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Chapter 5. Academic Research and Development

Expenditures and Funding for Academic R&D

Academic R&D is a key component of the overall U.S. R&D enterprise.[1] Academic scientists and engineers conduct the bulk of the nation’s basic research and are especially important as a source of the new knowledge that basic research produces. Indicators tracking the status of the financial resources, research facilities, and instrumentation that are used in this work are discussed in this and the next section of the chapter (for an overview of the sources of data used, see sidebar, “Data on the Financial and Infrastructure Resources for Academic R&D”).

National Academic R&D Expenditures

Expenditures by U.S. colleges and universities on R&D in all fields totaled $65.8 billion in 2012 (appendix table 5-1).[2] When adjusted for inflation, academic R&D fell by 1% from 2011 to 2012.[3] Expenditures in life sciences, physical sciences, and social sciences dropped by between 2% and 3% after adjusting for inflation. Expenditures in computer sciences and mathematical sciences increased by around 3% after adjusting for inflation; in other broad fields of science, expenditures remained relatively constant. Engineering expenditures increased by just below 1% after adjusting for inflation.

One-time ARRA funding was responsible for a sizable amount of academic R&D expenditures from 2010 to 2012 (over $9.3 billion). ARRA expenditures peaked in 2011 at $4.2 billion. In 2010 and 2012, they were similar—around $2.5 billion in each of these years (table 5-1). Looking across the period from 2009 to 2012, academic R&D expenditures would have increased by an average annual rate of 1.8% after adjusting for inflation if ARRA had not been enacted; with ARRA funds, these expenditures increased by an average annual rate of 3.1% after adjusting for inflation.[4] ARRA expenditures are expected to appear in the academic R&D total through 2014, in diminishing amounts.

A methodological change also contributed to the growth in reported academic R&D expenditures in recent years. As a result of a more extensive screening effort during the first year of the redesigned HERD survey to include institutions with substantial non-S&E R&D, 170 institutions were added to the survey population. The additional universities accounted for $533 million in total R&D expenditures in FY 2011.

Academic R&D spending is primarily for basic research—in 2012, 64% was spent on basic research, 27% was spent on applied research, and 9% was spent on development (table 5-2).[5] The estimated percentage of spending on basic research is somewhat less than institutions had reported throughout the late 1990s and the 2000–09 decade (appendix table 5-2). Improvements to the survey question in 2010 likely affected how universities reported these shares.[6]

Academic institutions spent a total of $3.5 billion on R&D in non-S&E fields in FY 2012, an increase of 7% (before adjusting for inflation) over the $3.3 billion spent in 2011 (table 5-3).[7] The federal government funds a much smaller proportion of R&D in non-S&E than in S&E fields: 34% of the $3.5 billion spent on non-S&E R&D in FY 2012, compared to 63% of the $62.3 billion spent that year on S&E R&D. The largest amounts reported for R&D in non-S&E fields were for education ($1.2 billion), business and management ($440 million), and humanities ($340 million).

Sources of Support for Academic S&E R&D

Academic R&D relies on funding support from a variety of sources, including the federal government, universities’ and colleges’ own institutional funds, state and local government, business, and other organizations (appendix table 5-3). The federal government has consistently provided the majority of funding for academic R&D in S&E. In 2012, the National Research Council reviewed the state of U.S. research universities and issued a report exploring ways to strengthen the partnership between government, universities, and industry in support of national goals (see the sidebar “National Research Council: Recommendations to Strengthen America’s Research Universities”).

Federal Expenditures

The federal government provided $38.9 billion (63%) of the $62.3 billion of academic spending on S&E R&D in FY 2012 (figure 5-1).[8] The federal share was somewhat higher in the 1970s, although the federal government has long contributed the majority of funds for S&E academic R&D (figure 5-2). For the most part, federal R&D funding to the academic sector is allocated through competitive peer review.

Federal expenditures for S&E academic R&D increased more from 2009 to 2012 (4.5% inflation-adjusted annual growth rate) than they did from 2005 to 2008 (–0.6% inflation-adjusted annual growth rate). The higher growth rates in later years largely reflect ARRA expenditures. Universities reported $4.2 billion in expenditures funded by ARRA in FY 2011 and an additional $2.4 billion in ARRA expenditures in FY 2012 (table 5-1). The distribution of ARRA funds across institutions—with just under three-quarters of these funds spent at the nation’s most research-intensive schools—generally mirrored the overall federal distribution of funds for academic R&D discussed below.

