Which US state has the best economy
Research and Development in the United States of America
The United States of America (USA), the world's largest economy, generates around a fifth of global economic output. The USA comprises 50 states and is the third largest state in the world in terms of population and area. That in these US states1 most goods and services are produced worldwide per period is reflected in the gross domestic product (GDP), the most important macroeconomic parameter. It was $ 17,419 billion in the U.S. in 2014.2 There are many reasons for this economic dominance, which has persisted for decades. The huge investments in research and development (R&D) are likely to play an important role here. In terms of gross domestic product, the USA invested 2.8% in research and development (R&D intensity) in 2012. This value is well above the EU average of 2%. As in Germany (2.8%)3 There are also individual states in the USA within the large association of states that are far above the national average for this parameter. The following article provides an overview of the R&D resources of this nation, which is the most active in research in the world, at the state level.
The US has been the world's largest economy for decades. Competitiveness was achieved, among other things, through decades of dominance in science, research and development. Even today, there is no other country in the world where R&D spending is as high as in the United States of America. In 2012, absolute R&D spending was $ 454 billion4 - a share of around 30% of global R&D expenditure. In the EU-28, China, Japan and Germany, significantly less funding is spent on research and development. In contrast to the up-and-coming Asian countries, above all China, the R&D dynamics in the USA have declined in the last few years at the comparatively high level. In the medium term, this could jeopardize the leading position of the United States of America.5
As in most advanced industrial nations, the proportion of R&D activities carried out in industry predominates in the USA. Around 70% of R&D expenditures were made in the business sector. In the state sector, with its state and university sectors, the share of R&D expenditure was 16 and 14%, respectively.6 A similar picture emerges in Germany. Overall, here too, with a share of 67%, the business sector shoulders the largest part of R&D expenditure. The share of the state sector is a good 15% and that of the higher education sector just under 18%. In Baden-Württemberg the business sector dominates R&D activities with 81% (state sector: 8%, higher education sector 11%).7
The states of the USA differ considerably in terms of their economic strength, population, area, infrastructure and natural resources, among other things. It is therefore not surprising that the distribution of the enormous R&D resources between the individual states of the USA is very different. Around 59% of total R&D spending in the US is concentrated in ten states. In half of the US states, the R&D share is even less than 1%. The ranking of the top 10 with the highest R&D investments8 is led by the economically strongest US state California. A good fifth of total R&D expenditure in the USA is invested here alone (23%). The gap to the runner-up US state Massachusetts is considerable. In this state the proportion is only just under 6%. This makes R&D spending in California four times that of the state of Massachusetts.9 For comparison: In Germany, Baden-Württemberg invests the most in research and development. Over a quarter of Germany's R&D activities take place in the southwest (2011: 26%) and together with Bavaria (19%), North Rhine-Westphalia (15%) and Hesse (9%), around 69% of total R&D investments are in these four federal states.
California is thus moving into the spotlight as an outstanding R&D location. The third largest in terms of area and by far the most populous US state would be the eighth largest economic power in the world as a single state, detached from the USA. The population and GDP are roughly half the values of Germany, the fourth largest economic area in the world. The situation is different with investments in research and development. In terms of absolute R&D expenditure, California and Germany are almost at the same level. California is rich in natural resources (including oil, natural gas, mercury, gold) and has a highly developed industry. Major locations for the IT and high-tech industries are located here. Companies such as Intel, Google, Cisco Systems, Oracle, Apple, Amgen and Hewlett-Packard have their headquarters here. These seven companies are among the 50 most invested in research and development in the world.10 In comparison, eight companies in this TOP 50 group have their headquarters in Germany (Volkswagen, Daimler, BMW, BOSCH, Siemens, Bayer, Boehringer Ingelheim and SAP). Four of these leading companies have their largest research and development locations in Baden-Württemberg.
The US state of Massachusetts has the two highest R&D investments and is one of the best performing US states in terms of gross domestic product per capita.11 It is one of the most important educational locations in the USA. World-famous universities and research institutes are located here, such as the University of Massachusetts, the private Harvard University and the Massachusetts Institute of Technology (MIT). Major industries in Massachusetts are the electrotechnical and electronic industries, mechanical engineering, and the metal industry.
The US state of Texas takes third place in the ranking with a share of 5% of total R&D expenditure in the USA. In terms of area and population, Texas is the second largest US state and, after California, the second largest industrial and commercial state in the United States. The major industries in Texas are oil and gas exploration, and oil and petrochemical refining.
The US states of Maryland, New York and Washington also have a share in R&D expenditure of just under 5%. While in the US states of New York and Washington most of the R&D expenditures are borne by the business sector, in the US state of Maryland the state sector is the mainstay. In New York and Washington, the business sector dominates R&D activities. In New York, the third largest economic area in the USA, for example, major pharmaceutical companies such as Merck US and Pfizer have their headquarters, and IBM, the leading IT technology company, is also located here. In the US, IBM invests the 10th largest amount of any US company in research and development. The company is in 22nd place worldwide in this ranking. First place in the USA - third place worldwide - in this ranking is Microsoft, the world's largest software developer with its headquarters in Washington.
Although the absolute R&D expenditure is a meaningful input indicator for the R&D resources of an economy, this amount or the regional share of R&D expenditure in relation to the total expenditure of a country is only suitable to a limited extent for a comparison of regions of different sizes or economic strengths . In order to be able to better compare regions with one another, the parameter R&D intensity is calculated for this reason. Here the R&D expenditure is related to the gross domestic product.12 How high should this important parameter be in relation to a region? It is undisputed that investments in research and development have been shown to have a positive effect on economic growth, employment development and thus on the prosperity of a society. The governments of the European countries consequently agreed in March 2000 within the framework of the Lisbon strategy on the common goal of investing 3% of their gross domestic product in research and development by 2010. This goal has now been reaffirmed by the heads of government as part of the EU 2020 strategy.
