14.1. OVERALL TRENDS WITHIN AND BETWEEN SECTORS
Total funding for R&D in the United States in 2006 was $340 billion. From 2002, this represented a 2.5 percent average annual change in inflation-adjusted terms (NSB, 2008). The bulk of R&D funding is for development (60 percent), followed by applied research (22 percent) and basic research (18 percent). Industry provides the majority of funding for total research and development, plus its implementation. It is also the major source of funding for applied research and its implementation (Table 14.1). The federal government dominates funding for basic research, and development (mainly related to the military); while universities dominate the performance of basic research.
| Total $340 billion | Basic $62 billion | Applied $75 billion | Development $204 billion | ||
|---|---|---|---|---|---|
| Industry | Funding Performance | $223 billion $242 billion | $10.5 billion $9.3 billion | $44 billion $48 billion | $169 billion $184 billion |
| Government | Funding Performance | $ 94 billion $ 38 billion | $36.6
$10 billion* *(includes $5 billion in FFRDCs) | $25 billion
$12 billion* *(includes $4.3 billion in FFRDCs) | $33 billion
$16 billion* *(includes $4.3 billion in FFRDCs) |
| University | Funding Performance | $ 12 billion $ 46 billion | $ 6.2 billion $34.7 billion | $2.4 billion $10 billion | $0.5 billion $1.8 billion |
| Other non-profit institutions | Funding Performance | $ 11 billion $ 14 billion | $ 8.4 billion $ 7.5 billion | $3.4 billion $4.7 billion | $1.7 billion $2.0 billion |
| []
Note: FFRDCs are Federally Funded Research & Development Centers. Source: National Science Board, Science and Engineering Indicators (2008). | |||||
[] Includes nonprofit research institutions, and state and local governments.
The pattern of R&D funding in the United States has changed markedly over the past three to four decades. The federal government led total R&D funding up to 1979, but by 2006 funded only about 28 percent of total R&D. Before the late 1960s, the federal government was the primary source of funds for industrial R&D, but it now represents less than 10 percent. While funding from academic institutions, not-for-profits labs, and state and local governments comprises a smaller proportion of total R&D compared to industry and the federal government, funding from these sources grew at a rate of 6 percent per year between 1986 and 2006, which exceeded the growth rates of other funding sources (NSB, 2008). Most of this was invested in research performed in the academic sector.
While funding and performance of R&D are necessary, they are not sufficient for innovation, which implies the creation of social or economic value in the marketplace. Industry, through the sheer magnitude of the R&D it funds and performs—as well as its profit orientation—plays the most prominent role in the creation of economic value. Traditionally, innovation in the government and universities has focused more on creation of social value. For example, the federal government supports the agricultural extension service, NASA, and funds substantial development within the military. Universities have focused on the goals of generating knowledge and educating the citizenry; while land grant institutions have partnered with the government in a variety of areas, notably agricultural extension. Not-for-profit labs such as Battelle Columbus Laboratories and SRI, International, attract funding from the government and industry to undertake research of interest to these clients. However, in the past two decades, government, university, and not-for-profit labs have taken on a more prominent role—directly and indirectly—in commercialization of research through interaction with industry as well as through business start-ups based on technology developed in their labs. Table 14.2 lists major formal mechanisms through which the sectors interact at the levels of both R&D and innovation. Some of the mechanisms involve a "hand off" or transfer of technology from one sector to another, with little interaction. Other mechanisms for technological innovation involve collaboration among the sectors to a greater or lesser degree. Many of these mechanisms will be addressed more fully in the following sections.