Basic research activities represented 65% of federal expenditures for academic R&D in FY 2012 (table 5-2).[9] Applied research represented 27%, and development activities accounted for the remaining 8%. The distribution in FY 2011 was very similar. Chapter 4 provides further detail on federal obligations for academic R&D, by character of work.

Top Federal Agency Supporters

Six agencies are responsible for the vast majority of annual federal expenditures for academic R&D: the Department of Health and Human Services (HHS), in particular, the National Institutes of Health (NIH); the National Science Foundation (NSF); the Department of Defense (DOD); the Department of Energy (DOE); the National Aeronautics and Space Administration (NASA); and the Department of Agriculture (USDA). In federal FY 2012, these six agencies represented over 92% of the estimated $38.9 billion federal expenditures for academic S&E R&D (appendix table 5-4; chapter 4 provides data on these agencies’ obligations for academic R&D).[10]

Among these six agencies, HHS is by far the largest funder, providing about 56% of total federal academic S&E R&D expenditures in FY 2012. NSF and DOD follow HHS, each providing between 12% and 13%; DOE, NASA, and USDA provided smaller shares of between 3% and 5% of total federal academic S&E R&D expenditures in FY 2012. From 2003 to 2012, the relative ranking of the top six funding agencies in terms of academic S&E R&D expenditures has remained relatively stable (table 5-4).

The federal government’s overall support for academic R&D is the combined result of numerous discrete funding decisions made by the R&D-supporting federal agencies, with input from the White House and Congress. Varying missions, priorities, and objectives affect the level of funds that universities and colleges receive as well as how they are spent. Broad geographic distribution of academic research capability and federal funding of academic R&D is one such objective. The Experimental Program to Stimulate Competitive Research (EPSCoR) is a long-standing, multiagency federal program that seeks to increase the geographical dispersion of federal support for academic R&D. An overview of the program and recent statistics on its activities are presented in the sidebar “Experimental Program to Stimulate Competitive Research.

Other Sources of Funding

Notwithstanding the continuing dominant federal role in academic S&E R&D funding, nonfederal funding sources have also grown steadily over the past 15 years (figure 5-1). Adjusted for inflation, annual growth in nonfederal funding for academic R&D averaged almost 4% from 1996 to 2012.

  • University and college institutional funds. In FY 2012, institutional funds from universities and colleges comprised the second-largest source of funding for academic S&E R&D, accounting for over 19% ($12.1 billion) of the total (appendix table 5-5). The share of support represented by institutional funds has remained near 20% since 1990 (appendix table 5-3). In addition to internal funding from general revenues, institutionally financed R&D includes unrecovered indirect costs and committed cost sharing.[11]
  • State and local government funds. State and local governments provided 5.5% ($3.4 billion) of academic S&E R&D funding in FY 2012. The state and local government funding share has declined from a peak of 10% in the early 1970s to below 6% in recent years. 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 reflect only funds that these governments directly target to academic R&D activities.[12] They exclude any general-purpose, state government, or local government appropriations that academic institutions designate and use to fund separately budgeted research or to pay for unrecovered indirect costs; such funds are categorized as institutional funds. (See chapter 8, “State Indicators,” for some indicators of academic R&D by state.)
  • Nonprofit funds. Nonprofit organizations provided 5.9% ($3.7 billion) of academic S&E R&D funding in FY 2012, a slightly higher share than that provided by state and local governments. A relatively large share of S&E nonprofit funding (73%) is directed toward R&D in life sciences. Life sciences comprise somewhat less (60%) of total federal funding for S&E academic R&D (appendix table 5-5).
  • Business funds. At $3.2 billion in FY 2012, support from the business sector accounts for the smallest share of academic S&E R&D funding (5.1%). Support for academia has never been a major component of business-funded R&D in the United States, although it is in some other countries (figure 5-3).
  • Other sources of funds. In FY 2012, all other sources of support, such as foreign-government funding or gifts designated for research, accounted for less than 2% (just under $1 billion) of academic S&E R&D funding.

