The September 2002 issue of the Institute of Electrical and Electronics Engineers' (IEEE) Spectrum Magazine contained a special report on R&D. It was generally upbeat about industrial R&D spending, noting that, "the world's Top 100 Spenders increased R&D expenditures by an average of 5.25 percent in 2001, despite massive turmoil in the telecommunications, computer, and semiconductor sectors" (1). The report indicates that all is well with the state of industrial R&D, but some do not believe the rosy descriptions reflect the current reality.
A former industrial R&D executive and I had a discussion about the current state of industrial R&D. He was skeptical about the Spectrum message because his peers provided anecdotal evidence of substantial layoffs and cuts in research divisions in 2002. He suspected that the true story was being underreported, in part because of the lack of timely data. Some of his colleagues insisted that he was getting a skewed perspective because his peers primarily come from the telecommunications industry, which has been hit hardest.
So, which perspective is more accurate? A variety of data sources track the magnitude and character of the R&D work to help answer the question.
R&D Data Sources
The National Science Foundation conducts an annual Survey of Industry Research and Development (www.nsf.gov/sbe/srs/indus/start.htm). A key advantage of the NSF data is the number of variables, in addition to R&D expenditures, it provides. The data are very useful for retrospective studies, but currently have two limitations: First, there is a significant lag time between the collection of the data and their presentation; e.g., the latest available data at the time of this writing were for calendar year 2000 (albeit there are indications that future NSF reports will lag only one year in reporting data). Second, the NSF data are aggregated by industry; disaggregated information at the company level would be more helpful to analysts.
Is there a good data source for more up-to-date R&D trends? This issue of Research * Technology Management includes the Industrial Research Institute's "R&D Leaderboard," which is based on Standard & Poor's Compustat database (see p. 21). The data show the changes from fiscal years 2000 to 2001.
The IRI also publishes the results of its annual member survey, "R&D Trends Forecast," in this issue (p. 17). And R&D Magazine publishes its own forecasts every January, based on work by Battelle and Schonfeld & Associates. There are also a variety of information/media companies that sell proprietary data.
Standard & Poor's bases its data on company financial statements that are reported to the Securities and Exchange Commission (SEC). Publicly traded firms are required to report their R&D expenditures in each reporting period. Financial Accounting Standards Board's FAS 2, which governs Accounting for Research and Development Costs, states, "Disclosure shall be made in the financial statements of the total research and development costs charged to expense in each period for which an income statement is presented" (2).
Public companies report R&D expenditures quarterly on their form "10-Q" and annually on form "10-K." Quarterly data provide an up-to-date and near real-time view of the industrial R&D landscape. Unfortunately, some of the largest R&D spenders only report data annually; e.g., Ford and GM, the two largest R&D spenders in 2001, do not report quarterly R&D data. It is also interesting to note that while there is a consensus among companies, investors and academics that R&D fuels future growth, the data are often difficult to locate in financial statements, or absent in the case of Ford and GM.
Current State of Industrial R&D
The Table, next page, shows R&D expenditures for the latest two quarters reported (e. …