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The United States is still No. 1 in R&D spending, but ...

National Institutes of Health

The U.S. leads the world in research and development spending, but faces increasing competition.


The United States still leads the world in spending on research and development, but experts say the competition is fierce and the weak economy could be a risk to the nation’s competitive edge.

“It’s not a good time to become complacent,” said Andy Wyckoff, director of science, technology and industry for the Organization for Economic Cooperation and Development.

A report released Thursday by the OECD finds the United States remains the clear heavyweight in R&D spending.

The United States poured about $398 billion into research and development spending in 2008, representing nearly 2.8 percent of GDP, according to OECD researchers.

By comparison, No. 2 China put the equivalent of $121 billion into R&D in 2008, or about 1.5 percent of GDP. The 2008 data is the most recent year for which there is comparable data available, the researchers said.

“The United States is, in many cases, world class and has quite an advantage,” Wyckoff said.

The country’s advantage in innovation comes from all sectors, including government-funded research from the likes of the National Institutes of Health, top universities such as Stanford University and major corporations such as Microsoft and Google.

Still, experts say there are plenty of warning signs that the U.S. could face stiffer competition in years to come.

“There are other countries, particularly China, who are making a sustained effort to build up their capabilities,” Wyckoff said. “They are pouring a lot of money into their universities and their research capabilities.”

It’s not just China. Israel and Finland already spend a higher percentage of their gross national product on R&D than we do, Wyckoff noted. Plenty of other countries also have placed an emphasis on developing new technologies and working toward scientific breakthroughs.

“It is a reality that other places are getting better,” said Gary Pisano, a Harvard Business School professor and expert on American competitiveness, who was not involved in the OECD report. “Their skills are improving, they’re spending more on R&D, and so it is a more competitive global environment and the gap is starting to close.”

The push to expand such spending in other countries comes as many worry that the years of weakness in the economy could further erode the traditional U.S. lead in this area. That’s because tight budgets are forcing hard choices about government, university and private business spending on science and innovation.

Pisano thinks that it’s smart and necessary to find ways to make research more efficient and cost-effective. But he warns that if we cut too close to the bone, we risk losing payoffs for decades to come.

He notes that research and development that began as early as the 1950s, at places like the National Science Foundation, have laid the groundwork for major discoveries that only came decades later. The NSF is a federal agency with an annual budget of $6.9 billion as of fiscal year 2010.

“If we don’t continue to invest, we won’t feel it next year and we won’t feel it in five years,” Pisano said. “In 15 or 20 years, or maybe 30 years, that’s when we’ll feel it.”

Still, Pisano notes that the situation now is not nearly as dire as some might think.

“The idea that somehow the U.S. is not innovating, that’s just – that’s not true,” he said.

Wyckoff, from the OECD, said the U.S. is not just a leader in terms of spending. The United States also leads the world in terms of academic research and boasts many of the world’s leading research institutions.

This country also is home to many of the world’s R&D hotspots, such as Boston and Silicon Valley.