Research and development is a hot topic, judging by the response to our recent editorial on the subject. So it might be interesting to see where research dollars really come from, according to figures from the National Science Foundation.
The NSF says a little less than 70% of all research funding in the U.S. comes from private industry. Federal government funds another 26%, with colleges and universities paying for a little less than 3%.
Even more interesting is that the U.S. accounts for about 33% of global R&D spending. In fact, the U.S. is the biggest R&D spender on the planet by far. Japan and China are second and third with about 13% and 9% of the world’s total, respectively.
But something doesn’t add up in this picture. With all the money flowing into R&D, you might wonder why there is so much hand-wringing among politicians and business leaders about a lack of innovation. One sign of the trend: For the first time, the Global Risk Management Survey compiled by the risk management firm Aon Corp. found business leaders put a failure to innovate on the list of top-10 global risks.
So if 33% of the world’s R&D funds don’t buy innovation, what do they buy? Insight into the answer comes from Matt Ridley, a zoologist-turned-science-writer for The Economist magazine. Ridley says that company R&D budgets “get captured by increasingly defensive and complacent corporate bureaucrats, who spend them on low-risk, dull projects and fail to notice gigantic new opportunities, which, thereby, turn into threats.”
More to the point, the evidence is that an increasing amount of R&D goes into erecting a thicket of patents to protect existing technologies rather than to perfect new ideas. You can get a sense of this effort from the NSF statistics which show that “R&D” is really small “R” and big “D”: About 60% of all R&D work in the U.S. is “development.” Applied research accounts for just 22% of the total, and basic research another 17%.
It’s been argued that much of the work now put into coming up with mundane-yet-patentable technology will have the unintended consequences of hindering innovation. This is especially likely if it falls into the hands of patent trolls buying up inconsequential patents simply so they can sue those who infringe them. The often-cited example of the potential damage is that of the smartphone industry. An estimated 250,000 patents cover this technology in one country or another. If a court finds just one infringed patent, it will force the offending handsets to be pulled off shelves.
Is there a way to make R&D more fruitful without spending more? Prescriptions for innovation often advocate thinking out of the box, so here is some out-of-the-box thinking about R&D, suggested by the work of George Basalla, Professor Emeritus of the University of Delaware’s Dept. of History: Eliminate patents. In the second half of the 19th century neither Holland nor Switzerland had a patent system, but that didn’t stop those countries from thriving economically. In fact, the lack of patents acted as a stimulus for two Dutch industries back then, margarine and incandescent light-bulb production. And Swiss industry of the time was successful enough to attract foreign capitalists willing to invest despite lack of patent protection.
— Leland Teschler, Editor