University Research Funding: The United States is Behind and Falling

Transcription

1 May 7, 2014 University Research Funding: The United States is Behind and Falling Dr. Robert D. Atkinson, President The Information Technology and Innovation Foundation

2 The Information Technology and Innovation Foundation (ITIF) is a Washington, D.C.-based think tank at the cutting edge of designing innovation policies and exploring how innovation will create new opportunities to boost economic growth and improve quality of life. ITIF focuses on: Innovation verticals : energy, life sciences, telecom, manufacturing, and Internet and IT transformation Innovation horizontals : trade, tax, talent, and tech policy Innovation economics as an alternative to mainstream economics

3 Headlines Federally-funded university-based research plays an increasingly vital role in the U.S. innovation system. But, as a share of GDP, both growth in and actual government funding and business funding for university research falls notably below the OECD country average. 3

4 Today s Presentation 1 Why Does S&T-Based Innovation Matter? 2 Trends in R&D Funding for Universities 3 Effects of Future R&D Cuts 4

5 Why S&T-based Innovation is Critical to Growth The societal rates of return to R&D are at least twice private returns. The private return to R&D is 7% while the societal RoR is 30% suggesting that the optimal level of R&D investment in the US economy is between two to four times larger than the total current level of private investment. (Jones and Williams, 2000) Every 1% increase in investment in research increased productivity by 0.23%. (Coe and Helpman, 1995) At least two-thirds of increase in per-capita GDP is attributable to innovation.

6 Corporations Shifting to Later-Stage Development Development: Up 54.1% $ Billions Applied Research: down 0.9% 0 Basic Research: up 8.5% Source: National Science Foundation 6

7 Corporations Shifting to Later-Stage Development Percentage Point Change in Business R&D Funding by Type: % Basic Research Applied Research Development -3.2% -3.7% Source: National Science Foundation 7

8 As a Result, University Research has Become More Important to the U.S. Innovation System U.S. Basic Research Expenditures by Performing Sector: % 14% 7% 59% Universities and Colleges Federal Industry Other Nonprofit Source: National Science Foundation 8

9 University Research Generates Substantial Societal Returns The social rate of return from investment in academic research is at least 40 percent. Scores of companies directly trace their origin to federally-funded universitybased research. 9

10 Today s Presentation 1 Why Does S&T-Based Innovation Matter? 2 Trends in R&D Funding for Universities 3 Effects of Future R&D Cuts 10

11 Government Funding for University R&D as a Share of GDP, %.68%.61%.58%.47%.43%.42%.41%.39%.39%.34%.33%.32%.31%.28%.28%.23%.09% 11

12 Percentage Point Change in Government Funding for University R&D as a Share of GDP, %.23%.21%.20%.15%.13%.12%.11%.09%.08%.08%.08%.08%.08%.06%.06%.04%.01% 12

13 Annual Percentage Change in Government Funding for University R&D in Constant PPP Dollars, % 12.7% 12.0% 9.5% 8.0% 7.2% 6.7% 6.6% 6.1% 4.9% 4.5% 4.2% 3.5% 3.3% 3.2% 2.6% 1.2% 13

14 .009%.008%.007% Percentage Point Change in Business Funding for University R&D as a Share of GDP, %.026%.020%.016%.014%.005%.002%.000%.000% -.001% -.002% -.002% -.004% -.005% -.008% Germany China Denmark Canada New Zealand Ireland Finland Korea Sweden Czech Republic EU-15 Japan Australia Taiwan France Norway United Kingdom United States 14

15 Business Funding for University R&D as a Share of GDP, % 0.05% 0.05% 0.05% 0.04% 0.04% 0.03% 0.03% 0.03% 0.03% 0.03% 0.02% 0.02% 0.02% 0.02% 0.01% 0.01% 0.00% 15

16 Average Annual Percentage Change in Business Funding for University R&D in Constant PPP Dollars, % 17.9% 16.6% 13.9% 11.1% 10.2% 5.7% 5.6% 5.4% 4.2% 1.7% 1.5% 1.3% 0.8% 0.5% 0.4% 0.1% 16

17 State Appropriations for Higher Education per Full-Time Equivalent Student, $12,000 $10,000 $8, dollars $6,000 $4,000 $2,000 $ Academic year 17

18 Today s Presentation 1 Why Does S&T-Based Innovation Matter? 2 Trends in R&D Funding for Universities 3 Effects of Future R&D Cuts 18

19 U.S. Federal R&D Expenditure Paths Keeping Pace with China's R&D/GDP Billions $US R&D/GDP Constant CBO Baseline: Hold R&D Expenditures at 2011 Levels Sequestration 50 19

20 R&D Expenditure Shortfalls($2012 Millions) Year Sequestration vs. R&D at 2011 Level Sequestration vs. Stable R&D Share of GDP Sequestration vs. Expanding R&D Share of GDP at China s Rate $12,484 -$15,326 -$20,646 Cumulative: $94,976 -$329,856 -$510,930 20

21 R&D Cuts Reduce GDP Impact on GDP Billions $US (Constant 2012) $0 -$250 -$500 -$750 -$1,000 -$203 -$565 -$860 Sequester Versus Expenditues at Constant 2011 Rates Sequestration versus Constant R&D share of GDP Sequestration versus the R&D Share of GDP at China's Pace R&D Funding Shortfalls and the Related Losses in Real GDP Cumulative Effect, Sources: NSF, OMB, CBO, BEA, ITIF 21

22 R&D Cuts Reduce New Knowledge Journal Publications Patents % -3.3% % -2.8% (Sequestration Compared to CBO Baseline) 22

23 R&D Cuts Reduce Jobs Keynesian Effect Schumpeterian Effect Net Effect ,837-94, ,308 Average Annual Losses: ( ) -117,771-81, ,224 (Sequestration Compared to CBO Baseline) 23

24 Thank You Robert D. Atkinson Follow ITIF facebook.com/innovationpolicy