Amid talks of cuts to government funding for research, new study shows decline in corporate funding for research as well
While the age-old debate of the chicken and the egg continues on, two Duke professors’ new project sheds light on a different poultry problem—the golden goose and its golden eggs.
Ashish Arora, Rex D. Adams professor, and associate professor of strategy Sharon Belenzon—both faculty in the Fuqua School of Business—have created a website called “The Golden Goose” to make public their findings on the mismatch between corporate research expenditures and patents.
“With this project, we said that science is the key activity that researchers take to understand how things work. Development is the activity that puts into practice the science that researchers uncover,” Belenzon said. “We wanted to understand to what extent companies participate in science, in the creation of pure knowledge about how the world works.”
In their publication, the two faculty wrote that the term golden goose represents the fundamental scientific concept that a company uncovers through research, whereas golden eggs are the patents that are developed using foundation.
“We think of [patents] as the golden eggs the golden goose was laying," Arora said. "We keep valuing the golden eggs, but not the goose itself."
The team first traced through major public corporations' patents, publications, corporate spending and more from the 1980s to 2006. This information was then collected onto their platform for the benefit of both the public as well as the companies under study.
Their project, which has been documented in two papers in addition to the web platform, seeks to understand how companies draw the line between research and development as well as why companies have placed a greater emphasis on development in recent years.
“The core of our work is to document systematically the decline of research in American corporations," Arora said. "Most of the time, if you follow the public discourse, people talk about R&D but treat it as one big thing, as if they were the same thing. But in fact, research is often quite different from development."
Their work shows that corporate spending on R&D as a united field has not dropped and, on average, the number of patents that companies win each year has not either. However, the team found that the companies surveyed have also declined collectively in their total research output.
Arora said that this lessening of pure science research was not confined to one type of company—startups tend not to do research, and more established companies are cutting back.
One reason that companies may be trimming their research budgets is that research is often published, making its benefits available to everyone and limiting its exclusivity, Arora explained. They found that if a company's research project directly related to its corporate aims, the company was more likely to continue funding it.
“Companies that are able to use their own research tend to continue to invest in it, but companies that are not able to use their own research are likely to withdraw,” he said. “Our measure of whether companies are able to use their own research is when they do their inventing, if you look at their patents, can we see if their research is reflected in their patents? Is their own research an input into their inventive, technical activity?”
For Arora and Belenzon, the patents are the golden eggs that rely on the golden goose for production. And as corporations shift more toward the development side of R&D and value the eggs more than basic research, the link between the two grows weaker.
“We believe that the science that is obtained through research is the key driver of economic growth by facilitating invention, which is development,” Belenzon said.
American research institutions are able to pick up some of the slack, Aurora noted. Duke, for instance, is ranked seventh in research expenditure at over a billion dollars compared to other American schools.
“You could imagine that we are now seeing a new division of labor between the university sector on one hand and the corporate sector on the other,” he said.
Despite their efforts, however, universities are often limited by logistical concerns such as federal funding or support. Aurora explained with the observed drop in corporate expenditures for R&D combined with potential government budget cuts for research, America could soon reach a breaking point.
“I think it will be catastrophic. Whenever university professors complain about government cuts for research, there is a little bit of self-serving bias there,” Arora said. “My personal view is that corporate America is more reliant on universities than ever before—not just for the new knowledge they are producing but also for the trained human capital that will come out as a result of that research activity.”
Going forward, the pair will continue to update their web platform with more recent data and make their findings more accessible for companies.
“The reason for looking at all of this is my conviction that the history of modern capitalism and modern economic growth is very closely tied up to the creation and use of new knowledge," Arora said. "The systematic application of science to economic ends is ultimately, I think, the source of productivity, growth and the improvement of living standards."