Economic shocks knock 2009 R&D funding outlook askew, says R&D Magazine, Battelle

COLUMBUS, Ohio – Recession, economic stimulus, a new administration and globalization have changed the research and development funding picture so much this year that R&D Magazine and Battelle for the first time ever updated their closely watched forecast.

The organizations have produced an R&D funding forecast at the beginning of each year for 31 years. The magazine has been doing its R&D funding forecast for 51 years. People rely on the forecast to indicate directions for R&D spending in government, industry and academia.

This year was no different. But in the last six months, the recession has deepened and $18 billion in American Recovery and Reinvestment Act money has become available. “These forces have had notable R&D effects in the automotive, biopharm, computer and other industries,” the organizations said in a joint press release.

That means R&D budgets for fiscal 2009 will reach $165.4 billion, an increase of 12.5 percent from base fiscal 2009 levels, the organizations said.

“The importance of the stimulus effect on construction and capital expenditures cannot be overstated,” said Marty Grueber, a co-author of the report and a research leader at Battelle. “At $3.64 billion, the [stimulus law] alone provides an amount equal to approximately 80 percent of recent years’ facilities and equipment budgets.”

According to the new forecast, the stimulus money:

• Includes $18.34 billion for R&D efforts, amounting to 2.3 percent of all of the stimulus money — $14.69 billion for direct R&D efforts, $3.64 billion for R&D facilities and capital equipment.
• The National Institutes of Health (NIH) is the big R&D winner, accounting for $10.4 billion, or 56.7 percent, of the stimulus funding.
• Federal R&D budget increased by 2.3 percent, from $143.7 billion in fiscal yeare 2008 to $147 billion in fiscal year 2009.
• Department of Defense received a $1.34 billion increase; NIH received a $1.2 billion increase; Department of Energy received an $814 million increase over fiscal year 2008 levels.

In the area of industrial research and development:

• For the first time since 2002, anticipated growth rate of effort directed toward new business declined.
• Growth of professional staff, hiring of new graduates and outsourcing of R&D to other industries is expected to slow.
• With few exceptions (notably Toyota and Motorola), a large number of technology companies made relatively few cuts to their most recent quarterly R&D budgets.

In academia:

• Institutions stand to receive more stimulus money than industrial or government researchers, and expect to spend about three-quarters of the funds on research.
• Response to the package is mixed: delighted to have the additional funding but concerned about the short time-frame over which the stimulus funds are to be spent.
• Significant concern that stimulus money will create a “blip effect,” though the doubling of the National Institutes of Health budget may limit this effect.

Internationally:

• Top 40 countries account for about 85 percent of all R&D spending in the world, to $1.125 trillion from $1.143 trillion in December 2008.
• China and India continue on their substantial growth path increasing their expenditures on R&D by 14.9 percent and 6.7 percent, respectively.
• Europe is drifting further behind the United States in R&D funding and may never close the research gap if it fails to boost investment in the services sector.