Academic R&D Expenditures, by Field

Investment in academic S&E R&D is distributed across eight broad fields, including life sciences, engineering, physical sciences, environmental sciences, social sciences, computer sciences, psychology, and mathematical sciences (appendix table 5-5). Expenditures have long been concentrated in life sciences, which have received more than half of all academic R&D expenditures for more than three decades. Life sciences consist primarily of medical sciences, biological sciences, and agricultural sciences. In FY 2012, academic R&D in life sciences accounted for $37.2 billion (60%) of the $62.3 billion academic S&E R&D total. R&D projects in life sciences constituted a slightly smaller share—58%—of federally supported academic S&E R&D that year.

Within life sciences, medical sciences accounted for 55% of the total academic R&D; biological sciences accounted for another 31%. Adjusted for inflation, academic R&D expenditures in medical sciences almost doubled from FY 1999 to FY 2011 (figure 5-4) and then dropped slightly in FY 2012. The sizeable increase from FY 1999 to FY 2011 resulted, in part, from a near-doubling of NIH’s budget from 1998 to 2003. Academic R&D expenditures in biological sciences (and in life sciences as a whole) increased by about 80% from FY 1999 to FY 2011 after adjusting for inflation. As with medical sciences, academic R&D expenditures in biological sciences dipped slightly in FY 2012. Meanwhile, expenditures in agricultural sciences rose slightly from FY 2011 to FY 2012.

The other broad fields of S&E experienced different rates of growth in recent years. Growth in inflation-adjusted academic R&D expenditures from FY 1999 to FY 2012 was greater in engineering (82%) than in environmental sciences (35%), physical sciences (37%), or social sciences (29%). Inflation-adjusted expenditures for computer sciences and mathematical sciences increased by from 50% to 60% from FY 1999 to FY 2012, and expenditures for psychology doubled, although the growth in these fields started at lower bases than the other broad fields of S&E (figure 5-4). Certain smaller fields within the broad fields have experienced steady growth in recent years. For example, academic R&D expenditures for astronomy, a field within physical sciences, although small relative to other fields, have increased steadily in recent years (appendix table 5-1). Even after adjusting for inflation, academic expenditures for astronomy grew by 34% from 2005 to 2012. Similarly, within the social sciences, sociology has also seen steady growth in recent years; from 2005 to 2012, expenditures increased by 24% after adjusting for inflation.

Agencies differ in the extent to which they focus funds on various fields of S&E (figure 5-5). HHS—primarily NIH—supports the vast majority of federal funding in life sciences (84%) and is also the lead funding agency in psychology and the social sciences. By contrast, and while their shares of total academic R&D funding are much smaller, DOD, DOE, NASA, and NSF have more diversified funding patterns. In FY 2012, NSF was the lead federal funding agency for academic research in physical sciences, mathematics, computer sciences, and environmental sciences. DOD was the lead funding agency in engineering.

Federal funding has played a larger role in overall support for some fields than others (appendix table 5-5). The federal government is the dominant funder in S&E fields such as atmospheric sciences (82% in FY 2012), physics (77%), and aeronautical and astronautical engineering (76%). It plays a smaller role in other S&E fields, such as agricultural sciences (34%).

The federally financed proportion of R&D spending in all of the broad S&E fields has generally been stable or has increased since 1990.[13] This reverses the trend between 1975 and 1990, when the federal share had declined in all the broad fields.

Academic R&D, by Institution Type

The prior discussion examined R&D for the academic sector as a whole. This section discusses some of the differences in S&E R&D conducted by public and private universities and colleges. Although public and private universities rely on the same major sources of S&E R&D funding, the importance of the different sources varies substantially (figure 5-6). For example, endowments generally provide a larger share of total revenue at private universities than at public universities, while state appropriations provide a larger share of total revenue at public universities. (See the section “Trends in Higher Education Expenditures and Revenues” in chapter 2 for a discussion of average university revenue and expenditures per student at different types of institutions.)

R&D Expenditures at Public and Private Universities and Colleges

In FY 2012, public institutions spent $41.6 billion in academic S&E R&D, and private institutions spent $20.6 billion, about one-half as much (appendix table 5-3). Similarly, of the top 100 academic institutions in academic R&D expenditures in 2012, two-thirds were public universities and colleges, and one-third were private schools (appendix table 5-6).

The federal government provided the majority of the S&E R&D funds that public and private institutions spent on R&D in FY 2012 (just under 60% and just over 70%, respectively). Public institutions received around 7% of their S&E R&D funds from state and local governments, while private institutions received a little less than 2%.

