Silicon Valley Universities – Critical Need to Strengthen R&D Funding

By Doug Henton & Janine Kaiser, Collaborative Economics

Research and development (R&D) is essential to the innovation pipeline in Silicon Valley and its universities have been losing ground to other U.S. regions, new Silicon Valley Competitiveness and Innovation Project data shows.

In addition, the U.S. is lagging other nations on R&D spending, with lower R&D expenditure as a share of GDP and slower growth than China, South Korea and Germany, as well as other nations.[i],[ii]

The slower growth in R&D funding in Silicon Valley compared to other regions is troubling.

In Silicon Valley, the region’s universities have seen total R&D expenditures expand by 12 percent over the past decade.[iii] Contrast that to China, in which total R&D spending expanded by 17.6 percent on average per year between 2002 and 2012.[iv] While Silicon Valley universities’ R&D expenditure levels are still among the highest in the United States ($2.8 Billion in 2013), growth in spending also lagged other key innovation regions over the decade, including New York City, Boston and Seattle.

This trend is especially pronounced for R&D supported by federal grants in Silicon Valley, which accounted for 55 percent of total university R&D expenditures in 2013. While American Recovery and Reinvestment Act expenditures drove an expansion of academic R&D funding across U.S. institutions between 2009 and 2012,[v] in 2013, Silicon Valley universities’ R&D levels actually fell below those of 2004 on an inflation adjusted basis, and lagged compared to other key innovation regions.[vi]

Because R&D activities and funding are critical for the long-term health of Silicon Valley’s innovation ecosystem, the SVCIP identified the following essential public policies to promote continued growth in R&D

  • Develop R&D funding matching program for areas such as biotechnology, clean energy and DARPA.
  • Implement permanent R&D (and R&D equipment) tax credits.
  • Emphasize return on investment in funding formula, tax credits.







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[i]Hourihan, Matt. “Federal R&D Budget Trends: A Short Summary.” American Association for the Advancement of Science . January 2015.

[ii] “Mercury News editorial: U.S. needs to increase R&D spending or cede world economic leadership.” San Jose Mercury News. March 18, 2015.

[iii] National Science Foundation. “Higher education R&D expenditures, ranked by FY 2013 R&D expenditures: FYs 2004–13”. Higher Education Research and Development (HERD) Survey Results. February 2015.

[iv] Hourihan, 2015

[v]National Science Foundation. “Expenditures and Funding for Academic R&D.” Science and Engineering Indicators 2014.

[vi] National Science Foundation. “Federally financed higher education R&D expenditures, ranked by FY 2013 federal R&D expenditures: FYs 2004–13”. Higher Education Research and Development (HERD) Survey Results. February 2015.