Returns from publicly funded research

14 July 2014

As Congress remains entrenched in budget appropriations for 2015, we are reminded that federal support for science research has changed dramatically over the years. Mid- and late-career scientists recall several decades of steady increases in federal science funding. From 1983 to its peak in 2004, nondefense R&D spending more than doubled.[1] Since 2005, however, federal support of scientific research has declined in real terms by 12.6%.[2]

Much of the recent discussion surrounding funding for science has to do with return on taxpayer investment. One measure of the economic benefits associated with federally funded research is the number of patents and licenses that are transferred to the business sector. This is an indication of potential new discoveries and inventions that can be commercialized. Both basic research and applied research have been successful in seeding commercial ventures.

In the first few decades following World War II, when the federal government first significantly invested in scientific research, little attention was paid to the commercial prospects of research. Despite the fact that most research was being conducted at universities and national labs, researchers and institutions had little incentive to seed commercial applications through patents and spin-off companies. Although culture played a role, the problem was in large part legislative in that any resulting intellectual property resided with the federal government. This all changed with passage of the landmark Bayh-Dole Act of 1980, which provided patent ownership rights to the inventor and the inventor’s institution. The consequences of this legislation have been significant.

In June 2012, the House Science, Space and Technology Committee took stock of the legacy of the Bayh-Dole Act in a hearing. One of the hearing witnesses, Todd Sherer, the president of the Association of University Technology Managers (AUTM) shared impressive testimony based on an AUTM member survey of licensing activity. The latest survey data shows that in 2012 university income from patent licensing activities was $1.89 billion, and the estimated boost to the US economy was more than $80 billion through technology transfer to over 700 companies. To put this into perspective, fewer than 400 patents were awarded to the university community in the year prior to Bayh-Dole. By 2010, nearly 4500 such patents were issued, according to AUTM.

A particular success story is the federal investment in biotechnology, which has seen significant commercialization of these research expenditures. Basic research in this field has led to important commercial applications in vaccines and therapeutics for cancer and many other human diseases. The biotech industry accounted for approximately eight million jobs in the US economy in 2012. According to the 2012 AUTM survey, more than 75% of these companies based their technology on patents from US universities. [3]

It would be a gross simplification to assume that short-term commercialization is the only measure of the return on investment in research. There is no simple formula for predicting the value and impact of new scientific knowledge for future generations. One study by the Center for American Progress estimates the return for each federal research dollar invested in research ranges from 30 to 100% —an impressive return compared to typical investments.

However, the timescale for returns on many worthwhile scientific endeavors can be decades. For example, only in the last decade have we seen significant commercial returns from Einstein’s theory of general relatively, which is absolutely necessary for the accuracy of our valued GPS location devices. Along that same vein, we have 60 years of research to thank for the recent introduction of gene-targeted pharmaceuticals, progress-in-the-making ever since Watson and Crick solved the structure of DNA in 1953.

With every dollar that Congress puts into research—basic or applied, short-term or long-term—we benefit, both tangibly and intellectually. It is up to us to make sure our elected officials are aware of this fact.

[1]   AAAS Report XXXVIII: Research and Development FY 2014. Matt Hourihan, Historical trends in federal R&D. Available: