America faces at least two challenges in how it funds university researchers. First, it doesn’t fund them enough, and that will likely only worsen as the Trump administration and Musk’s DOGE look under the sofa cushions for savings and target university research. Second, given the existential technology competition America finds itself in with China, too much federally funded research, especially from the National Science Foundation (NSF), is overly basic. It generates knowledge that benefits the world but is only tangentially related to helping American companies compete with China.
Vannevar Bush crafted the original model for the federal government’s key role in science in his 1945 report, The Endless Frontier. Its core principles—1) the government should not pick between disciplines, 2) the government should let scientists decide what to pursue, and 3) science is global—no longer work.
It is time to retire these 80-year-old principles and move on to something new. If the United States is not to lose to China, it must better align university research with critical technologies and ensure that this research more directly supports the needs of U.S. companies.
To do that, federal research funding agencies, especially NSF and the National Institutes of Health (NIH), should prioritize university researchers who have obtained hard financial commitments from industry. If a researcher (or research center) can demonstrate that industry is willing to contribute to their overall research costs, this should “move them to the top of the list” when it comes to awarding federal research grants. The greater the share industry is willing to fund, the higher they should go on the priority list.
The funding wouldn’t be intended to cover all of a researcher’s expenses, but rather to serve as a seal of approval that the research is of interest to industry. By committing real funds, industry can show it has skin in the game. For those who would ask, “If this is important to industry, why doesn’t it pay for all of it?” the answer is externalities.
The federal government should take at least two additional steps to encourage industry to do this. To start, the Department of Justice should provide an exemption from antitrust scrutiny for the formation of research funding alliances in which individual companies contribute to a common industry-based pool—likely administered by industry associations—and university principal investigators and research centers can apply for that money. (This could likely be done under the 1984 Collaborative Research and Development Act.)
To further incentivize participation, Congress should add a provision in the Research and Experimentation Tax Credit that provides a 40 percent credit for company funding of university research.
The university research community will likely oppose such a system because it impinges on their autonomy. But we are clearly in a world where the status quo in science policy no longer cuts it. If universities were wise, they would be open to such bold experiments. Otherwise, they should prepare for more cuts.
Industry will likely have mixed responses—ranging from enthusiasm to indifference. Some industry associations are primarily interested in lower taxes and fewer regulations. But others, even in “traditional” industries, could very well see this as an important tool to help their companies better compete internationally, especially against China. By supporting university research tied to their competitiveness, we can help companies take a slightly longer view of their own interests.
Finally, for budget hawks, this approach has the distinct advantage of costing relatively little. Certainly, the provision prioritizing industry-funded projects costs nothing. And the cost of the collaborative R&D tax credit is not likely to be enormous.
