The major predictions for 1999 include:

• Industry, which continues to dominate the amount and growth of R&D spending, will increase R&D spending to $157 billion, an increase of more than 9 percent from last year. The expenditures are growing at a rate that significantly exceeds inflation.

• The federal government will spend $68.1 billion for R&D in 1999. This is a slight increase over 1998 spending, barely keeping pace with inflation. The federal budget continues to give mixed signals relative to the support of R&D. While the budget has authorized greater amounts of funding, the actual expenditures remain relatively low.

• Universities and other non-profit organizations will spend $10.8 billion. This is about 5 percent more than the amount committed in 1998.

Duga notes that both industry and government have been engaged in conflicts relative to short-term benefits and long-term objectives.

Duga predicts that industry's commitment to fund R&D will continue to be strong, noting that industry has seen the benefit of long-term investments – providing platforms for the future — in lieu of short-term profits that could leave corporations struggling instead of prospering years down the road.

Increases in R&D will not be uniform across industry. Areas expected to show notable increases in R&D expenditures are electric components, pharmaceuticals and medicine, office computing, and communications equipment.

R&D investments will tend to support projects that lead to new businesses. Also, industry will continue to outsource much of its research. This will be driven by a number of considerations, including costs, productivity, decreased overhead, and an emphasis on the need for on-time and on-budget deliverables.

"The government policy, on paper, is for long-term R&D investment," Duga said. "Unfortunately, the commitment to growth will not be felt significantly until after the resolution of outstanding revenue issues."

Prior to 1980, more than 50 percent of all R&D was funded by the federal government, spread throughout many agencies. In the past 18 years, however, the government’s share of R&D has dropped to about 30 percent. There is little evidence that this trend will be reversed in the near future.

Most decreases in federal R&D funding have come through reductions in spending by the Department of Defense. Present budget authorization projections indicate that increases in federal support of R&D will be more widespread, and that almost all areas of basic research, applied research, and development will receive additional funding, at least for the next few years.

The federal government supports R&D in federal laboratories, private industry, academic institutions and other non-profit organizations. Each area will receive increased funding in 1999, but academic and non-profit performers of R&D will receive increases that exceed inflation.

"It should be noted that the support of R&D by both industry and government is volatile and dependent upon factors over which the United States has some influence, but little control," Duga said. "Foreign economic crises have an impact on U.S. industry, given the interdepen-dence that directly or indirectly characterizes almost all activity."

Reprints of the report can be obtained from Battelle by contacting Debbie Martin, 614.424.4204.

For more information, contact Jules J. Duga at Battelle – 614.424.6512 – or Tim Studt at R&D Magazine – 847.390.2623.

Battelle serves industry and government by developing, commercializing and managing technology. With a wide range of scientific and technical capabilities, Battelle puts technology to work for clients in 30 countries.