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.

In Silicon Valley we have a plethora of international trade organizations ensconced to help facilitate business among US companies and investors with foreign companies wishing to enter the US market. I’ve noted that the longer the trade organization has a had presence in Silicon Valley the greater success they’ve had in transferring knowledge back to the home country for the benefit of their local entrepreneurs. Yet, no one has been able to replicate the success of Silicon Valley and the relative ease with which successful new companies are created in the US. There are many cultural reasons why Silicon Valley exists and remains the largest entrepreneurial ecosystem in the world. Risk-taking is a major factor…the US is more tolerant of failure than most other countries and more importantly there is significantly more upside to taking risks through better exit opportunities in the US. But what are the advantages for US companies to go outside their home country? What can these trade organizations offer to US entrepreneurs that can facilitate knowledge transfer…teaching entrepreneurialism to the home country while transferring technology knowledge to the US companies? Many of these countries function as venture capitalists but are they proactively drawing the best US entrepreneurs to partner with local companies or research institutes to fund rapid commercialization of new technologies? How do we facilitate two way traffic to enrich entrepreneurs in every country? And if they were to succeed how long would Silicon Valley sustain its competitive advantage?

Actually they’ve been coming for the past 5 years to Silicon Valley Open Doors – an investor conference sponsored by AmBAR for Russian and Russian-American entrepreneurs. This is my fourth year attending and I’ve found it insightful in terms of the dynamics of innovation and migration of innovation centers. An interesting example was a company that presented in 2006 which designed a product for India, manufactured it in China and came to Silicon Valley for funding – the company was based in Israel.

This year has been notable in terms of the sophistication of the investor presentations and also in the complexity of the offerings. It’s not just twenty-somethings with a Web 2.0 application they coded in their dorm room. There’s more gray hair, more serial entrepreneurs and not so many hockey stick revenue projections.

What’s interesting this year is the migration of financing. A US-based company that started to flounder after receiving its Series A funding went to Russia for its next round of funding. It received funding from Troika Dialog (Russia) and DoCoMo (Japan). It was then able to close a sizable Series B round from Morgenthaler Ventures.

In addition to learning about entrepreneurial activity in former Soviet Union states, there are always nuggets to be gleaned from the high quality VC speakers they secure. A few highlights from my perspective are noted below:

The second day included a one hour Q&A session with Vinod Khosla of Khosla Ventures who offered his point of view across a wide area of topics but some particularly interesting ones on CleanTech:

And after 18 presentations culled from 80 submissions ….The winner is….PTP Group Americas.

Looking forward to SVOD 2010.

…rather quietly.  It’s hard to believe that 10 years have gone by.  It’s the longest job I’ve had and most of the time the best boss I’ve had.  We’ve ridden the dot com boom and bust, the rolling waves of recessions adjusting our services to meet client needs along the way.  Our tag line evolved from Marketing Strategies that Deliver Results to Creating Value Across the Product Lifecycle to our latest incarnation of Turning Innovative Ideas into Global Success.

We’ve watched the epicenter of innovation — Silicon Valley — lose a bit of luster as emerging markets developed their own innovation centers.  We’re enjoying riding that wave with relationships to organizations like FinPro, AmBAR, Innovation Center Denmark with the goal of having similar relationships to Chinese and Indian trade organizations.

When we started, cleantech had been languishing for roughly 20 years…it was not the hot technology sector it is today targeted to lead the US into financial recovery.  Now it’s a significant part of our business and we’ve done our pro bono part mentoring entrepreneurs competing in the California Cleantech Open.

What has been constant over the 10 years is our passion for helping entrepreneurs and companies find the best way to bring the best products to market for the benefit of customers and now more than ever, the planet.  We look forward to continuing that commitment here in Silicon Valley and the many new innovation centers around the globe.