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Chapter 5. Academic Research and Development

Expenditures and Funding for Academic R&D

Academic R&D is a key part 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, the research facilities, and the 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 the sidebar, "Data on the Financial and Infrastructure Resources for Academic R&D.")

Academic R&D in the National R&D Effort

Expenditures by U.S. colleges and universities on R&D in S&E fields totaled $54.9 billion in 2009.[2] Academic spending in non-S&E fields that year was another $2.4 billion. The corresponding figures for 2008 were $51.9 billion and $2.2 billion. In 2004, these figures were $43.3 billion and $1.6 billion, respectively.

Academic R&D spending is primarily for research (basic and applied)—in 2009, about 96% was spent on research (75% basic, 22% applied) and almost 4% was spent on development.[3] These shares are not appreciably different from the proportions that prevailed 5 and 10 years ago (appendix table 5-1).

Universities and colleges performed about 14% of all U.S. R&D in 2009. Higher education's prominence as a national R&D performer has generally increased over the last 30 years, rising from about 10% of all R&D performed in the United States in the early 1970s to an estimated 14% in 2009 (figure 5-1).

Universities and colleges accounted for just under 36% of all U.S. research in 2009. This was slightly higher than the 35% reported in 2002—and the previously highest share of the U.S. research total over the last 30 years (figure 5-1).

In regard to basic research, the academic sector is by far the country's largest performer. In 2009, it accounted for 53% of all the basic research performed in the United States. Indeed, institutions of higher education have accounted for more than half of all U.S. basic research since 1998 (figure 5-1).

(For a comparison of the academic R&D profiles of other countries, see the section on "International R&D Comparisons" in chapter 4.)

Sources of Support for Academic 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, industry, nonprofits, and other organizations. Nevertheless, the federal government has consistently provided the majority of funding.

Federal Funding

The federal government provided $32.6 billion (59%) of the $54.9 billion of academic spending on S&E R&D in FY (academic) 2009.[4] The federal share was somewhat higher in the 1970s and early 1980s, although the federal government has long contributed the majority of funds for academic R&D (figure 5-2 and figure 5-3).

This $32.6 billion of federal funding in FY 2009 was 4.2% above the level of the previous year. The rates of growth in 2008 and 2007 were 2.8% and 1.0%, respectively. Over the previous 10 years, the level of federal funding for academic R&D has been consistently up, averaging 3.3% annually for the 5-year period of 2004–09 and 7.3% annually for the 10-year period of FY 1999–2009. But when adjusted for inflation, the 5-year annual average increase was 0.8% and the 10 year average was 4.8%—FY 2006 and 2007 were years with constant dollar declines in federal funding.

An additional perspective on funding trends is provided by inflation-adjusted obligations for academic S&E R&D reported by the federal agencies (i.e., the funds in constant dollars going to academic institutions in a given federal fiscal year that will be spent on R&D activities in the current and subsequent years). In constant 2005 dollars, federal academic R&D obligations peaked in FY 2004 at $25.0 billion, fell in the three subsequent years, reaching $24.0 billion in FY 2008, and then spiked upward in FY 2009, reaching $28.8 billion (appendix table 5-3).

Federal obligations for S&E R&D grew more than 10% each year on a constant dollar basis between FY 1998 and 2001. This reflected, for the most part, the federal commitment to double the R&D budget of the National Institutes of Health (NIH) over a 5-year period. Between FY (federal) 1998 and 2004, NIH's share of federal academic R&D funding increased from 57% to 63%. Then in FY 2009, the American Recovery and Reinvestment Act (ARRA), which was signed into law on February 17, 2009, provided an additional $18.3 billion in appropriations for federal R&D and R&D facilities and equipment in FY 2009.[5] The significant uptick in obligations observed in FY 2009 reflects the presence of nearly $5 billion of these ARRA funds (appendix table 5-3).

Top Federal Agency Supporters

Six agencies are responsible for the vast majority of annual federal obligations for higher education R&D: the National Institutes of Health (NIH), National Science Foundation (NSF), Department of Defense (DOD), National Aeronautics and Space Administration (NASA), Department of Energy (DOE), and Department of Agriculture (USDA). In federal FY 2009, these six agencies represented about 96% of the estimated $31.6 billion obligated for S&E R&D that year (appendix table 5-3).[6]

NIH is by far the largest funder, providing about 65% of total federal academic R&D obligations in FY 2009. NSF provided 13%; DOD, 9%; NASA, 3%; DOE, 4%; and USDA, 3%.

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, all of which have differing missions and objectives, which in turn affect the priorities for research funding in the academic sector. For the most part, federal R&D funding to the higher education sector is allocated through competitive peer review. Nevertheless, congressional priorities and concerns in the course of the annual federal budget process can influence funding outcomes—see the sidebar, "Congressional Earmarks."

Federal Agency Support by Character of Work

Basic research activities represented about 58% of federal obligations for academic R&D in FY 2009 and about 56% in both FY 2007 and 2008 (appendix table 5-4). The two agencies funding the majority of basic research in the academic sector were NIH and NSF.

Applied research represented about 38% of federal obligations for academic R&D in FY 2009, 37% in FY 2008, and 38% in FY 2007. NIH provided the vast majority of funding in this category. Federal obligations for development activities in academia were 4–7% throughout FY 2007–09, with DOD and NASA the principal funders.

Other Sources of Funding

Notwithstanding the continuing dominant federal role in academic R&D funding, funding from nonfederal sources has grown steadily in recent years (figure 5-3). Adjusted for inflation, annual growth in nonfederal funding for academic R&D has averaged 4.8% over the last 5 years, and 4.4% for the last 10 years. The corresponding growth rates for federal funding have been 0.8% and 4.8%.

  • University and college institutional funds. In FY 2009, institutional funds from universities and colleges comprised the second largest source of funding for academic R&D, accounting for about 20% ($11.2 billion) of the total (appendix table 5-2). Institutional funds encompass institutionally financed research expenditures and unrecovered indirect costs and cost sharing. They exclude departmental research, which is 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 it has remained near 20% in the subsequent years. 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 and licenses or revenue from patient care 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% ($3.6 billion) of higher education R&D funding in FY 2009. Although their absolute funding total has continued to rise annually, their funding share has declined from a peak of 10% in the early 1970s to below 7% 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 only reflect funds that these governments directly target to academic R&D activities.[7] 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. (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 (just under 6%), and support for 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 has been steadily increasing, reaching $3.2 billion in FY 2009. (See appendix table 4-3.)
  • Other sources of funds. In FY 2009, all other sources of support accounted for 8% ($4.3 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.
EPSCoR

The Experimental Program to Stimulate Competitive Research (EPSCoR) is a long standing multi-agency federal program that has the objective of improving the geographical distribution of federal support for academic R&D. An overview of the program and recent statistics on its activities are discussed in the sidebar EPSCoR: The Experimental Program to Stimulate Competitive Research.

Academic R&D Expenditures by Field

Investment in academic R&D has long been concentrated in the life sciences, which have received more than half of all academic R&D expenditures for more than three decades.

Science and Engineering R&D

In FY 2009, academic R&D in the life sciences accounted for $32.8 billion (60%) of the $54.9 billion academic S&E R&D total (appendix table 5-5). Within the life sciences, the medical sciences accounted for 33% of the academic total and the biological sciences accounted for another 18%.[8]

Adjusted for inflation, academic R&D expenditures in the medical sciences increased by more than 75% from FY 1990 to FY 2000, and by almost 65% from FY 2000 to FY 2009 (figure 5-4 and appendix table 5-6). This sizable increase shifted the distribution of academic R&D expenditures (figure 5-5). The life sciences gained more than 4 percentage points in financial share over the decade of the 1990s (from 54% to 58%) and nearly another 2 percentage points since 2000 (up to 60%). By contrast, the physical sciences lost 2 percentage points in share over FY 1990–2000 (from 11% to 9%) and an additional percentage point since FY 2000 (down to 8%).

Federal R&D Funds by Field

R&D projects in the life sciences also constitute a majority of federally supported academic S&E R&D. They accounted for $19.3 billion (59%) of the $32.6 billion of federal support in FY 2009 (appendix table 5-7). The Department of Health and Human Services (HHS)—of which NIH is a part—supports the vast majority of this life science funding (83%). 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 (figure 5-6). In FY 2009, NSF was the lead federal funding agency for academic research in the physical sciences (30% of federally funded R&D expenditures), mathematics (56%), computer sciences (40%), and environmental sciences (34%). DOD was the lead funding agency in engineering (32%).

Federal funding has played a larger role in overall support for some fields than others (appendix table 5-8). The federal government is the dominant funder in fields such as the atmospheric sciences (78% in FY 2009), physics (73%), and aeronautical/astronautical engineering (70%). But it plays a much smaller role in other fields, such as economics (32% in FY 2009), political science (37%), and agricultural sciences (28%).

The federally financed proportion of R&D spending in all of the broad S&E fields has been stable or increased since 1990 (appendix table 5-8). This reverses the trend between 1975 and 1990, when the federal share had declined in all the broad fields.

