Hunt for Cash Sends Colleges Overseas

As U.S. investment in R&D wanes, colleges look to other countries.

Nov. 22, 2008— -- When you think of research and development powerhouses, chances are Portugal misses your list.

Yet in the past two years, the tiny seaside nation tapped government coffers to finance one of the most ambitious international research and development partnerships in the history of American higher education.

In 2006, they kicked off a project providing Portugal a portfolio of post-graduate courses and potentially high-reward R&D investments in energy systems at MIT, information technology at Carnegie Mellon and advanced computing at the University of Texas-Austin. Next stop: Harvard Medical School, which will operate an R&D program in medical sciences on behalf of Portugal.

Click here to learn more about American colleges tapping foreign countries for donations at our partner site,

The country's not alone. The global race for economic and strategic influence through scientific supremacy is accelerating as nations from Finland to the United Arab Emirates and South Africa to Malaysia to Germany brace for the technical and commercial challenges that every economy will face in the coming decades. And many of America's leading academic institutions are finding a ready market for what they do best--though it's increasingly from foreign governments.

"This is about competitiveness," Dr. Lewis Edelheit, General Electric's former senior vice president of corporate research, said at a National Academy of Sciences conference about science and technology policy last winter. "Some countries are tying to figure out how to get it, others how to keep it and still others how to get it back. And it's all about learning how to move fast and win in a brutally competitive global economy such as we've never seen."

In the past decade or so, nearly a dozen deep-pocketed national R&D agendas have emerged around the world, accelerating the pace of innovation in fields from solar energy to DNA synthesis. In 2006, the world's industrialized economies invested more than $817 billion on R&D, nearly twice the amount spent in 1996 in real terms, according to the OECD's Science and Technology Outlook 2008. Despite this impressive increase, R&D spending has been pushed primarily by emerging economies in Asia and the Middle East.

China has sustained double-digit growth in R&D budgets for nearly a decade. India isn't far behind. Countries like South Africa and the United Arab Emirates also invested heavily in science and technology initiatives, according to the OECD's Science and Technology Outlook 2008.

In the U.S. it's a different story. Although the U.S. private sector is spending more on R&D projects, it is not spending those dollars in the same places it did a few years ago. In 2001, for the first time in nearly 30 years, industry funding for academic research in the U.S. fell. Then it fell for three years in a row. In 1993, 179 of the top 200 academic institutions received more than 10% of their funding from industry. By 2004, only 101 universities received 10% of R&D funds from private sector.

Although industry funds have stabilized in the past two years, the federal government in 2006 failed to increase funding enough to keep pace with inflation for the first time since 1982. And yet in 2007 the academic sector increased spending levels more than any other R&D-performing sector. It has done so--at least in part--by attracting foreign investors like Portugal.

"The motivation for many of these collaborations probably has more to do with being keyed into knowledge networks than achieving basic research objectives," said Philip Auerswald, a professor of public policy and innovation at George Mason University. "Large investments in specific institutions can make sense in certain circumstances if they allow researchers to tap new ideas and approaches and so forth. The insights and ideas that drive innovation systems are often discovered in larger knowledge networks. Mature institutions have developed networks of knowledge that foreign institutions like Max Planck want to tap. These are different types of R&D investments than we've seen."

While these collaborations may shape the evolution of science and technology over the longer term, the nation's economic prospects hinge on far more near-term competitive outcomes. The U.S. has been a net exporter of intellectual property-related services since the early 1990s, but rising imports have outpaced exports for several years, according to an ongoing study of data from the U.S. Bureau of Economic Analysis (BEA), data by members of the National Science Foundation, and the U.S. Department of Commerce.

Although the National Science Foundation (NSF) tracks R&D trends domestically and internationally, it does not isolate non-U.S. funding for R&D performed domestically. The BEA data have begun to reveal the full extent of foreign industry R&D conducted in the U.S. for the first time. Foreign multinationals not only spend significant sums on R&D performed in the U.S., they increased spending by roughly 8% every year between 1997 and 2004. During the same time period, profits at U.S. multinationals grew more dependent on high margins in foreign markets as domestic growth went essentially flat.

If America slips into a prolonged downturn, the nation's innovation policies will likely attract far more attention and unanswered questions about foreign sources of R&D funding in U.S. research institutions could easily degenerate into a political controversy.

"It has become increasingly clear [that] efforts should be directed toward including isolation and identification of R&D that is performed by U.S. institutions, but supported by non-U.S. entities," Jules Duga, a senior research analyst at Battelle-Memorial Institute and the long-time co-author of Battelle-R&D Magazine's Global R&D Report, wrote recently. Not surprisingly, NSF staffers have been busy for months trying to determine how to do just that.