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The Manufacturer's Agenda: US R&D Investment Lead Continues to Erode

Feb. 7, 2014

As other nations race to increase research and development funding and support, let's work to ensure we're not like the proverbial frog, who sits complacently while the heat is slowly turned up -- until it's too late.

Patricia Panchak

The alarms aren't going off as in years past, but the U.S. research and development community continues to worry. With the fiscal year 2014 omnibus officially signed into law, some federal funding has been restored, but its growth continues to lag in comparison to other countries' investments.

The sigh of relief over passage of the Consolidated Appropriations Act of 2014 demonstrates just how bad things could have been.

Meanwhile, Asian countries, especially China but not Japan, are racing to catch up.

China's steady investment, part of its two-decade plan to transition to being "innovation-driven" by 2020, is expected to reach a research intensity of 1.95% of GDP by 2014, according to the annual forecast co-sponsored by Battelle and R&D Magazine. The forecast notes that China seeks to hit a 2.2% rate by 2015. The U.S. still leads this measure, with expected spending of 2.5% of GDP in 2014.

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But trends revealed when comparing changes through the years are ominous. The forecast notes:

"Just five years ago, the U.S., Canada and Mexico were responsible for nearly 40% of global R&D. That share has dropped to about 34%, with the U.S. shrinking from a 34% share in 2009 to 31% now.

"In the same five years, Asia's share of R&D investments has risen from 33% to nearly 40%, with China rising from 10% to nearly 18%."

Certainly I don't begrudge China's -- or any nation's -- efforts to strengthen its economy. Its advancement through the early stages of industrial development has lifted the economic fortunes of millions. As well, in an open, global economy, more innovation for China means more innovation for the world.

Still, it's difficult to dismiss that Chi

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na, as other countries before it, tilts the scales to its favor, which is cause for concern. More troubling, however, are the actions under our public policy leaders' control. While the U.S. loses ground, they have seemed -- until recently -- more interested in squabbling amongst themselves rather than uniting to build our nation's competitiveness. Let's hope recent glimmers of cooperation hold. It's been said that organizations often need a burning platform to jolt leaders to adapt to competition, and perhaps the same can be said for governments. We've not reached that crisis stage yet. The Battelle/R&D Magazine report forecasts that the U.S. will remain the dominant force in global research across numerous industries.

Federal Funding Matters: Learn which innovations got their start with government funding at iw.com/Fed-Funded-Innovations

But let's work to ensure we're not like the proverbial frog, who sits complacently while the heat is slowly turned up -- until it's too late.

About the Author

Patricia Panchak | Patricia Panchak, Former Editor-in-Chief

Focus: Competitiveness & Public Policy

Call: 216-931-9252

Follow on Twitter: @PPanchakIW

In her commentary and reporting for IndustryWeek, Editor-in-Chief Patricia Panchak covers world-class manufacturing industry strategies, best practices and public policy issues that affect manufacturers’ competitiveness. She delivers news and analysis—and reports the trends--in tax, trade and labor policy; federal, state and local government agencies and programs; and judicial, executive and legislative actions. As well, she shares case studies about how manufacturing executives can capitalize on the latest best practices to cut costs, boost productivity and increase profits.

As editor, she directs the strategic development of all IW editorial products, including the magazine, IndustryWeek.com, research and information products, and executive conferences.

An award-winning editor, Panchak received the 2004 Jesse H. Neal Business Journalism Award for Signed Commentary and helped her staff earn the 2004 Neal Award for Subject-Related Series. She also has earned the American Business Media’s Midwest Award for Editorial Courage and Integrity.

Patricia holds bachelor’s degrees in Journalism and English from Bowling Green State University and a master’s degree in Journalism from Ohio University’s E.W. Scripps School of Journalism. She lives in Cleveland Hts., Ohio, with her family.