Scientific Researchers at Asian Universities Attracting More Industry Funding than American Counterparts

A report released last week by Times Higher Education, the World Academic Summit Innovation Index, finds that university scientific researchers from many Asian nations—including Korea, Singapore, Taiwan, and China—are attracting substantially more industry funding per researcher than their American counterparts. For example, the report finds that on average Korean researchers receive four times as much industry funding as their American peers, with the average value of industry funding per researcher in Korea totaling a world-leading $97,900, compared to just $25,800 for American researchers, which placed the United States 14^th in the thirty-nation study. What makes this all the more striking is that American researchers tend to cost more than their Korean counterparts, and yet the latter still receive more funding.

Unfortunately, this report merely continues to present evidence from a long and troubling trend of faltering industry investment in university research in the United States. As ITIF found in its 2011 report University Research: The United States is Behind and Falling, from 2000 to 2008 the United States ranked just 23^rd among 30 leading economies in percent change in business-funded research performed in the higher education sector. In fact, over this period, business funding for U.S. university research actually declined by 7 percent as a share of GDP. By 2008, business funding of U.S. university research fell to just 0.020 percent of GDP, less than two-thirds of the 30-country average of 0.032 percent of GDP.

This is particularly troubling for a number of reasons. First, given the long-running decline in the federal government’s share of contribution to national R&D activity (the federal government would have to invest $110 billion more in R&D than it does today to match its contribution as a share of GDP in 1983), business R&D funding has played a critical role in picking up this slack and maintaining a relatively high national R&D intensity level. Moreover, business funding of university research encourages essential links between commerce and academia, orienting research toward topics and ideas that are more likely to create new businesses, products, and jobs. Given that university researchers, left to their own devices, are not necessarily motivated to work on problems that are relevant to commercial needs, high levels of industry funding of university R&D moves researchers closer to developing new technologies and solving applied engineering challenges that can bolster the competitiveness of a nation’s science and technology-based industries.

That thirteen nations rank ahead of the United States in terms of attracting industry funding for scientific researchers is not accidental. The outcome reflects the intentional efforts that a number of nations have implemented to boost competitiveness by facilitating industry-university collaborations and investing in scientific research. For example, four of the nations that surpass America on this metric—Belgium, Canada, Denmark, and the Netherlands—have implemented collaborative R&D tax credits that provide a more generous credit for business R&D funded at universities. For instance, in the Canadian province of Quebec, businesses receive a refundable tax credit of 35 percent on 80 percent of all research expenditures at universities or public research centers, on top of a federal tax credit of up to 35 percent on all R&D expenditures. As ITIF writes in Creating a Collaborative R&D Tax Credit, almost a dozen nations have established collaborative R&D tax credits, but in the United States, the U.S. R&D credit is actually less generous for research funded at universities. To remedy this, Congress should allow firms to take a flat credit of 20 percent for all collaborative research conducted at universities, at national laboratories, or between research consortia.

Another policy several countries have implemented to incent industry-university collaboration is to allocate a share of federal R&D based on universities’ ability to attract industry R&D. In fact, Sweden, which ranks 8^th in the Times Higher Education study, recently began to allocate 10 percent of its federal R&D funding for universities based on performance indicators, in an effort to make Swedish universities more accountable for results. As Sweden has done, the amount of industry-funded university research should be one of the first variables used in the United Sates when making allocation decisions about the distribution of federal R&D dollars to universities. This could be achieved by requiring the inclusion of data pertaining to a university’s record at attracting industry funding in the evaluation of all National Science Foundation (NSF) research grants.

The United States should also explore a number of other policies to increase the extent of industry-university collaboration. For example, Congress could create a new NSF-industry PhD fellows program that would work by enabling industry to fund individual fellowships of $20,250, with NSF matching industry funds dollar-for-dollar. If Congress allocated an additional $21 million to such a joint industry-NSF STEM PhD fellowship program, this could support an additional 1,000 graduate fellows. Other measures, like increasing federal funding for Industry/University Cooperative Research Centers (I/UCRCs), would also facilitate industry investment in university scientific research.

In short, the Times Higher Education report is just one more showing that America has been resting on its laurels and not innovating. It provides all the more reason why America needs in 2013 a serious and committed Reauthorization of the America COMPETES Act which reaffirms the federal government’s commitment to invest in scientific research and supports the introduction of innovative policies like innovation vouchers, commercialization accelerator grants, and funds for pilot programs supporting experimental approaches to technology transfer and commercialization.

We simply can’t take America’s leadership in global innovation for granted anymore. We must continue to invest and to introduce innovative public policies that support private-sector innovation if America is to maintain its status as the world’s most innovative nation.