For nearly 50 years, the Cold War was the duct tape that held U.S. research and development efforts together. For obvious reasons, there was both public and private commitment to R&D, with real-dollar R&D expenditures growing three times faster than the GDP between 1953 and 1968. In fact, the U.S. led the world in R&D funding in the 1960s, spending 25 percent more than other industrial countries. Since then, however, commitment to R&D has fallen faster than the Berlin Wall, with the growth in R&D spending currently lagging behind the growth in GDP. At 2.6 percent of GDP, the U.S. today spends less on R&D than both Japan (3 percent) and Germany (2.8 percent). Five years ago, U.S. companies made up three-quarters of the world's top 20 R&D spenders: Today, only seven companies are American.
Year by year, federal commitment to R&D has decreased, too. In 1996, according to the Battelle Memorial Institute, the federal government will spend an estimated $60.4 billion (out of a budgeted $71.5 billion) on R&D, about a half-percent less than in 1995. The Clinton administration's proposed 1997 budget ups the R&D ante to $72.7 billion, although that figure is far from being approved. (Clinton's proposal includes, for instance, $345 million for NIST's Advanced Technology Program, which was zeroed out in the 1996 budget.)
As with schemes to privatize everything from national parks to public schools, Washington is counting on the private sector to pick up the slack. Prior to 1980, the federal government funded the bulk of R&D spending. That's changed, with industry now funding approximately 60 percent of the nearly $174 billion total U.S. R&D expenditures, while government chips in about 35 percent (universities and other nonprofit institutions contribute the rest). Microsoft's R&D spending, for instance, rose 66 percent to $364 million (17 percent of total sales), compared to 1995 in which the company spent $219 million (14 percent of sales). R&D spending for Texas Instruments will also increase in 1996 to $1.1 billion, mostly in the areas of DSP, advanced memory and microprocessors, digital-imaging technology, and wireless data communication. IBM is spending on R&D at the rate of $2.7 billion a year, while (prior to its breakup) AT&T's annual R&D budget was in the neighborhood of $3.4 billion. Okay, a billion here, a billion there, and all of a sudden we're talking real money. Still, the real big spenders include Japan's NTT (expected to spend $4.4 billion in 1996) and Hitachi (weighing in at $6.2 billion).
By far, telecommunications pockets the biggest chunk of industrial U.S. R&D change, chewing up $22.1 billion in 1996. Computer technology eats up $12.8 billion, while $5.9 billion is spent on software-specific R&D. These figures are somewhat misleading, since software is likely included in both telecommunication and computer R&D (not to mention the $17.8 billion in automotive research or the $15.4 billion in aerospace).
Clearly, U.S R&D is undergoing fundamental restructuring. Many companies, for example, are decentralizing corporate R&D efforts. Instead of monolithic, corporately funded R&D departments, narrowly defined research efforts are being dovetailed into individual business units, while some traditional R&D roles are being redefined for operational technical support.
Another trend is toward R&D outsourcing to both domestic and international companies, particularly as large U.S. companies continue to downsize. R&D Magazine reported that at approximately one-fourth of the companies it surveyed, research was being conducted by other firms-typically either small, focused independent-research laboratories, or large companies (such as Microsoft or Intel) trickling down R&D to customers. (About 68 percent of U.S. companies acquire new technology from their suppliers.) Another trend is toward offshore outsourcing, often involving subsidiaries of U.S. companies. Apple, for example, announced last fall it would spend more than $40 million for R&D in Singapore.
Trends related to the lack of support for R&D have some economists worried. Department of Commerce Under Secretary of Technology Mary Good points out that the trade balance of products using advanced-technology processes by R&D-intensive companies has shifted from a surplus of $256.6 billion in 1991 to a deficit of $4.34 billion in 1994.
Technological leadership is crucial to the U.S. economy. But to maintain this position, the country needs to get serious again about supporting research and development-and it won't take much for Washington to jump start the process. For one thing, the federal government can continue to fund basic academic research at current or higher levels (65 percent of U.S. companies acquire new technology from universities). Secondly, the government can ensure the longevity of R&D tax credits, thereby encouraging continued investment. Finally, the government can help build an infrastructure to support cooperative research.
Unfortunately, most of our representatives in Washington still think research is what you do when perusing a menu at a lobbyist-paid lunch, and that development means sidling up to campaign contributors. Until that paradigm shifts, the slide in R&D leadership will continue.