Business
R&D investment cut and shifted, public sector uncertainties
"Our nation's economic growth
depends on our capacity to educate, innovate and build," says a new report
released today by the National Science Board, the governing body of the National
Science Foundation. But between 2008 and 2009, in the midst of the most recent
recession, American businesses cut funding for research and development by
nearly five percent, or $12 billion. The science board said these cuts coupled
with government budget constraints at all levels are reasons for concern.
Private venture capital investment in
select science and technology industries declined from $43 billion in 2000 to
less than $10 billion in 2010. Private equity investments in certain S&T
industries plummeted from nearly $60 billion in 2007 to less than $10 billion
in 2008, but it has rebounded somewhat since then, reaching about $15 billion
in 2010. The decline in private-sector investment was accompanied by a shift
away from investment in crucial early stage start-ups, a more risky investment.
"Private-sector R&D investment
is sensitive to economic trends," said Arthur K. Reilly, a former senior
director for Strategic Technology Policy at Cisco Systems. "During
recessions, it's not surprising that businesses would spend less. But the
volatility also reflected shifts of private equity, venture capital and angel
funding from early stage investment to the less risky late-stage
investment," said Reilly, who led the development of the report.
During 2008-2009, when business
investment dropped, the decline was partly, but temporarily, made up by
increased federal R&D funding. But federal funding is more focused on
fundamental, capacity-building research and private-sector funding on
development, which is closer to the market. The federal government is the chief
funder of basic research--funding 53 percent compared to the private sector's
22 percent. This basic research, much of it performed at National labs and
research universities, generates the transformative knowledge base from which
the private sector can draw.
The federal government also fosters
business-funded R&D through tax credits, support for higher education and
funding for programs such as the National Science Foundation's recently
established Innovation Corps, which builds and strengthens public-private
partnerships.
"A large, complex, and
interdependent system of businesses, government and universities has made the
U.S. the world's leader in science and technology," said Ray M. Bowen, who
chairs the board's Committee on Science and Engineering Indicators.
"Surveying the past decade, we see several troubling trends that, taken
together, could have an impact on capacity to innovate in both the near and
long term." Bowen is the president emeritus of Texas A&M University
and a visiting distinguished professor at Rice University.
S&E
workforce concerns
The board said it is also concerned
about recent trends in the government's capacity to educate and train the
future R&D workforce. State funding for major public research universities
declined by an inflation-adjusted rate of 10 percent between 2002 and 2010, or
by 20 percent on a per-student basis. Likewise, the federal government
investment in academic R&D faces uncertainties due to future budget
constraints.
"Human resources are key,"
said José-Marie Griffiths, a former science board member. "Today, the
United States finds itself in a long-distance race to sustain its essential
global advantage in science and engineering (S&E) human resources and our
leadership in science and technology, even as attractive and competitive
alternatives for education and jobs are increasing around the world for S&E
talent.
"The federal and state governments
play a leading role in training the next generation of scientists. Universities
attract foreign talent and they conduct critical basic and applied research.
Federal immigration and visa policies have a direct impact on our ability to
attract and retain the type of science and engineering talent we need for
economic growth here, " said Griffiths, the vice president for Academic
Affairs at Bryant University.
"R&D-based innovation has long
been a pillar of the U.S. economy, contributing importantly to the nation's
wealth, employment, security, and general quality of life," the report
said. "With growing international competition in high-technology
industries, the need for continued and enhanced public efforts to strengthen
national R&D is clear."
Innovative
capacity still strong
Despite its concerns about the long-term
health of the nation's innovation capacity, the Board indicated that there are
reasons for optimism. Total U.S. R&D has grown nearly uninterrupted since
1953, with sizable increases from both the private sector and the federal
government.
The private sector funded 62 percent and
conducted 71 percent of all U.S. R&D in 2009. Notably, the private sector
funded nearly 80 percent of development work, which is critical to bringing
potential innovations to market.
In addition, while the annual growth of
the science and engineering workforce has slowed to 1.4 percent during the last
decade, it far exceeded the 0.2 percent growth in overall jobs. Unemployment is
also lower among S&E degree holders and workers in S&E occupations than
in other fields, and salaries tend to be higher.
The report released today--Research
& Development, Innovation, and the Science and Engineering Workforce--is a
companion report for Science and Engineering Indicators 2012, the biennial
analysis that highlights trends and factors that have an impact on the nation's
economy, competitiveness and innovation capacity.
For the report and more information, see
the NSB website.
-NSF-
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