (e) 6,051.0 6,962.0 5,713.2
Ford Motor (e) 4,700.0 5,000.0 4,005.6
Procter & Gamble 1,907.0 1,975.5 1,531.7
Caterpillar 1,421.0 1,905.0 1,693.0
Deere (e) 993.3 1,085.7 915.8
Kraft Foods (e) 466.0 583.0 470.1
Whirlpool 489.0 516.0 386.5
PepsiCo (e) 414.0 488.0 391.0
Navistar International 434.0 484.0 417.0
Eaton 395.0 425.0 316.0
Source: Battelle/R&D Magazine/Company information; (e) = estimated

Leadership in Manufacturing R&D
With 18 U.S. corporations among the top 50 firms according to R&D spending, the U.S. remains dominant in manufacturing R&D. Translating this level of R&D and innovation into output, products, and jobs is the challenge faced by both U.S. corporations and government. Depending on the economic measure (direct output value or estimated purchasing power parity) used, China either has surpassed the U.S. in total manufacturing output or will in the next few years. However, from a manufacturing R&D perspective, the U.S. is the leader in investments, but China is gaining ground. Our 2012 estimate of U.S. R&D funded and performed by industry reaches $273 billion, a level surpassing all R&D investments in China. This is the case even when discounting that share of U.S. corporate R&D investments made outside the U.S. China's surge in R&D, though possibly overstated based on R&D investment estimates, is getting noticed—33% of the Battelle/R&D Magazine survey respondents believe that the U.S. currently leads in manufacturing R&D, but 31% believe that the leadership has shifted to China.

Survey respondents were also asked to comment on what role the federal government should play in assisting the R&D efforts of U.S. manufacturers. Two-thirds of the respondents stated that tax credits and incentives should be key components of federal support. This response reflects the significant concern that the federal government has failed to provide a long-term, stable, and globally competitive R&D tax credit for U.S. corporations.

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How should government support manufacturing R&D? Source: Battelle, R&D Magazine Survey

R&D Return on Investment
Because the ongoing issue of R&D tax credits affects corporate investment decisions, the return from these investments is also a key determinant. Calculating and tracking a return on investment (ROI) for R&D expenditures is becoming more common across manufacturing, as operation budgets tighten across corporations of all types. Among survey respondents, 52% of manufacturers said R&D ROI was important in calculating their R&D budget. Currently, 45% of the respondents calculate R&D ROI in some fashion. Though still a minority of respondents, this is a significant increase over levels from a couple of years ago.

ROI and effects of manufacturing R&D investments are measured in various ways related to the corporate "bottom line," according to survey respondents. The level of specificity in measuring ROI, however, remains a broad and somewhat elusive target. About 55% of the respondents cited broad concepts such as improved competitiveness, improved product quality, and market success of new products as indicators of effective R&D. Improved profitability was cited by 53% of the respondents, improved productivity by 45%, and reduced product development costs by 35%.

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World of Industrial R&D 2010. Source: Battelle, R&D Magazine, EU R&D Scoreboard

Collaborative R&D
Throughout this forecast, we are examining the role that collaboration is playing in R&D efforts. Fully 81% of U.S. manufacturing survey respondents indicated their involvement in some type of collaborative R&D activity. Collaborations with academia were noted by 54% of the respondents, with 48% also involved in collaborations with other U.S. companies. Involvement with federal laboratories, contract research organizations, and non-U.S. companies was considered a somewhat less viable option for manufacturers, with only about 29% of the respondents involved with each of these. The overall importance of collaboration is also recognized by U.S. manufacturers. More than 60% viewed these technology collaborations as important to the growth of their organizations, with 39% planning to expand their collaborative efforts beyond existing levels. The results that companies expect from these collaborations vary, with knowledge sharing (71%), shorter development cycle (49%), and availability of proprietary technologies (47%) key among the respondents.

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