Dr. Proenza told participants that this issue should be of concern to all because America’s capacity to innovate determines its capability for economic growth. “Knowledge builds new capacities just as surely as new materials build new structures,” he said, “and our nation’s investments in research have built real assets that yield real and large returns. When new knowledge is quantified in a market environment, it creates fuller employment, capital formation, growing profits and surpluses for reinvestment.

“In other words, research discoveries lead to new companies and new jobs; the economy expands, and new wealth is created.”


Dr. Proenza then discussed the recent significant shifts in global research and development investment, estimated at more than $1 trillion. He pointed out that ten countries collectively account for almost 80 percent of that total, and that the U.S. with annual R&D expenditures of nearly $400 billion, itself accounted for 33 percent. However, the U.S.’ global share is down from 44 percent five years ago. Dr. Proenza said this relative decline is attributed primarily to China’s increasing R&D investment, which has an annual average growth rate of 19 percent during the past decade, moving it beyond Japan for second place in R&D investments in 2011.

He added that China’s R&D spending is presently only 1.5 percent of its gross domestic product, compared to 2.7 percent in the U.S., and that China’s R&D share of GDP has doubled in the last 10 years. While U.S. spending on R&D is still far beyond that of its closest competitors, the gap between it and other nations is narrowing.

Within the U.S., approximately 67 percent of R&D expenditures flow from industry, 26 percent from the Federal government, and 7 percent from foundations, states, and research universities, which are increasing pressed into cost sharing with the Federal government. The U.S. spends about $69 billion on basic research, $89 billion on applied research, and $240 billion on development activities.

Dr. Proenza noted that while U.S. colleges and universities perform a little over half of the country’s basic research, they perform only a nominal percentage of development. Industry now supports less than 5 percent of research in universities, a figure that has declined from a high of 7 percent. He linked that dismal rate to the reluctance of a majority of university leaders to participate in commercialization or to accept responsibility for any aspect of economic development. Dr. Proenza said this “major disconnect in our innovation ecosystem” is being addressed through initiatives such as the National Academies’ University-Industry Demonstration Project, as well as by other regionally based efforts.

Research and development activity in the U.S. also is geographically concentrated, with states varying significantly by type of research, he said. For example, 10 states account for nearly 64 percent of U.S. R&D expenditures.

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