At both public and private academic universities, institutions’ own funds were a significant source of support for S&E R&D expenditures. Public academic institutions supported a larger portion of their S&E R&D from their own sources—22%, compared to 13% at private institutions. This larger proportion of institutional R&D funds in public institutions may reflect the general-purpose state and local government funds that public institutions directed toward R&D. Private institutions, in contrast, reported a larger proportion of unrecovered indirect costs (43% of their institutional total in FY 2012 versus 31% for public institutions).[14] Private institutions also reported a larger proportion of cost sharing (14% of their institutional total in FY 2012 versus 8% for public institutions).

Public and private institutions both received 5%–6% of their R&D support from business in FY 2012. Nonprofit organizations funded 5.5% of total R&D expenditures in public institutions and 7.4% in private institutions. Funding from all other sources was less than 2% in both public and private institutions.

Distribution of R&D Funds across Academic Institutions

Academic R&D expenditures are concentrated in a relatively small number of institutions. In FY 2012, 907 out of a total of approximately 2,250 baccalaureate-, master’s-, and doctorate-granting institutions reported spending at least $150,000 on R&D. Of these, the top-spending 20 institutions accounted for 31% of total academic S&E R&D spending, and the top-spending 100 institutions accounted for 79% of this spending. Although there were slight shifts in the share of academic S&E R&D expenditures accounted for by the top 20 and top 100 institutions in recent years, the relative shares have been remarkably stable over the past two decades (figure 5-7). Even so, the identities of the universities in each of these groups have varied over time. The top 100 institutions in S&E R&D are listed in appendix table 5-6.

R&D Collaboration between Academic Institutions

Research collaboration involving multiple institutions is a growing trend. Contributing to this growth are federal initiatives to encourage collaborative research and also technological advances that facilitate communication and provide opportunities to mobilize specialized skills beyond the capacity of an individual institution. Opportunities to share risk and increase research credibility have also contributed to the growth of collaborative R&D (Cummings and Kiesler 2007). Academic R&D collaboration is notably evident in the growth of jointly authored research articles (for details, see the section “Outputs of Academic S&E Research: Articles and Patents” in this chapter).

This trend is also evident in flows of funds among institutions to support collaborative research activities. One measure of this research collaboration is the amount of total expenditures for R&D that universities pass through to others, including academic institutions and other entities. Available data on pass-through funding encompass S&E R&D from 2000 to 2009 and total R&D (including non-S&E as well as S&E funds) from 2010 to 2012. As with overall academic R&D funding, pass-through funding arrangements are heavily concentrated in the most research-intensive institutions.

Between FY 2000 and FY 2009, pass-through funding for collaborative projects among universities and colleges grew more rapidly (although from a much lower base) than the decade’s growth in overall academic R&D expenditures (appendix table 5-7; see also Hale [2012]). In FY 2000, total academic S&E R&D expenditures stood at $30.1 billion; this grew to $54.9 billion in FY 2009, an increase of 47% after adjusting for inflation. In contrast, the pass-through funds that universities provided to other universities from FY 2000 to FY 2009 more than doubled over this period of time, rising from $700 million in FY 2000 to $1.9 billion in FY 2009.[15]

The federal government contributed extensively to the growth in pass-through funding from FY 2000 to FY 2009. Almost 90% of all pass-through funds that universities provided to other universities came from federal funds during this decade (figure 5-8), a larger share than the federal government’s share of total academic R&D expenditures.

From 2010 to 2012, pass-through funding continued to increase. The federal government continues to be the major provider of pass-through funds; in FY 2012, it was the source for over 85% of all pass-through funds provided or received (tables 5-5 and 5-6).

The growth in pass-through funding has been accompanied by changing research practices, seen particularly in the growth of larger research teams, including many that span multiple disciplines, and in increasing numbers of coauthored articles (discussed later in this chapter in the section “Outputs of Academic S&E Research: Articles and Patents”). Although interdisciplinary research is widely viewed as a growing trend in academic S&E R&D, developing a generally agreed-on concept of interdisciplinary research and measuring how it has grown have proven to be challenging. (See the sidebar “Can Bibliometric Data Provide Accurate Indicators of Interdisciplinary Research?” in Science and Engineering Indicators 2010 [NSB 2010:5–35].) Efforts have been undertaken to measure the extent to which interdisciplinary research involves closely related versus dissimilar fields. For example, Porter and Rafols (2009) suggest that article citations are mainly distributed among closely related disciplinary areas, reflecting relatively modest increases in interdisciplinarity over the past 30–40 years.

