Research and development spending on a slight upswing

COLUMBUS, Ohio -- U.S. spending for research and development (R&D) should increase about 5 percent to $277 billion in 2001, according to a forecast by Battelle-R&D Magazine in Columbus, Ohio.

Driving the increase is industrial support, which continues to dominate the amount and growth of R&D spending. Tempering the growth, however, is the unpredictable and sometimes skittish state of the "dotcom" world and stock market fluctuations that can influence R&D spending.

Industry will increase its R&D spending -- at a rate that significantly exceeds inflation -- by about 6.5 percent to $190 billion.

Spending by the federal government will increase slightly by 1.3 percent to $72 billion, a rate that is not quite keeping pace with inflation.

Academic institutions and other non-profit organizations will spend about $15 billion in 2001, which is about 6.2 percent more than last year.

"It is important to note that industry is continuing to promote research and development at a healthy rate, even though the growth is less than what we have experienced in recent years," the report states. "In addition, the role of government cannot be under-emphasized, both for the investment that the federal agencies make and the growth environment that has been fostered."

Industrial outlook: "R&D will continue to provide the underpinning of the economy, on both the national and international scene. And it is not just the high-visibility communications, computers, and information technologies, and the entire area of health care -- it is also the technology that leads to more efficient industrial processes, improved transportation, and production and use of all manner of energy resource," says Jules Duga, a Battelle senior researcher and co-author of the report.

Industry will continue to emphasize various forms of partnering and collaborations, including relationships with other industry, federal laboratories and international facilities. Many of these partnerships will most likely continue to concentrate on those aspects of basic and applied research, which are far from commercialization, but which are necessary for the establishment of stronger platforms for future technology growth.

Throughout 2001, industrial support of R&D will continue to increase, rebounding from a combination of cost-cutting and organizational structure modifications, and benefiting from the recent strong expansion of the national and international economy. However, significant upheavals in foreign economic or political stability could influence U.S. business positions and have an ancillary effect on R&D funding.

The federal government also may have a significant influence on R&D spending, the report predicts. Excellent business conditions, a strong economy and enhanced tax revenues continue to fuel a federal budget surplus, thus potentially easing some past pressures on government support of R&D.

"However, the federal budget continues to give very mixed signals about its support of R&D, with major differences between budget authorization and actual expenditures of funds," Duga says. "Just as in private industry, policy is long-term, but practice is often more short-term, and the commitment to change in federal support will not be felt significantly until after the first year of the new administration."

Factoring in the change in administration, continued modest growth of federal commitment to a broad range of R&D programs is expected, if the economy remains strong and the revenue stream continues to flow. No major reversals or initiatives are expected over the short term.

Other trends to note include:

-- Evolving Enterprise: The shape of the R&D enterprise will continue to evolve. The old rules that influenced relationships between funders and performers continue to be redefined. Successful organizations will seek both positions and procedures that will permit flexibility, including reliance on outsourcing, alliances and collaborations.

-- Basic Research: Statistics suggest that industry has been supporting a significant amount of directed basic research, specifically, research that still qualifies for the designation of "basic" but which is associated with the long-term strategies and technologies and projected business area of the corporation.

-- Health research is hot: Recent significant gains in biomedical and health-related R&D will continue. Federal government commitment to health- related R&D has been instrumental in spurring the growth of private industry funding in this area.

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