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Chapter 5. Academic Research and Development

Financial Resources for Academic R&D


Academic R&D is a significant part of the national R&D enterprise.[2] Academic scientists and engineers conduct the bulk of the nation's basic research, about one-third of its total (basic plus applied) research, and 13% of its total R&D. To carry out world-class research and advance the scientific knowledge base, U.S. academic researchers require adequate and stable financial resources and the research facilities and instrumentation that facilitate high-quality work. For a discussion of the sources of the data used in this section, see sidebar, "Data Sources for Financial Resources for Academic R&D."

Academic R&D Within the National R&D Enterprise

Universities and colleges play an important role in the nation's overall R&D effort, especially by contributing to the generation of new knowledge through basic research.[3] Since 1998, basic research performed within institutions of higher education has accounted for more than half of the basic research performed in the United States.

In 2008, U.S. universities and colleges spent $52 billion ($42 billion in constant 2000 dollars) on R&D. Higher education's prominence as an R&D performer increased slightly during the past three decades, rising from about 10% of all R&D performed in the United States in the early 1970s to an estimated 13% in 2008 (figure 5-1 ). For a comparison with other countries, see "International R&D Comparisons" in chapter 4.

Academic R&D involves mostly basic and applied research and little development activity.[4] In 2008, an estimated 96% of academic R&D expenditures went for research (76% for basic and 21% for applied) and 4% for development (appendix table 5-1 ). Universities and colleges accounted for an estimated 31% of the U.S. basic and applied research total in 2008, down from a high of 35% in 2002 but still above the levels prevalent until then (figure 5-1 ). Higher education's share of total U.S. research expenditures had previously increased by 11 percentage points between 1982 and 2002. In terms of basic research alone, the higher education sector is the country's largest performer, currently accounting for an estimated 55% of the national total.


Federal Support of Higher Education R&D

Higher education R&D relies heavily on federal support, along with a variety of other funding sources. The federal government has consistently contributed the majority of the funds (figure 5-2 ).[5] It accounted for about 60% of the $51.9 billion of R&D funds expended by universities and colleges in FY 2008 (appendix table 5-2 ).[6] In current dollars, federally funded academic R&D expenditures rose 2.5% between FY 2007 and FY 2008 to $31.2 billion. After adjustment for inflation, this represents a 0.2% increase from FY 2007 and follows 2 years of slight declines in constant dollars since FY 2005.

Another look at recent trends is provided by federal agency-reported inflation-adjusted obligations for academic R&D—funds going to academic institutions in a given fiscal year, to be spent over the current and succeeding years. In constant 2000 dollars, federal academic R&D obligations peaked in FY 2004 at $22.1 billion and have since declined by almost 7% to an estimated $20.7 billion in FY 2009 (appendix table 5-3 ). Constant dollar federal R&D obligations had grown more than 10% each year between FY 1998 and FY 2001, largely reflecting a commitment to double the R&D budget of the National Institutes of Health (NIH) over 5 years. Consequently, between 1998 and 2004, NIH's share of federal academic R&D funding increased from 57% to 63%.

The American Recovery and Reinvestment Act, signed into law by President Obama on February 17, 2009, provides an additional $18.3 billion in appropriations for federal R&D and R&D facilities and equipment in FY 2009. (See "Federal R&D" in chapter 4.)[7]

The federal government's overall contribution is the combined result of numerous discrete funding decisions made by several R&D-supporting agencies with differing missions and purposes, which in turn affect research priorities in the academic sector. Most of the federal R&D funding to the higher education sector is allocated through competitive peer review (see sidebar, "Congressional Earmarks").

Examining and documenting the funding patterns of the key funding agencies is important to understanding both their roles and that of the federal government overall. For a discussion of a major federal program with the objective of improving the geographical distribution of federal obligations for academic R&D, see sidebar, "EPSCoR: The Experimental Program to Stimulate Competitive Research."

Top Agency Supporters
Six agencies are responsible for most of the federal obligations for higher education R&D, providing an estimated 97% of the $25.7 billion obligated in FY 2009 (appendix table 5-3 ).[8] NIH was by far the largest funder, providing an estimated 65% of total federal academic R&D obligations in FY 2009. The National Science Foundation (NSF) provided an additional 15%, the Department of Defense (DOD) 8%, the Department of Energy (DOE) 4%, the National Aeronautics and Space Administration (NASA) 2%, and the U.S. Department of Agriculture (USDA) 2%.

