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R&D funding remains stable, but sources fluctuate

July 13, 2023

Over the past two decades, business has done most of the heavy lifting for research and development (R&D) funding. Calculated in the dollar value of 2012, business funding increased from $10.4 billion in 2000 to an estimated $36.0 billion in 2021.

The National Center for Science and Engineering Statistics (NCSES) keeps track of these types of statistics, and the above data is from Business Sector Increases Funding for Basic Research, one of three InfoCharts released last month.

The “Business Sector Increases Funding for Basic Research,” InfoChart, written by NCSES’ Gary Anderson, explains that although federal funding increased from 2000 to 2005, it has remained stagnant since then at near or below $40 billion.

Whether looking at a longer or a shorter timeframe, the trend of declining federal funds is apparent. From 1961–70, on average, the federal government funded 70% of basic research, and the business sector funded less than 20%. But, by 2021, the federal government only funded 40% of basic research. At the same time, the business sector’s share of funding had increased to 36%. The increase in business funding represents a return to the 1950s level of funding: Before 2016, the 1950s were the last time businesses funded 30% or more of basic research.

The InfoChart “Federally Funded R&D Declines as a Share of GDP and Total R&D,” written by Anderson and NCSES’ Francisco Moris, illustrates that, although R&D may be holding its own as a percentage of the gross domestic product (GDP) at 3.40% in 2021, the sources of R&D funding are inverted from what they were in 1964. That year, the government funded 67% of all domestic R&D, whereas in 2020, businesses contributed 73%.

The third InfoChart, Recent Increase in R&D to GDP Ratio Driven by Increases in Experimental Development, also by Anderson and Moris, further explains the underlying trends that allowed the ratio to remain relatively even while the funding sources for R&D changed dramatically. During this time, funding for basic and applied research stayed at previous levels, while experimental research, defined by NSF as systematic work drawing on knowledge gained from research and practical experience and producing additional knowledge directed to producing new products or processes or improving existing products or processes, rose. From 2010 to 2020, experimental research funding increased to 62% to 66% of the share of R&D in GDP.