- Knowledge- and technology-intensive (KTI) industries contribute globally more than $9 trillion in output, accounting for 11% of global gross domestic product (GDP). KTI industries are defined by their research and development (R&D) intensity—the ratio of an industry’s R&D expenditures to its value-added output—and consist of five high R&D intensive industries and eight medium-high R&D intensive industries.
- The United States is the world’s largest producer of output in high R&D intensive industries, accounting for nearly a third of global production. These industries are manufacturing of aircraft; pharmaceuticals; computer, electronic, and optical products; computer software publishing; and scientific R&D services. China and the European Union (EU) are the second-largest producers (about 20% global share each).
- China is the world’s largest producer in medium-high R&D intensive industries (26% of global output), followed by the EU and the United States (22%–23%). These include information technology (IT) services, machinery, transportation equipment, and scientific instruments.
- The United States and China are investing heavily in research and commercialization of artificial intelligence (AI) technologies. Business adoption of AI technologies is occurring across the world, including North America, Europe, Asia-Pacific, Middle East, India, and other developing countries.
R&D and other activities that advance science and technology play a central role in a country’s economic growth and competitiveness. This report examines trends in production and trade of KTI industries of the United States and other major world economies. Knowledge and technology intensity of an industry can be measured in different ways, including R&D performance, employment of high skilled workers, and patenting and innovation activities. This report focuses on industry R&D intensity: the ratio of an industry’s business R&D expenditures to its value-added output. These industries make large investments in R&D, and produce goods and services embodied with advanced technologies. Other industries, and society as a whole, benefit from and use technologies that originate from KTI industries.
Industries with the highest ratios of R&D expenditures to output are labeled in this report as “high R&D intensive” industries. Among these industries, the United States is the world’s largest producer, accounting for nearly a third of global production. Although they account for a small share of U.S. industrial output and employment, these industries fund a disproportionately large share of U.S. business R&D. China and the EU are the second-largest global producers of output, each with about a 20% global share. Global output of high R&D intensive industries has more than doubled in the past 15 years, reflecting both price and quantity growth. The U.S. global share has remained stable over the last decade while the EU share declined and China’s rose rapidly.
In medium-high R&D intensive industries, the United States has a smaller global share (22%) compared to the largest producer, China (26%). China has rapidly increased its output over the last decade. U.S. output grew slower than China’s, and the U.S. global share remained roughly stable. The EU’s output has stagnated over the last decade, resulting in a notable decline in its global share.
The United States is the world’s third largest exporter of KTI products, behind the EU and China. The U.S. global export share has fallen over the last decade and the U.S. trade deficit has widened. Accounting for domestic intermediate production, the United States has higher exports and a far smaller trade deficit on a value-added basis in computer, electronic, and optical products, which are part of high R&D intensive products.
This report also examines AI technologies, which are predicted to have widespread economic and societal impact in the coming decade. Many KTI industries are either developing or utilizing AI technologies, including software publishing, IT services, and computer, electronic and optical products industries. Furthermore, AI is likely to give rise to new technologically advanced industries, products, and services. The United States and China are investing heavily in the research and commercialization of AI. Both countries have AI initiatives that include the following stated goals: increase public funding of AI R&D, develop and improve the skills necessary at the workplace to effectively utilize AI, and promote collaboration between the private sector, universities, and government. Company adoption of AI technologies, measured by AI being embedded in at least one business unit of the company, is occurring across the world, including North America, Europe, Asia-Pacific, Middle East, and India and other developing countries.