REAL INCREASE IN R&D SPENDING EXPECTED FOR 1998, FORECAST PREDICTS
REAL INCREASE IN R&D SPENDING EXPECTED FOR 1998, FORECAST PREDICTS

January 5, 1998

The United States could be on the cusp of a major resurgence in the funding of research and development, according to the annual forecast by Battelle and R&D Magazine.

R&D spending in 1998 is expected to reach more than $215 billion, a 4.66 percent increase over the $206 billion that the National Science Foundation estimates was spent in 1997.

The prediction comes after years of stagnation in R&D spending. The increase signals a trend that is expected to last into the next century, according to Dr. Jules J. Duga, Battelle's senior analyst and the forecast's principal author.

"Industry realizes that changes in operations and structure are not the only roads to profitability, " said Duga. "Investment in research and technology is required for long-term survival."

Predictions for 1998 include:

  • The federal government will contribute $62.9 billion to conduct R&D, slightly more than what was spent last year.
  • Industry will invest $143 billion, an increase of more than 6 percent from 1997.
  • Universities and other non-profits will invest nearly 10.2 billion on R&D.

Before 1980, the federal government was the dominant supporter of R&D, funding more than 50 percent of the work. Since then, however, government's share has slipped to less than 30 percent, a figure that is expected to continue falling over the next five years.

The government supports R&D in all four performing sectors - federal laboratories, private industry, academic institutions, and other non-profits. However, the forecast predicts that only academia will enjoy increased funding, though the total will barely keep pace with inflation.

These trends in funding are consistent with the response to a recent R&D Magazine survey, where 50 percent of those surveyed expected funding to remain constant. The remaining 50 percent was divided evenly between those expecting slight increases or decreases.

While the industrial funding of R&D is expected to climb to 6.72 percent, the real increase beyond inflation factored at 2.6 percent will be about 4.1 percent.

"After a decade or more of down-sizing and cost-cutting, American companies are shifting their attention to top-line growth," said Stephen M. Millett, a researcher and futurist at Battelle. " The great challenge of the future is to both grow sales and increase profitability. American companies would like to compete in customer satisfaction rather than lowest cost. So, they are investing more in R&D to realize significant improvements in the benefits provided to customers."

"Pharmaceuticals is a huge area of investment. Top on the list is genetic research and the development of genetic-based ethical drugs. Micro-electronics is another area of intensive R&D. This trend moves with advances in telecommunications and computer technology."

The other significant increases will occur in the areas of electronic components; medicine; scientific and mechanical measuring instruments; non-electrical machinery; office, computing, and accounting machines; and motor vehicles.

"These sectors are high-intensity supporters of R&D," Duga said. "They will account for 50 percent of R&D funding, but only 33 percent of total sales."

Duga said industries that will see the smallest changes in funding include paper, petroleum refining, and industrial chemicals.

The overall increase in R&D funding could stretch well into the next decade, Duga said.

The 1998 Battelle-R&D Magazine forecast was prepared by Jules J. Duga of Battelle and Tim Studt of R&D Magazine. Special input was provided by R&D Magazine and the Industrial Research Institute. Other information was provided by the National Science Foundation, federal budget documents, the American Association for the Advancement of Science, Schonfeld & Associates, and other sources.

The complete Battelle-R&D Magazine forecast can be found in the January issue of R&D Magazine.

For more information, contact Jules J. Duga at Battelle (614-424-6512) or Tim Studt at R&D Magazine (847-390-2623).

HIGH-GROWTH AREAS FOR R&D
  • Pharmaceuticals
  • Genetic Research
  • Microelectronics
  • Telecommunications
  • Computer Technology
  • Electronic Components
  • Medicine
  • Scientific Instruments
  • Non-electrical Machinery
  • Motor Vehicles

PROJECTED FUNDING OF R&D

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