Agency Support by Character of Work
More than 56% of federal obligations from FY 2007 through FY 2009 funded basic research projects (appendix table 5-4 ). The two agencies funding the majority of academic basic research were NIH and NSF. More than one-third of federal obligations for academic R&D from 2007 through 2009 funded applied research, with NIH providing the vast majority of funds in that category as well. About 5% of R&D obligations went toward development during 2007–09. DOD and NASA were responsible for more than 80% of the small amount of federal academic R&D funds spent on development.


Other Sources of Funding

In contrast to the recent trend in federal R&D funding, higher education R&D funding from nonfederal sources has grown steadily since FY 2004, and grew by 8% (6% in inflation-adjusted terms) between 2007 and 2008 (figure 5-3 ).

  • Institutional funds. In FY 2008, institutional funds from universities and colleges constituted the second largest source of funding for academic R&D, accounting for 20% ($10.4 billion) of the total (appendix table 5-2 ). Institutional funds encompass (1) institutionally financed research expenditures and (2) unrecovered indirect costs and cost sharing. They exclude departmental research, a more informal type of research that is usually coupled with instructional activities in departmental budget accounts and thus does not meet the Office of Management and Budget definition of organized research. The share of support represented by institutional funds increased steadily from 12% in 1972 to 19% in 1991 and has since remained at roughly that level. Funds for institutionally financed R&D may derive from general-purpose state or local government appropriations; general-purpose awards from industry, foundations, or other outside sources; endowment income; and gifts. Universities may also use income from patents, licenses, or patient care revenues to support R&D. (See section "Patent-Related Activities and Income" later in this chapter for a discussion of patent and licensing income.)
  • State and local government funds. State and local governments provided 7% ($3.4 billion) of higher education R&D funding in FY 2008. Even though their absolute funding total continues to rise annually, the nonfederal government share has declined since its peak of 10.2% in the early 1970s. However, these figures are likely to understate the actual contribution of state and local governments to academic R&D, particularly for public institutions, because they only reflect funds that these governments directly target to academic R&D activities.[9] They exclude any general-purpose state or local government appropriations that academic institutions designate and use to fund separately budgeted research or pay for unrecovered indirect costs; such funds are categorized as institutional funds.[10] (See chapter 8, "State Indicators," for some indicators of academic R&D by state.)
  • Industry funds. Industrial support accounts for the smallest share of academic R&D funding (6%), and support of academia has never been a major component of industry-funded R&D. After a 3-year decline between 2001 and 2004, industry funding of academic R&D increased for the fourth year in a row, to $2.9 billion in FY 2008. (See appendix table 4-5 for time-series data on industry-reported R&D funding.)
  • Other sources of funds. In FY 2008, other sources of support accounted for 8% ($4.0 billion) of academic R&D funding, a level that has stayed about the same since 1972. This category of funds includes but is not limited to grants and contracts for R&D from nonprofit organizations and voluntary health agencies and all other sources not included in the other categories.

Expenditures by Field and Funding Source

Investment in academic R&D historically has been concentrated in a few individual S&E fields. The life sciences have for decades accounted for more than half of all academic R&D expenditures. In FY 2008, they accounted for approximately 60% of both the federal and nonfederal totals (appendix table 5-5 ). Within the life sciences, the medical sciences accounted for 33% of all academic R&D expenditures and the biological sciences accounted for another 19% (appendix table 5-5).[11]

Between 1998 and 2008, R&D expenditures in the medical sciences almost doubled, from $7.7 billion to $14.1 billion in constant 2000 dollars (figure 5-4 ), changing the distribution of academic R&D expenditures across the various broad S&E fields. The life sciences gained 4 percentage points over the period, driven by a 4-percentage-point rise in the share of medical sciences, from 29% to 33% of the total (appendix table 5-6 ). The physical sciences lost 2 percentage points, from 10% to 8% of the total. Figure 5-5 shows share gains and losses in both the 1990–2000 and 2000–08 periods.

Of the $31.2 billion in academic R&D expenditures funded by the federal government, R&D projects in the life sciences accounted for $18.7 billion (60%) in FY 2008 (appendix table 5-7 ). The Department of Health and Human Services (HHS), notably NIH, contributes the majority of this life science funding (83%). Although their share of total academic R&D funding is much smaller, DOD, DOE, NASA, and NSF have more diversified funding patterns (figure 5-6 ). In FY 2008, NSF was the lead federal funding agency for academic research in the physical sciences (29% of federally funded R&D expenditures); mathematical sciences (47%); computer sciences (42%); and environmental sciences (34%). DOD was the lead funding agency in engineering (32%).

The proportion of academic R&D expenditures funded by the federal government also varies significantly by field (appendix table 5-8 ). The field with the largest proportion of federal funding in FY 2008 was atmospheric sciences, at 80%, followed by physics (76%), mathematical sciences (72%), and aeronautical/astronautical engineering (72%). The fields with the smallest percentages of federal funding in FY 2008 were economics (32%), political science (37%), and agricultural sciences, which received less than 30% of their funds from federal sources.

