R&D investments are key to revitalizing U.S. economy

The following article is from Edward Bernstein, president, Industrial Research Institute, on how R&D investments are key to revitalizing the U.S. economy:

We will recover from the frightening economic crisis that has gripped our nation for more than a year. That much appears clear. We will survive. The more important question for our long-term economic well-being is, Will we thrive?

A favorable answer to that question depends on the largely unheralded efforts of thousands of engineers, technicians, scientists and specialists working in research and development (R&D) at corporations and universities across America and around the world. Whether the problem is developing safe and sustainable food supplies, finding new vaccines and medications, or meeting our ever-growing need for affordable and clean energy, the solutions will flow from our R&D community. Those efforts, centered largely in the private sector, depend upon the continued and sustained support of our government, both to revive our economy and to retain America's position as the global technology leader.

At the moment, the main thrust of the U.S. response to the economic crisis targets ailing parts of our existing economy, with the banking, investment, housing and domestic automobile sectors absorbing unprecedented levels of direct government involvement. Fortunately, the Obama administration and a bipartisan coalition in Congress understand that R&D, of the kind that can create new product lines and even entirely new businesses, will provide the magnetic force to pull us out of the economic depths.

There has been a lot of talk about leverage as people ask what kind of public spending provides the most 'bang for the buck,' in terms of economic multiplier effects. The Industrial Research Institute (IRI), representing companies that employ more than 10 million Americans and generate roughly a third of our gross domestic product, believes the answer to this question is obvious. We may confront a world of scarce investment capital at a moment of crisis in the banking industry, but there is no shortage of problems whose solutions - derived from R&D - could become thriving, job-generating businesses.

Staying focused on the importance of R&D is critical at a time when an ailing economy is forcing companies to cut back on capital investment and longer-term strategic research. IRI's R&D Trends Forecast for 2009, an annual survey based on responses from just under half of the 182 IRI member companies that conduct R&D in the United States (visit www.iriinc.org), clearly shows that companies that invest in R&D always do better coming out of recessions than those that do not.

A new set of winners and losers may well become apparent as our economy regains equilibrium. The Forecast also shows that about one in five reported growth of five percent or more in their spending on new product development. Overall, R&D budgets were flat between 2007 and 2008 as the recession set in, and during the more severe downturn that followed, have remained largely unchanged.

Our research indicates that the emphasis is on development of new products and business lines as opposed to the perfection of existing lines. There is also a growing willingness on the part of companies that guard their proprietary expertise jealously to work together with other firms and with universities. This collaborative effort can be critical to addressing one of the thorniest problems in the world of R&D, that of speeding the process of turning new ideas into viable commercial products and services.

The American people are already providing critical support through legislation called "America COMPETES." It doubles support over the next decade to three government agencies that offer grant support for industrial and scientific research. Government can make a key additional contribution by fostering the kind of cooperative research that we already see occurring among private companies, their competitors and academia. And the public sector must get behind efforts to improve education and training opportunities to replenish our work force with the levels of technological expertise needed to continue as the global technology leader.

Even as these cooperative efforts accelerate the speed with which technological innovation improves our lives and boosts our economy, the government must take further steps to modernize and strengthen our system for protecting intellectual property.

Our banks and investment firms need more than relief from their troubled assets. They need viable, promising lines of business to support and underwrite.

Growth is the key to our economic health and technological innovation drives our nation's economic growth and spurs job creation. It is particularly important in the face of the current economic challenges to maintain healthy levels of investment and to promote policies that strengthen the ability of R&D to move the country back into a period of economic expansion.

Edward Bernstein is president of the Industrial Research Institute (IRI), an organization of some 200 industrial and service companies having common interest in effective management of technological innovation. IRI members invest more than $100 billion annually in R&D, nearly 50 percent of the nation's privately funded effort. For more information about IRI, visit www.iriinc.org.