In 2012, the R&D intensity in the USA was 2.8% and thus, comparable to Germany (2.9%), just below the target value for the EU. The USA and Germany thus research far more intensively than the average of the EU and OECD countries, which spent an average of 2% and 2.4% of the gross domestic product on research and development in 2013, respectively. As in Germany, there are also individual regions in the USA that are well above the national average for this key figure. In 2011, New Mexico topped the list of US states in the USA with an R&D intensity of 7.6% due to structural peculiarities. The US states of Maryland and Massachusetts followed in the following ranks with an R&D intensity of 6.3 and 5.7% respectively. These three US states thus have a significantly higher R&D intensity than Baden-Württemberg (4.8%). Maryland and Massachusetts have a smaller population than the Southwest, but are somewhat comparable to Baden-Württemberg13. In contrast, New Mexico only has a population of around 2 million, which is significantly less than that of Baden-Württemberg (just under 11 million). The three US states of Washington, California and Michigan, where the headquarters of the major American automobile manufacturers General Motors and Ford are located, still have a considerable R&D intensity of over 4%. The US states of California, Massachusetts, Maryland and Washington thus not only have a high proportion of the total R&D expenditure expended in the USA, but also invest a significant part of their economic output in research and development and thus in future innovations. A different picture emerges in the two economically strongest US states along with California, Texas and New York. Here the R&D intensity in 2011 was only a meager 1.6%.
With around 2 million inhabitants, New Mexico ranks 37th out of 50 US states. Its population density - New Mexico is the fifth largest state in the United States - is extremely low at seven people per square kilometer. In terms of economic power and per capita income, the US state ranks 39th and 44th, respectively. Larger research-active companies are not located here. The main pillar is the state sector or its support for R&D activities. In the field of energy supply, two major nuclear research and development centers are being funded in New Mexico. New Mexico is the main uranium supplier in the United States. The high R&D intensity in New Mexico is therefore due to the high level of government investment in research and development in relation to the overall low gross domestic product of the US state.
The R&D intensity in the USA increased in the last 10 years, starting from 2001, by only 0.2 percentage points. In the period between 2001 and 2007, the share of research and development expenditure in the gross domestic product stagnated or in some cases even fell slightly. A similar development was also evident in the EU average and in the OECD countries. However, individual US states deviate significantly positively from this general development in the 10-year period under review. Of the most research-active US states, the R&D intensity in the observation period in the US state of California developed most dynamically. In 2011, the total R&D intensity here was one percentage point higher than it was 10 years ago - in Massachusetts it was 0.6 percentage points. In some cases, however, this parameter also declined in US states that are important for research and development, such as Michigan. In the 1990s, this key figure was still 6% and thus far above the current value of 2011. In the meantime, only 4.3% of the gross domestic product is invested in R&D in this state. For comparison: In Germany, the R&D intensity increased by 0.4 percentage points within this period. In Baden-Württemberg the value climbed to 4.8% in 2011 and has thus improved by a remarkable 1.1 percentage points compared to 2001.
The United States of America produces most of the world's goods and services by period. High investments in research and development are intended to promote innovations in order to maintain the enormous economic performance in the future. In terms of R&D investment, the United States is the world's most research-active nation. As in other highly developed industrialized countries, however, these R&D resources are distributed differently from region to region. The economic regions of California, Massachusetts, Texas, Maryland, New York and Washington have particularly high shares of total R&D expenditure in the USA. In Maryland, Massachusetts, Washington and California in particular, a large proportion of economic output is invested in research and development.
When comparing the 50 US states, California proves to be an outstanding R&D location. This most important economic area in the USA alone shoulders a good fifth of the total R&D expenditure of the United States of America. In addition, a share of 4.8% of the gross domestic product is invested in R&D here - as much as in Baden-Württemberg. The following comparison shows how outstanding this research and development location is: The R&D intensity in Germany is significantly below that of California (2 percentage points), although Germany has roughly twice the population and economic output. Both economic areas invest in roughly the same absolute expenditure in research and development.
In the USA as a whole and also in individual economically important US states such as Michigan, the willingness to invest in R&D has stagnated or declined in recent years. If this trend continues in the USA, the continued uninterrupted dynamic expansion of research resources in China could jeopardize the USA's leading position in research and development in the medium term.
1 Hereafter including Washington D.C. (District of Columbia).
2 Data source: World Economic Outlook Database April 2015, nominal GDP.
3 Data source: Federal Statistical Office. Year 2013, calculation status for GDP: November 2014 / February 2015.
4 Data source: Main Science and Technology Indicators 2014-2, year 2012.
5 Cf. State Statistical Office (publisher): Research and Development Monitor Baden-Württemberg, Statistical Analysis Series, 01/2014, p. 23 ff.
6 State sector: Public and publicly funded institutions for science, research and technology outside of universities. Including non-profit institutions serving households.
7 2011, rounding differences.
8 The terms R&D expenditure and R&D investment are used synonymously in this article.
9 Data source: National Science Foundation. For the analysis of R&D activities in the US states, the current data from 2011 is used and compared with the data from 2001 for a longer-term view.
10 Industrial R&D Investment Scoreboard of the world top 2500 companies 2014, http://iri.jrc.ec.europa.eu/scoreboard14.html (accessed: June 26, 2015).
11 Data source: National Science Foundation, www.nsf.gov/statistics/states/ (accessed: June 26, 2015).
12 The R&D intensity is a central indicator for assessing the technological performance in a region. It should be noted that this key figure changes even with constant research and development expenditure depending on the gross domestic product.
13 The population is around 7 and 6 million respectively.
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