Between 1975 and 1990, the federally financed proportion of R&D spending declined in all of the broad S&E fields (appendix table 5-8 ).[12] Since 1990, those declines have either stabilized or reversed, and the federal share reported in FY 2008 was higher than the 1990 share for all fields except mathematical sciences and physical sciences.


Non-S&E R&D Expenditures

Academic institutions spent a total of $2.2 billion on R&D in non-S&E fields in FY 2008 (table 5-1 ).[13] This represents an increase of 9% over the $2.1 billion spent in FY 2007.[14] This $2.2 billion is in addition to the $51.9 billion expended on S&E R&D. The largest amounts reported for R&D in non-S&E fields were for education ($880 million), business and management ($325 million), and humanities ($254 million). The federal government funds smaller proportions of R&D in non-S&E than in S&E fields: 37% of the $2.2 billion in non-S&E R&D in FY 2008.


Academic R&D by Institution

The previous sections examined R&D for the entire academic sector. This section looks at some of the differences across institution types.

Funding for Public and Private Universities and Colleges
Public and private universities rely on the same major sources to fund their R&D projects, but the relative contribution of those sources differs substantially (figure 5-7 ; appendix table 5-9 ). In FY 2008, the federal government provided 72% of the R&D funds spent by private institutions, compared with 55% for public institutions. Conversely, public institutions received approximately 9% of their $35.3 billion in R&D expenditures from state and local governments, compared with 2% of private institutions' $16.6 billion.

Public academic institutions also supported a larger portion of their R&D from their own sources (24% versus 12% at private institutions). Their larger proportion of institutional R&D funds may reflect general-purpose state and local government funds that public institutions have directed toward R&D.[15] Private institutions in turn report a larger proportion of unrecovered indirect costs (53% of their institutional total in 2008, versus 42% for public institutions). For both types of institutions, these shares have declined over the past decade, from 64% to 53% for private institutions and from 46% to 42% for public institutions (figure 5-8 ).

Both public and private institutions received approximately 6% of their R&D support from industry in FY 2008. The share of total R&D expenditures funded by all other sources was also comparable, at 7% and 9%, respectively.

Distribution of R&D Funds Across Academic Institutions
Academic R&D expenditures are concentrated in a relatively small number of institutions. In FY 2008, 679 institutions reported spending at least $150,000 on S&E R&D. Of these, the top-spending 20 accounted for 30% of total academic R&D spending and the top 100 for 80% of all academic R&D expenditures. Appendix table 5-10 presents the detailed distribution among the top 100 institutions. The concentration of academic R&D funds among the top 100 institutions has stayed constant over the past two decades (figure 5-9 ), as have the shares held by both the top 10 and the top 20 institutions.

It should be noted that the composition of the universities in each of these groups varies over time as universities increase or decrease their R&D activities. For example, 5 of the top 20 institutions in FY 1988 were no longer in the top 20 in FY 2008.

A similar concentration of funds is found among university performers of non-S&E R&D. The top 20 performers accounted for 36% of the total non-S&E R&D expenditures in FY 2008 (appendix table 5-11 ).

R&D Collaboration Between Higher Education Institutions
One way to measure the extent of collaboration among academic institutions is to examine how much of their total R&D expenditures was passed through to other academic institutions or received by institutions as subrecipient funding. R&D funds for joint projects that were passed through universities to other university subrecipients more than doubled from FY 2000 to FY 2008, from $699 million to $1.7 billion (figure 5-10 ; appendix table 5-12 ). This amount represents 3.3% of total academic R&D expenditures in FY 2008, compared with 2.3% of the total in FY 2000. In FY 2008, 90% ($1.5 billion) of these pass-through funds came from federal sources.

Not coincidentally, universities receiving pass-through funds from other universities likewise reported a rapid increase in subrecipient R&D expenditures between FY 2000 and FY 2008, from $669 million to $1.7 billion. More than 90% ($1.6 billion) of these subrecipient funds originated from federal sources.[16]

Overall, $3.5 billion was passed through institutions to all types of subrecipients in FY 2008 (including both academic and nonacademic institutions), and $3.9 billion was received as subrecipient funding from all types of pass-through entities (appendix table 5-12 ). Again, the majority of these funds were from federal sources (87% of pass-through funds and 90% of subrecipient expenditures).


Academic R&D Equipment

Research equipment is an integral component of the academic R&D enterprise. This section examines expenditures for moveable research equipment necessary for the conduct of organized research projects (e.g., computers, telescopes) and the federal role in funding these expenditures.

