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Scott Andes: Why Who Pays for University Research Matters

Universities can help the U.S. remain competitive by designing research agendas that are relevant to private companies and their local economies.

 

With the best university system in the world, academic research is a major artery for U.S. innovation and competitiveness. But not all university research is created equal. Some scientific discoveries enable new products and services that grow the economy, while others are lost in the tomes of unread, obscure journals.

The economic impact of university R&D often depends on where funding comes from. Companies fund research in areas of science and engineering that they do not have the capacity for internally and that are relevant to their product portfolios. State R&D expenditures usually relate to areas regional economic advantage, while institutional funding reflects the priority of academic donors and administrators. Finally, the funding method of each federal agency is unique with highly variable impact on the economy.

Over the last two decades, the funding landscape for America’s university research has shifted. Institutional funds have increased most dramatically as endowment levels have grown, while state and local and business funding have declined precipitously. The share of R&D budgets coming from state governments has declined by nearly a third, while business investments have declined by a quarter.

 

Change in university R&D funding, by source, 1990-2013

graph

Source: National Science Foundation, Science and Engineering Indicators

 

The loss of state and business resources from the nation’s university R&D has worrying implications for U.S. innovation. States and regional governments are often more aware of regional economic clusters and the needs of local firms than university endowments or federal agencies. Funding research at in-state universities that meets the needs of critical sectors — such as the aerospace industry in Alabama or software development in Washington — should be seen as an essential tool in state government’s economic development tool kit.

To be sure, some states continue to fund research at their local universities. For example, more than 20 percent of the research done at universities in North Dakota, Arkansas, Vermont and Maine is paid for by state and local governments. At the University of Arkansas, more than 40 percent of research comes from state coffers and funds efforts like the Arkansas Research and Technology Park, which supports high-growth tech companies in the state. Nonetheless, across the country there is a dangerous trend in which states and regions are investing less in their anchor research institutions. That hamstrings regional efforts to attract business and create jobs.

Potentially more worrying is the loss of private sector resources at the nation’s university system. While the private sector funds more than two-thirds of U.S. R&D, only 5 percent of university research is paid for by companies.

R&D can have the most economic impact when basic scientific discovery is connected to applied research and product development being done closer to going to market. This becomes substantially harder when firms decouple their research efforts from the university system.

Some industries — most notably the life sciences — continue to rely heavily on academic research. The Route 128 corridor in Boston is home to hundreds of biotechnology companies with intellectual property developed at MIT. And Clemson University’s International Center for Automotive Research is a unique partnership between BMW and Clemson aimed at putting the region at the center of innovation in the auto industry. Yet these efforts are more exceptions than the rule.

The U.S. university system is a vital component of the American competitiveness. But to continue drive technology development — a leading indicator of high-quality jobs, productivity and exports — research must link to firms and the regional economies where universities are located.

Universities can and should do a better job at designing research agendas that are relevant to economic development agencies and private companies. One way to do this is would be to create a technology transfer metric for tenure-track professors, as opposed to solely teaching and publication metrics. Another would be to loosen intellectual property restrictions. But state governments and firms should also take a longer view of their innovative efforts and proactively seek R&D partnerships with relevant academic researchers.

(Top image: Courtesy of Thinkstock)

 

 

Scott Andes is Senior Policy Analyst at the Metropolitan Policy Program at Brookings.

 

 

 

 

 

 

 

 

All views expressed are those of the author.

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