Business Investment in R&D Lagging, New Report Finds; Leading Think Tank Calls for More Robust Federal Support

June 4, 2018

WASHINGTON—While U.S. businesses appear to be making robust investments in research and development (R&D), a new report released today by the Information Technology and Innovation Foundation (ITIF), the world’s leading think tank for science and technology policy, finds that the rate of growth for business R&D investment as a share of GDP has been anemic and risks undermining U.S. leadership in innovation. For its innovation economy to remain strong, the report recommends that the United States enact more robust policies to support both business and federal R&D.

“Business R&D has helped establish the United States as the leader in the global innovation economy,” said ITIF Economic Analyst John Wu, author of the report. “But without the necessary support from the federal government, the United States risks falling behind China and other competitors that have made R&D a greater priority.”

While business R&D investment in the United States jumped by two-thirds on an inflation-adjusted basis from $328 billion in 2000 to $458 billion in 2016, the rate of R&D growth as a share of GDP over the same period has been anemic—inching up from 2.61 percent to 2.74 percent. Businesses are also focusing more on near-term product development and investing much less in riskier early-stage basic and applied research. Business investment in basic and applied research peaked in 1991 at 0.55 percent of industry value added and declined to 0.43 percent by 2014. Moreover, the global share of business R&D performed in the United States has fallen significantly in the last decade as other countries have increased private investments to compete in high-value-added industries.

The report offers a series of policy recommendations to spur U.S. business R&D, including:

  • Expanding the Alternative Simplified Credit;
  • Instituting an “innovation box” to support intellectual property;
  • Increasing funding for industry-university partnerships to at least $50 million annually.

Read the report.