In FY 2008, about $1.9 billion in current funds was spent for academic research equipment (appendix table 5-13 ).[17] In constant dollars, this represents an increase of 1.0% from FY 2007 but a decline of more than 10% from the 2004 level. Overall, expenditures for R&D equipment have risen 61% in real dollars since 1985. About 80% of FY 2008 expenditures were concentrated in three fields: the life sciences (43%), engineering (23%), and the physical sciences (16%) (appendix table 5-13). After a period of steady growth between 2001 and 2004, equipment expenditures in the physical sciences, medical and biological sciences, and engineering have declined since FY 2005 (figure 5-11 ).

Federal funds for research equipment are generally received as part of research grants or as separate equipment grants. The share of federal funding for research equipment varies significantly by field (appendix table 5-14 ). The field of atmospheric sciences had the largest proportion of federally funded R&D equipment (85%) in FY 2008. The overall share of research equipment funded by the federal government fluctuated between 56% and 64% over the past two decades.

Notes

[2] The academic R&D totals presented here exclude expenditures at federally funded research and development centers (FFRDCs) associated with universities. Those expenditures are tallied separately and are examined in greater detail in chapter 4. FFRDCs and other national laboratories (including federal intramural laboratories) also play an important role in academic research and education, providing research opportunities for both students and faculty at academic institutions and highly specialized shared research facilities.
[3] For this discussion, the terms universities and colleges, higher education, and academic institutions are used interchangeably and include only those schools that grant a bachelor's or higher degree in science or engineering and spend at least $150,000 for separately budgeted R&D in S&E.
[4] For the definitions used in NSF surveys and a fuller discussion of these concepts, see chapter 4 sidebar, "Definitions of R&D."
[5] The discussion of federal support for academic R&D includes both obligation data from the funding source (federal agencies) and expenditures data from the performer (universities and colleges).
[6] The academic R&D reported here includes separately budgeted R&D and related recovered indirect costs as well as institutional estimates of unrecovered indirect costs associated with externally funded R&D projects, including mandatory and voluntary cost sharing.
[7] This funding was required to be obligated by the end of FY 2009; however, the expenditures for these projects will span several years.
[8] Performing and funding series may differ for many reasons. For a more detailed discussion of the differences between these two sources, see chapter 4 sidebar, "Tracking R&D: Gap Between Performer- and Source-Reported Expenditures."
[9] Federal grants and contracts and awards from other sources that are passed through state and local governments to academic institutions are credited to the original provider of the funds.
[10] This follows a standard of reporting that assigns funds to the entity that determines how they are to be used rather than to the one that necessarily disburses the funds.
[11] The medical sciences include fields such as pharmacy, neuroscience, oncology, and pediatrics. The biological sciences include fields such as microbiology, genetics, epidemiology, and pathology. These distinctions may be blurred at times because boundaries between fields often are not well defined.
[12] In this section of the chapter and the section "Doctoral Scientists and Engineers in Academia," the broad S&E fields refer to the computer sciences, environmental sciences (sometimes referred to as "earth, atmospheric, and ocean sciences"), life sciences, mathematical sciences, physical sciences, psychology, social sciences, other sciences (those not elsewhere classified), and engineering. The more disaggregated S&E fields are referred to as "subfields." The fourth section of the chapter, "Outputs of S&E Research: Articles and Patents," groups the broad fields and subfields slightly differently (see sidebar "Bibliometric Data and Terminology" and appendix table 5-24).
[13] Data reported on non-S&E R&D expenditures are slightly lower-bound estimates for the national totals because NSF did not attempt to estimate for the 2.7% nonresponse rate on this item. Also, only institutions that conducted at least $150,000 of S&E R&D were surveyed. The activities of institutions that do not perform S&E R&D (but may conduct substantial amounts of non-S&E R&D) are not reflected here.
[14] Data on non-S&E R&D expenditures have only been collected since FY 2003, and response rates for years prior to 2006 make trend data unreliable.
[15] Another hypothesis is that some of the difference may be due to many public universities not having the incentive to negotiate full recovery of indirect costs of research because such funds are frequently returned to the state treasury rather than the institution.
[16] Amounts reported as passed through to higher education subrecipients do not precisely equal amounts reported as received by those subrecipients due to differences in timing and in the item response rates for these two survey questions each year.
[17] Because of rising capitalization thresholds, the dollar threshold for inclusion in the equipment category has likely changed over time. Generally, university equipment costing less than $5,000 would be classified under the cost category of "supplies."
 

Science and Engineering Indicators 2010   Arlington, VA (NSB 10-01) | January 2010

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