NATIONAL SCIENCE FOUNDATION
Directorate for Social, Behavioral
and Economic Sciences
NSF 99-317 December 23, 1998
by Alan I. Rapoport
What are the Sources of Funding for Academically Performed R&D?
The federally financed share of academic R&D had been declining during the 1970s and 1980s but stabilized at around 60 percent in the 1990s.
Although industry R&D support to academia grew faster than funds from any other source, industry accounts for only 7 percent of the total.
Adequate financial support for research and development (R&D) activities at U.S. universities and colleges is essential in enabling academic researchers to carry out world-class research. Such support comes from a number of sources whose relative contribution has been changing over the past several decades. Changes in support patterns tend to raise concern in the academic science and engineering community about potential impacts on overall academic R&D activities. This Issue Brief focuses on the main sources of financial support for academic R&D and the changes that have taken place over the past two decades.
Overall Sources of Support
Institutional funds constitute the second largest source of academic R&D funding. The major sources of institutional R&D funds are (1) general-purpose state or local government appropriations, particularly for public institutions; (2) general-purpose grants from industry, foundations, or other outside sources; (3) tuition and fees; (4) endowment income; and (5) gifts that are not restricted to research by the donor. Other potential sources of institutional funds are income from patents or licenses and income from patient care revenues. The share of support represented by institutional funds has been increasing fairly steadily since 1970. In that year, institutional funds accounted for about 11 percent of all academic R&D expenditures; the estimated 1998 share is just over 19 percent.
The share of academic R&D funding provided by state and local governments declined from 10 to 8 percent between 1970 and 1980, stayed around the 8 percent level between 1980 and 1991, and declined further during the 1990s, nearly reaching an estimated 7 percent in 1998. This share, however, only reflects funds directly targeted to academic R&D activities and does not include general-purpose state or local government appropriations that may be used for separately budgeted research or to cover unreimbursed indirect costs or cost sharing. Consequently, the actual contribution of state and local governments to academic R&D will be understated, particularly for public institutions.
The funds provided for academic R&D by the industrial sector grew faster than did funding from any other source during the past three decades, although they still account for one of the smallest shares of funding. Industry increased its share from slightly below 3 percent in 1970 to about 4 percent in 1980 and about 7 percent in 1990, where it has remained since. Industry's contribution to academia represented an estimated 1.3 percent of all industry-funded R&D in 1998, compared to 0.8 percent in 1980 and 0.6 percent in 1970. However, this relative contribution has not grown since 1994.
Other sources of support include grants for R&D from nonprofit organizations and voluntary health agencies, gifts from private individuals that are restricted by the donor to research, and all other sources restricted to research purposes and not included in the other categories. This source of academic R&D support has stayed fairly constant at about 7 percent during the past three decades.
These various funding sources often have different research priorities. The Federal sector primarily supports basic research at academic institutions72 percent of its estimated 1998 funding went to basic versus 20 percent to applied research. Nonfederal sources, on the other hand, provide a somewhat larger share of their estimated 1998 support for applied research (63 percent for basic and 30 percent for applied research). As a consequence of this differential emphasis, 63 percent of the basic research performed at universities and colleges is supported by the Federal Government while only 49 percent of the applied research is so supported.
Sources of Support by Broad S&E Field
This Issue Brief was prepared by:
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 For a fuller discussion of academic R&D, see National Science Board, Science and Engineering Indicators-1998, NSB-98-1 (Washington, DC: U.S. Government Printing Office, 1998), Chapter 5.
 The academic R&D funding reported here includes only separately budgeted R&D and institutions' estimates of unreimbursed indirect costs associated with externally funded R&D projects, including mandatory and voluntary cost sharing. It does not include departmental research, and thus excludes funds-notably for faculty salaries-in cases where research activities are not separately budgeted.
 Institutional funds are separately budgeted funds that an academic institution spends on R&D from unrestricted sources, unreimbursed indirect costs associated with externally funded R&D projects, and mandatory and voluntary cost sharing on Federal and other grants.
 Some of the growth in institutional R&D funds may be due to accounting changes, including both a shift of departmental research to separately budgeted research and increased institutional ability to calculate unreimbursed indirect costs, including mandatory and voluntary cost sharing.
 See National Science Foundation/Division of Science Resources Studies, National Patterns of R&D Resources: 1998, forthcoming (Arlington, VA: 1998).
 For more details and the latest data on academic R&D performance by type of R&D performed and sources of funds, see National Science Foundation/Division of Science Resources Studies, National Patterns of R&D Resources: 1998, forthcoming (Arlington, VA: 1998). Data are not available on specific nonfederal sources by S&E field.
 Data were not collected until 1980 for detailed fields within engineering and for the atmospheric, earth, and oceanographic sciences.