firms receive over 60 percent of federal R&D funds in
California, compared with the national average of slightly
less than half. In fiscal year 1993, $9.4 billion of a $15.4
billion statewide total flowed to industrial firms.
percent of these funds, or $7.5 billion, came from DOD, the
balance coming primarily from NASA. Industrial firms receive
federal R&D funding mostly to conduct contract research
for defense or space needs rather than to subsidize commercially-oriented
vast majority of DOD-funded R&D in California is for development
work on weapons systems, including an array of evaluation,
prototype development, and testing work which carries through
until production. Industrial firms, particularly those concentrated
in Southern California, conduct about 80 percent of this type
of work, with DOD labs performing the remainder.
firms also play a significant role in the performance of basic
and applied research funded by DOD. This is in sharp contrast
to research funded by other agencies which is usually conducted
by government labs, FFRDCs, or universities.
development work in California, and thus its funds to California
industrial firms, are expected to increase slightly in FY
1996 and in subsequent years despite flat or declining total
R&D spending. After many years of decline, DOD's R&D
budget increased by 1.5 percent between FY 1995 to 1996, to
$35.9 billion. Congress has indicated its intention to hold
the line on defense spending even as nondefense spending declines.
Also, the current DOD strategy is to expand the share of DOD's
R&D budget that goes toward advanced development activities
at the expense of basic and applied research, a trend which
should favor California defense contractors. In FY 1996, the
"Science and Technology" portion of DOD's R&D
declined by 2 percent while the budget for the remaining advanced
development, testing and evaluation categories in which California
firms are dominant increased by nearly 6 percent.