Useful Stats: Higher education R&D expenditures soar past $100B in 2023

The most recent  Higher Education R&D (HERD) survey revealed the largest year-over-year percentage increase in higher education R&D since 2002 to 2003 and dollar increase across all fiscal years (FYs) captured by the survey. HERD expenditures breached the $100 billion mark in 2023, having grown 11% from $97.8 billion in 2022 to $108.8 billion in 2023 (7% in constant 2017 dollars, from $82.9 to $89 billion). Federally funded HERD expenditures continue to increase in dollars, but decrease in overall share, while business and institution funds grow as a proportion.

As seen in Figure 1, since 1973, the earliest data available, HERD expenditures have shown a consistent upward trend in both constant and current dollars. However, growth in current dollars has been more pronounced due to inflation. Expenditures reflect real growth when adjusted for inflation (constant 2017 dollars).

HERD has grown steadily, increasing an average of 8% annually in current, and 4% annually in constant, dollars since 1973. HERD expenditures have fallen four times in constant terms (1973-1974, -4%; 2011-2012, -1%; 2013-2014, -1%; and 2020-2021, -1%).

Several economic recessions, highlighted in Figure 1, have had limited impact on HERD expenditure trajectories. While there may have been short-term stagnations during periods such as the Great Recession or the COVID-19 recession, expenditures resumed their upward trend shortly after.

Figure 1: Constant and current HERD expenditures in billions of USD, 1973-2023.

SSTI explored the breakdown of the sources of funds to understand the driving forces behind these changes in HERD expenditures. This breakdown is shown in Figure 2.

Figure 2: HERD expenditures by source of funds.

Since 1973, there has been a distinct shift in the source of funds for HERD expenditures, with institutions and businesses making up larger shares, while federal, state, and local governments’ proportions have shrunk.

However, this is not to say that any of these sources have decreased; while overall HERD expenditures have increased approximately 3,700% from 1973 to 2023, there is much variation between the various sources of funds: HERD funded by institutions has increased over 8,600%, while that funded by businesses has increased over 7,300% and other sources (e.g., R&D expenditures from nonprofit organizations) by over 4,700%. Those with the lowest increases, federal government and state and local government, still rose 2,900% and 1,750%, respectively.

Looking at a relatively shorter timeframe, over the past decade since 2014, SSTI found that total HERD expenditures have increased 62%, with the largest relative increases coming from institution funds (76%), business (67%), and all other sources (66%). Federal government (57%) and state and local government (39%) both still increased, just at lower relative values.

Following recessionary periods, a trend can also be seen.

From 2019-2020, the first year of the pandemic-induced recession, there was a 3% jump in HERD expenditures, with federal government and institution funds having the largest relative increases at four percentage points each. Federal government funds are the primary funding source for HERD overall

From 2008-2009, following the Great Recession, the trend changed, with business and miscellaneous sources having the largest relative growths at 11% and 10%, respectively, outpacing the 6% overall growth. The main driver of growth was still federal dollars, which increased 4% year-over-year, but there is still a clear jump in business-funded HERD expenditures.

This page was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.