Vision & Execution’s Weblog

After attending Nordic Green II and Building Innovation Bridges between US and Europe, I became curious about just how much the US spends on basic research and where does it go. Turns out our government publishes this data and it’s really quite interesting.

From the National Science Board’s 2010 Digest on Key Science and Engineering Indicators, I found the following fascinating facts:

Basic vs. Applied Research Funding Sources

In the US, unlike most other countries, industry is responsible for the bulk of R&D investment and has been since 1980. In 2008, 67% of the estimated total was sponsored by industry followed by 26% from the federal government and the remaining 7% from educational institutions and other non-profits. The majority of the industry funds (78%) are for applied research and development while basic research gets 60% of its funding from the federal government.

Volume vs. Intensity vs. Velocity

Globally, the US in sheer dollar value, spends the most on R&D estimated at $398 billion in 2008. The rapidly growing R&D expenditures of the Asia-8 economies (China, India, Japan, Malaysia, Singapore, South Korea, Taiwan, and Thailand) surpassed those of the EU-27 in 2003.


When it comes to R&D intensity – how much of a country’s economic activity (gross domestic product) it reinvests – Asia takes the lead. The Asia-8 have increased their intensity with South Korea committing 3.5% of its GDP followed closely by Japan at 3.4% of its GDP. Both the EU-27 and the US have remained steady and well below the 3% mark.

The Asia -8 economies growth rates for R&D often exceeded 10% and in China’s case, 20%, annually over the period 1996–2007. Comparable R&D growth rates for the United States and the EU-27 averaged single digits — 5%–6%. Surprisingly, only 5% of China’s R&D is in Basic Research

Why is this significant?

As noted in the Proceedings of the Sino-US Forum on Basic Science for the Next Fifteen Years, numerous economic studies have indicated that up to 50 percent of economic growth can be attributed to research and development (R&D), with basic research as the driving force. These analyses also indicate that the social rate of return on investments in basic research is twice the private rate of return, suggesting that government is more likely to invest in basic research than private industry, and also that government investments leverage substantial research investments from other sources, primarily industry. Basic research is also essential in teaching new generations of scientists and engineers about the detailed assumptions and processes of science, no matter what their ultimate career choices turn out to be. In particular, individuals who have received basic research experience at the PhD level constitute a key resource for translating scientific results into economic growth.

It’s interesting to note that Obama’s 2011 budget plans for a 3.5% decrease in applied research funds while it increases basic research by 4.1%…assuming the budget gets passed. The total amount has remained relatively stable despite multiple administrations, with the exception of the 2009 blip for the American Recovery and Reinvestment Act. This is not the way the US will remain competitive in the global economy.

The nearly 40 year lead that the Nordic countries have on the US in clean technology is a direct outcome of a socially responsible decision by national governments which drove investment in basic research. At Nordic Green II, it was striking how advanced the Nordic countries are when it comes to clean technology innovation. The results are compelling. While the US is hard at work to make up the difference, and we bring many resources to bear on the issues at hand, it will be a costly exercise to match the Nordic success.

What is the cost of playing catch up?
• Korea: “Green New Deal” ? $46 billion over 5 years
• Japan: invests $63 billion over 5 years
• US: plans to invest $172 billion over 5 years
• China: invests $440 billion over 10 years

Fortunately for the US, industry is playing a critical role in funding cleantech ventures: the US represented 21% of 2009 VC investments as compared to China at 14% and India at 6%.

What are other risks we should be taking now? In cleantech? In healthcare? Or In education? Where are the next disruptive ideas for socially responsible innovations?