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The Changing Nature of U.S. Basic Research: Trends in Performance

June 04, 2015

Part three of a 3-part series: Part one, Part two

It has long been known that academic institutions are a key driver of research and development performance in the United States. While industry still funds and performs the majority of R&D in the U.S., universities and colleges (U&C) play a pivotal role in the advancement of basic human knowledge. Using the latest data update of the National Science Foundation’s National Patterns of R&D Resources series, this article, the third and final of SSTI’s series on basic research, describes how the performers of R&D and basic research in the U.S. have changed over time.

The first installment of SSTI’s series on basic research found that, in general, U.S. spending on research and development has failed to keep up as a share of total spending. The article also described the changing nature of federal research and development spending, namely that basic research as a share of federal spending on R&D has increased over time while making up a relatively small proportion of total spending compared to development and applied research.

The second installment of SSTI’s series on basic research funding found that, beginning in the 1960s, funding for research and development in the United States began to shift away from being primarily funded by the federal government to primarily being funded by industry. Despite this, basic research has never played a significant part in the private sector’s total R&D spending.

As cited last week, George Mason University professor Philip Auerswald, responding to recent articles in The New York Times on innovation, notes how the shift from science-based innovation to networked innovation makes the linearity of the invention-to-growth model increasingly obsolete. Collaboration has become a necessary contributor to both the frontier of new knowledge and in the creation of new product combinations. Auerswald is critical of the arguments made by many techno-skeptics, including his own colleague Tyler Cowen, who suggest that the best ideas for moving human societies have already been discovered and applied. Instead, Auerswald proposes that the nearly unbounded power of combinatorial possibilities makes the innovation frontier basically endless. 

Understanding the relationship between R&D funding sources and performers is helpful in identifying future areas for networked innovation. Ultimately, there appears to be additional opportunities for the various sources and performers to collaborate to drive future innovation.

 

 

In addition to funding the majority of research and development in the United States, private industry also performs the lion’s share of this work. Industry performed $316 billion of the $452.5 billion spent on R&D in 2012, or 70 percent. Since 1953, industry has never performed less than 65 percent of all R&D in the U.S. The share of R&D performed by the federal government has declined since reaching an all-time high of 20 percent in 1953. Since falling to below 10 percent in 1991, the share of R&D performed by the federal government has remained relatively stable. Meanwhile, the share of R&D performed by universities and colleges has increased significantly since 1953. In 1989, the share of R&D performed by universities and colleges reached 11 percent, overtaking the federal government as the second-largest performer of R&D.

 

Industry, the performer of the vast majority of research and development in the United States for decades, is now largely self-funded in this category. Although the federal government comprised more than half of the funding for R&D performed by industry in the early 1960s, this share has dropped considerably since then. In 2012, 88.5 percent of R&D performed by industry was funded by industry, a share relatively consistent over the previous decade.

 

Disentangling industry from total R&D performance reveals the growing role of universities and colleges as an important performer of research and development. The federal government once performed as much as 20 percent of R&D in the United States, and more than half of total R&D not including industry performance. This share, however, has been decreasing for decades as U&C began to perform more research and development. While these higher education institutions once performed less than 5 percent of all research and development, they performed 14 percent in 2012. Not factoring in industry performed R&D, universities and colleges performed 46 percent of R&D in the United States in 2012.

 

An analysis of basic research performance provides additional evidence for the increasing role of universities and colleges within the nation’s R&D system. Although the federal government funds the majority of basic research in the United States, it has performed a considerably less amount of it over time. In 2012, the federal government performed 6.8 percent of all basic research in the United States, a result consistent with the previous six years.  Coupled together with federally funded research and development centers (FFRDCs), the federal performance accounted for just 15 percent of performed R&D, compared to a peak of 29.3 percent in 1978. Perhaps most enlightening about basic research performance is the reversed role of industry and academic institutions. Once performing less than 27 percent of all basic research, universities and colleges increased their share to more than half throughout the early-1970s. Universities and colleges have performed between 50 and 60 percent of all basic research in each year since 1998, including 53.5 percent in 2012. Conversely, industry which once performed about one-third of all basic research in the U.S. has seen this share decrease over time. Less than 20 percent of all basic research has been performed by industry in each year since 1998, including a share of 18.6 percent in 2012.

The chart above illustrates the funding sources for basic research performed at U&C. As described in the first installment of this series, the federal government has begun driving more of its R&D dollars to basic research. At the same time, however, the federal government is moving away from federally-funded, federally-performed research. Increasing amounts of federal funding for basic research now go to universities and colleges, who have also begun funding their own basic research in larger quantities. A relatively small amount of university-performed basic research is funded by industry, state and local governments, and other nonprofits.

Ultimately, universities and colleges have become the place where the majority of the country’s basic research is performed, though this amount has become relatively stagnant since the Great Recession.  During that time, an increasing amount of funding has gone to applied research and development at universities and colleges. As the U.S. moves towards performing more and more of its basic research at universities and colleges, it is important for these academic institutions to continue to support their own basic research activities.

The role of academic institutions is particularly relevant within the realm of networked innovation, given the importance of science, technology, innovation, and entrepreneurship to many regional economies. Uber’s decision to hire nearly the entire Carnegie Mellon University National Robotics Engineering Center for its new Pittsburgh office lends credence to this. Richard Florida, writing in City Lab, sees this as a net-positive for the region’s tech-community.  Universities, such as the University of Minnesota’s Office of Technology Commercialization, are increasingly running their research branches as if they were a private company, while private sector companies continue to locate near university research.

Research and development is likely to continue its evolution in the United States, but trends indicate that universities and colleges will retain their large role. Given the nature of networked innovation, however, this also means that other institutions –not just the federal government – will be responsible for sponsoring and performing research and development.

Basic research offers an interesting opportunity for increased collaboration. In a blog post for The Brookings Institution, Scott Andes and Mark Muro posit that, with future federal spending for research and development in question, states and metropolitan areas are increasingly bootstrapping their own innovation. Through TBED programs such as the Ohio Third Frontier Initiative or the Indiana Biosciences Research Institute, both of which carry large basic research components, states and metropolitan areas are asserting themselves in a larger role to promote research and development activities.  As competition for federal funding increases, states and metropolitan areas may seek to leverage remaining funds to capitalize on the research competencies of FFRDCs and universities. In this way, networked innovation and the limitless combinations of talent and resources can contribute to the necessary paradigm shifts outlined by Andes and Muro.

 

 

 

r&d, ssti features