University Research Funding: The United States is Behind and Falling

Research and development drives innovation and innovation drives long-run economic growth, creating jobs and improving living standards in the process. University-based research is of particular importance to innovation, as the early-stage research that is typically performed at universities serves to expand the knowledge pool from which the private sector draws ideas and innovation. As such, it is troubling that in 2008 the United States ranked 22nd out of 30 countries in government-funded university research and 21st in business-funded university research. Moreover, we are falling even farther behind.

From 2000 to 2008, the United States ranked 18th in the growth of government-funded university research, with countries like China, Korea and the United Kingdom significantly outperforming the United States. Worse still, the United States ranked 23rd in the growth of business-funded research, with it actually declining as a share of GDP. In contrast, collaboration between universities and business grew dramatically in nations like Austria, China, Israel and Taiwan. These statistics are unmistakable and troubling. As we fail to increase these investments in our future at anywhere near the rate of our economic competitors, our innovation system is faltering. National economies increasingly compete on the basis of innovation, and, in the race for global innovation advantage, the United States will continue to trail countries that have placed university research and industrial collaboration at the forefront of their economic policy.

While our public research universities used to be the envy of the world, 20 years of underfunding by state governments have meant that many public research universities have fallen in their capabilities relative to private research universities. And while our research universities, public and private, are still a key strength, their future is uncertain given the large cuts in state higher education budgets and slow growth in federal support for university research. Of course, there is a remedy. Instead of across-the-board budget cutting at the state and national levels, policymakers can prioritize and target university research for increased funding, with the knowledge that the long-term payoffs to their state and to the nation as a whole will be substantial. Likewise, instead of “reforming” the tax code by “broadening the base” and lowering the rate, policymakers can take a page out of the playbooks of other nations and enact a collaborative R&D tax credit that provides companies with a generous tax credit for expenditures on research conducted at universities.