ing indicated they would cut R&D to meet their firm’s next-quarter’s profit projections.5 Pharmaceutical companies report that only one of every ten thousand chemicals they investigate as potential new medicines is ultimately approved for patient use. According to one estimate, it costs on average $802 million, an amount that continues to increase and takes an average of 12 years, to transition one new chemical from the exploratory phase to use by United States patients.6 Such considerations represent a great barrier to investors, both large and small.

In this environment the great United States corporate research laboratories of the past are increasingly becoming a thing of the past. The canonical case is Bell Laboratories, home of the transistor, the laser and numerous Nobel Laureates—which was gradually downsized until the remainder was sold to a French firm. As other nations have increased their investments in research, discoveries can be expected to shift abroad as well. For example, the development of new research tools is an important by-product of the research process. Successful innovation requires the invention of new tools that allow for more precise measurements, the production of purer or better materials, and more effective manipulation of data. A case in point is the field of particle physics which employs high energy accelerators as a principal discovery tool. Since their invention, the most capable of these machines has always been located in the United States—until recently when, for the first time, the most capable machine is located abroad, in Switzerland and France.

Given the trend of industry to invest less in fundamental research, focusing on more predictable development projects, it is increasingly left to government to fund the former type of activity. This is consistent with the notion that governments should assume responsibility for supporting activities that produce benefits to society as a whole but not necessarily commensurately to the individual performer or underwriter. In such a scenario the nation’s research universities will have to assume even greater responsibility for performing much of the nation’s research—with that research largely being funded by the federal government. In 2008, about 43 percent of the $68 billion worth of research (basic and applied) supported by various federal agencies was performed at universities.7 It is noteworthy that such activity is rapidly becoming globalized, with the percentage of


J. Graham, C. Harvey, and S. Rajgopal, The Economic Implications of Corporate Financial Reporting, September 13, 2004. Available at:


Tufts Center for the Study of Drug Development, How New Drugs Move through the Development and Approval Process, November 2001.


National Science Board (NSB), Science and Engineering Indicators 2010. Arlington, VA: National Science Foundation (NSB 10-01), Appendix Tables 4-8 and 4-9.

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