U.S. Companies Spending More on R&D Than Ever Before

The U.S. government may be cutting back on research money, but U.S. companies are sinking spending money into research and development at the quickest rate in history.

According to an article in Bloomberg Business, “from November 2014 to March 2015, U.S. businesses funded R&D at an annual rate of $316 billion, or about 1.8% of gross domestic product, the largest share ever for the private sector,” while federal R&D spending has plummeted 1.2% as a share of GDP  since the 1960’s. This year marked the lowest rate it has been since World War II.

U.S. companies are doing a good job in making up for the lack of federal R&D funding. Many economists believe that this is the transition we have been waiting for; companies are investing more in long-term projects to create new products and efficient processes, rather than focusing on short-term projects with limited profits.

“The connection between R&D spending and the growth in productivity from one decade to another is very hard to see and unlikely to be significant,” says Robert Gordon, an economist at Northwestern University, according to Bloomberg Business. It may be difficult to see in this lifetime, but at least we are heading in the right direction.

Robert Atkinson, president of the Information Technology and Innovation Foundation (ITIF) believes, “it’s the difference between coming up with evolutionary products instead of revolutionary ones.”



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