Notes
[1] The academic R&D totals presented here exclude expenditures at the federally funded research and development centers (FFRDCs) associated with universities. Those expenditures are tallied separately and discussed in chapter 4. Nevertheless, the FFRDCs and other national laboratories (including federal intramural laboratories) play an important role in academic research and education, providing research opportunities for students and faculty at academic institutions, often by providing highly specialized, shared research facilities.
[2] For this discussion, the terms universities and colleges, higher education, and academic institutions are used interchangeably.
[3] Gross domestic product implicit price deflators were used to convert current dollars to constant 2005 dollars.
[4] From 2005 to 2008, prior to the enactment of the American Recovery and Reinvestment Act of 2009, academic R&D expenditures increased by an annual average rate of 1.5% after adjusting for inflation.
[5] For a more complete discussion of these concepts, see the chapter 4 “Glossary.”
[6] Starting in 2010, the Higher Education Research and Development Survey asked institutions to categorize their R&D expenditures as either basic research, applied research, or development; prior surveys had asked how much total S&E R&D the institution performed and requested an estimate of the percentage of their R&D expenditures devoted to basic research. By only mentioning basic research, the survey question may have caused some respondents to classify a greater proportion of their activities in this category. The 2010 question provided definitions and examples of the three R&D categories to aid institutions in making more accurate assignments. In debriefing interviews, institutional representatives cited the changes in the survey question as the most important factor affecting their somewhat lower estimates of the amount of basic research institutions performed. The explicit inclusion of clinical trials and research training grants and the addition of non-S&E R&D may also have contributed.
[7] Data on non-S&E R&D expenditures have been collected by the National Science Foundation since FY 2003. However, the response rates on these items for the years prior to 2006 make trend analysis unreliable.
[8] The academic R&D reported here includes separately budgeted R&D and related recovered indirect costs and also institutional estimates of unrecovered indirect costs associated with externally funded R&D projects, including committed cost sharing. Indirect costs are general expenses that cannot be associated with specific research projects but pay for things that are used collectively by many research projects at an academic institution. Two major components of indirect costs exist: (1) facilities-related costs, such as the construction, maintenance, and operation of facilities used for research; and (2) administrative costs, including expenses associated with financial management, institutional review boards, and environment, health, and safety management. Some indirect costs are recovered as a result of indirect-cost proposals that universities submit based on their actual costs from the previous year. Unrecovered indirect costs are calculated as the difference between an institution’s negotiated indirect cost rate on a sponsored project and the amount it recovers from the sponsor. Committed cost sharing is the sum of the institutional contributions required by the sponsor for specific projects (mandatory cost sharing) and the institutional resources made available to a specific project at the discretion of the grantee institution (voluntary cost sharing).
[9] The Higher Education Research and Development Survey collects aggregate data not separated by field on universities’ estimates of basic research, applied research, and development.
[10] Statistics on R&D performance can differ depending on whether the reporting is by R&D performers—in this case, academic institutions—or R&D funders. Reasons for this difference are discussed in the chapter 4 sidebar, “Tracking R&D: The Gap between Performer- and Source-Reported Expenditures.”
[11] Institutionally financed research includes both organized research projects fully supported with internal funding and all other separately accounted-for funds for research. This category does not include funds spent on research that are not separately accounted for, such as estimates of faculty time budgeted for instruction that is spent on research. Funds for institutionally financed R&D may also 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 and licenses or revenue from patient care to support R&D. (See this chapter’s section “Commercialization of U.S. Academic Patents” for a discussion of patent and licensing income.)
[12] Federal grants, 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.
[13] The federally financed share of academic S&E R&D expenditures dipped slightly in 2012; in part, this is because universities and colleges spent more American Recovery and Reinvestment Act of 2009 funds in 2011 (about $4.2 billion) than in 2012 (about $2.4 billion).
[14] In 1991, the Office of Management and Budget capped reimbursement of administrative costs at 26% of total direct costs. As a result, actual unrecovered indirect costs at both public and private universities may be somewhat higher than the amounts reported on the Higher Education Research and Development Survey.
[15] During the early years of the 2000 decade, survey questions on pass-through funding were voluntary, with relatively high nonresponse (11% in 2000 versus 4% in 2009).
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