Non-S&E R&D

Academic institutions spent a total of $2.4 billion on R&D in non-S&E fields in FY 2009 (table 5-1), an increase of 8% over the $2.2 billion spent in 2008.[9][10] This $2.4 billion is in addition to the $54.9 billion expended on S&E R&D. The federal government funds smaller proportions of R&D in non-S&E than in S&E fields: 36% of the $2.4 billion in non-S&E R&D in FY 2009.

The largest amounts reported for R&D in non-S&E fields were for education ($921 million), business and management ($341 million), and humanities ($253 million). Other areas of non-S&E R&D include law, social work, communication, journalism, library science, and the visual and performing arts.

Academic R&D by Institution

The prior discussion examined R&D for the academic sector as a whole. This section discusses some of the differences that prevail across the types of academic institutions.

R&D Funding for Public and Private Universities and Colleges

In FY 2009, public institutions received $37.5 billion in academic S&E R&D and private institutions received $17.4 billion (appendix table 5-9).

Although public and private universities rely on the same major sources of R&D funding, the importance of the different sources varies substantially (figure 5-7). The federal government provided 71% of the R&D funding for private institutions but only 54% for public institutions. Conversely, public institutions received around 9% of their R&D funding from state and local governments, while private institutions received a little over 2%.

Public academic institutions also supported a larger portion of their R&D from their own sources—24%, compared to 12% 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 have directed toward R&D. Private institutions in turn report a larger proportion of unrecovered indirect costs (54% of their institutional total in FY 2009, versus 42% for public institutions). For both types of institutions, these unrecovered indirect costs have declined over the past decade, from 63% to 54% for private institutions and from 44% 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 2009. The share of total R&D expenditures funded by all other sources was also comparable, at 7% in public and 9% in 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 2009, 711 institutions reported spending at least $150,000 on S&E R&D. Of these, the top-spending 20 institutions accounted for 30% of total academic R&D spending and the top 100 for 80% of this spending (figure 5-9).

The top 100 institutions are listed in appendix table 5-10. The concentration of academic R&D funds among the top 100 institutions has remained largely constant over the past two decades (figure 5-9). Similarly, the shares held by both the top 10 and the top 20 institutions have not changed much over the same period. (Even so, the identities of the universities in each of these groups have varied 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 is found among universities that perform non-S&E R&D. The top 20 performers accounted for 36% of the total non-S&E R&D expenditures in FY 2009 (appendix table 5-11).

R&D Collaboration between Academic Institutions

A persistent trend in academic R&D has been the growth of research collaboration—notably evident in the growth of jointly authored research articles (see later in this chapter for details). This trend is also evident in flows of funds among institutions to support collaborative research activities. One indicator of this collaboration is the amount of total R&D expenditures that is passed through to other academic institutions or received by institutions as subrecipient funding.[11]

On this basis, the R&D funds for joint projects passed through universities to other university subrecipients more than doubled from FY 2000 to 2009, from $699 million to $1.9 billion (figure 5-10 and appendix table 5-12). The FY 2009 value is about 3% of total academic R&D expenditures that year, compared with 2% in 2000. In FY 2009, $1.7 billion (89%) of these pass-through funds came from federal sources.

Overall, $3.8 billion was passed through institutions to all types of subrecipients in FY 2009 (including both academic and nonacademic institutions), and $4.1 billion was received as subrecipient funding from all types of pass-through entities (appendix table 5-12). Again, the majority of these funds (85% of pass-through funds and 90% of subrecipient expenditures) were from federal sources.

Notes

[1] 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.
[2] 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 and highly specialized, shared research facilities.
[3] For the definitions used in National Science Foundation (NSF) surveys and a more complete discussion of these concepts, see the chapter 4 sidebar, "Definitions of R&D."
[4] 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.
[5] Under the act the funding was to be obligated by the end of FY 2009. However, the expenditures for these projects could span several years.
[6] Statistics on R&D performance can differ depending on whether the reporting is by R&D performers or R&D funders. There are a number of reasons for this difference; for a discussion see the chapter 4 sidebar, "Tracking R&D: Gap Between Performer- and Source-Reported Expenditures."
[7] 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.
[8] The medical sciences include subfields such as pharmacy, neuroscience, oncology, and pediatrics. The biological sciences include subfields such as microbiology, genetics, epidemiology, and pathology. These distinctions may blur at times because the boundaries between fields often are not well defined.
[9] Data reported on non-S&E R&D expenditures are lower-bound estimates (slightly) for the national totals because NSF did not attempt to adjust for the 2.7% nonresponse rate on this survey 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.
[10] Data on non-S&E R&D expenditures have been collected by NSF since FY 2003. However, the response rates on these items for the years prior to 2006 make trend analysis unreliable.
[11] This financial pass through is far from a complete indicator, as it provides little indication of the nature of the collaborative relationships involved.
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