The shift to private R&D investment may curtail innovation

A new study makes the case that as funding for university research shifts from government to private firms, entrepreneurship suffers.

Why it matters: The share of research funding to universities from the federal government has declined as private companies make up a bigger proportion of R&D spending. Far from encouraging the development of new companies, the shift may be slowing the pace of valuable innovation.

What's happening: In a new working paper, researchers led by Tania Babina of Columbia Business School compared research grants, patent filings and U.S. Census Bureau data to identify the effects that changes in the sources of university research funding had on academic scientists.

• Tracking the career outcomes of researchers in high-tech fields, they found that a higher share of private-sector R&D funding leads to more patents and an increased likelihood of researchers leaving academia to join the companies that funded their work.
• When government funding predominates, however, it leads to a higher likelihood of scientists remaining in academia and more new startups spinning off the research.

What they're saying: "If you get more private funding, it creates intellectual property that companies can appropriate through patents," says Elisabeth Ruth Perlman of the U.S. Census Bureau's Center for Economic Studies, one of the paper's co-authors.

• "With federal money, those new ideas are open to be taken by people who worked on them and commercialized through the wider startup ecosystem."

By the numbers: Since 2000, federal funding as a percentage of university R&D has fallen from 60% to below 45%, while corporate funding has risen from 20% to 30%.

• By some metrics, rates of entrepreneurship in the U.S. have been declining since the 1970s, and Perlman notes that "when you have more private money going in, you see more products of university research flow to large established companies that have the money to give those grants."

Flashback: The paper cites the example of a company born in the late 1990s through research funded in part by the federal government, which left its founders free to commercialize their innovations.

• That company is Google.

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