In our modern world, the ongoing technological innovation is widely
recognized as the key to competitive stability of a company in their market of
operation. As this is true for most active players in the market, it is crucial
for each to enhance their R&D attachments. There are however difficulties in
the forms of ROI evaluations, a lack of active capital access from government
and industrial investment funds: especially for small and
So what are the options left for a firm to access quality R&D,
which can design their innovative road to win the competitions?
R&D Funding as such
First let’s build the ground floor of how R&D is generally funded.
Global R&D spending is expected to get over 2.47 trillion US dollars in
2022. In contrast, in 2005 the Global R&D spent managed to get
close to 1 trillion US dollars, and in 1996 it got to “only” 555 billion
US dollars. With the recession in 2020,
R&D spending decreased, however, since 2021 global R&D investments
are getting back on the growth track.
As the US federal government makes it one of the three if not the highest
R&D-investing country, let’s boil the above numbers down just for the US
and for the year 2022. This year, the US federal government has been
forecasted to invest 181.4 billion US dollars in R&D, more than
all other countries (except China and Japan, however, the Government-Private
sector cooperation is built on special terms for these countries). The US
academia, on the other hand, will reach 23 billion US dollars in R&D investments, and
as for the US industrial organisations, the collective investments to push the
R&D efforts will be reaching as high as 65.8% of the total R&D
investments from the US (679.4 billion US dollars) – amounting to
447 billion US dollars. This industrial investment is 2nd to China.
In the EU similarly, R&D is a cornerstone, put through in the Political Guidance for the next European
Commission. The total government budget allocations for R&D (GBARD)
reached to 109 250 million EUR in the EU which was the 0.8% of the GDP (6%
Let's look into the global R&D spending per sector as well as the global
private-sector R&D focus:
Surely, pharmaceuticals are the sector with the higher R&D spendings,
especially within the past few years and it keeps getting the same attention as
it has the higher percentage of revenues from R&D investments, it has the
close ties to academia through both government and private R&D funds. At the
same time, the contrast based on profits from industrial R&D investments
shows that high-tech, automotive, and consumer products are increasingly showing
higher interest in R&D investments – with more than 20 % of earnings
(earnings before interest, taxes, depreciation, amortization) back
R&D Spending by Company 2020
Some of the companies spending most on R&D during 2020 were
Amazon: 42.7 billion US dollars. Alphabet, Inc.: 27.6 billion US dollars.
Huawei: 22 billion US dollars. Microsoft: 19.3 billion US dollars. Apple:
18.8 billion US dollars. Samsung: 18.8 billion US dollars. Meta (Facebook): US
18.5 billion US dollars.
Even then the volume of investments from these companies was larger than
R&D investments of some industry verticals, or countries for that matter.
And now, with the shortages of Microchips, and the bloodbath of competition
within the automotive for the EV market – the investments are expected to
grow even more drastically. This notion is backed by the billions of dollars
invested in newer, better EV manufacturing and battery plants
Now all these above factors in mind, who would you give the credit to,
and thus who should the R&D researcher, scientist, or startup go to, to find the more
productive way to a successful project, or simply, a firm looking to enhance its
capacity in the highly technologically competitive world? is it
government-powered funds, or is it private funds to consider first?
Government vs Private Sector in Terms of R&D. Who’s the
What are the R&D and innovation types that can be considered in this
context, especially from the point of Outcome? The US National Science Foundation split it into three branches:
The first is described as an experimental work or tasks that have theoretical
nature and are performed to access new knowledge. The applied research on the
other hand has a clear eventual target. The development is the practical step of
applying the knowledge into formed experiments to achieve new knowledge, and
eventually either a new product or an improved product.
For governments, it is more likely to take the road of basic research,
although basic research is usually a smaller share of the total R&D per
country (around 15% of total US R&D efforts in 2019). The main reason why
the private sector is not as keen on taking over the basic research funding is
the law's potential profit yield from these investments. This is not to
undermine the importance of basic research, as it has a clear high payoff in
terms of social importance, and accumulated knowledge.
The debate can be made in favor of basic research, in fact, vouching for the
eventual importance of the knowledge that gets discovered during the
research – these are such examples as Google getting its start from a federal
grant, or the development of the Internet as such (the involvement of DARPA Funding is undeniable
here). Even though similar examples are actively ongoing, and significant,
it is crucial to notice that such knowledge gathered from basic research is
brought to its productive state by the private sector, which turns the research
into a consumer good and ensures demand from the people.
Applied Research, therefore, is something more preferred by the private
sector: turning science into technological change – this is where innovation
shines! As stated in William D. Nordhaus’s Schumpeterian profits in the American
Economy the wealth generated by producers of innovation is an ice cube
compared to the iceberg of benefits it ends up bringing the general population
(less than 2.5% in fact), thus, if not a fair game, the existence of innovating
companies (however, one might think of their public decisions) is at least
highly beneficial for the general population. Just as the government
This brings us to the main takeover of the original question of this
paragraph – who’s the real hero – evidently, the one does not exist
without the other, and both contribute to the same eventual causes, each in
their specific form, thus, there is not a competition between Government and
Private-funded R&D, but rather they are better solutions for their
Firms’ Access to R&D, and to R&D effects
What is the motivation of a company when investing in R&D today? Be it a
MedTech, Telco, or Composite pre-preg manufacturer, fundamentally the R&D
investor private company expects the R&D effort to yield a technology that
can be developed into a new or highly upgraded product.
The experience shows that R&D is as successful as the
organization’s core team is giving it due respect. When R&D is accepted
by a firm as a cornerstone of achieving as well as shaping the corporate
strategies – the R&D efforts and Returns on Investments are likely to
match if not overcome the ceiling of the firm’s expectations. The R&D
access is especially crucial for a company’s competitive “edge” due
potential differentiated offer it has with the new product for the
the exclusive edge it has over its competition;
the new business prospects that are opened up.
This access to R&D and innovation is not straightforward for a firm. As
it has to first, be properly, financially backed in the planning process, and
the ROI from R&D is not a feature
found in simple calculators. While the private sector is responsible for
fostering excellent achievements of scientists, university researchers (R&D
professionals, scientists, Ph.Ds, etc.) are still occupied in more than half of
all basic research (especially true in the US and
This means that for a firm to access R&D – the relevant knowledge and
insight, the academically-acclaimed talented human resource, especially one with
some understanding of business development – the firm needs to have a
specific game plan and to be attractive and accommodating for such talent,
within itself or in a form of partnership (outsourced R&D).
Some good action steps to start with are:
Awareness of What Else Is Out There
A good way for a firm to detect, gather and access crucial research and keep
the finger on the pulse of ongoing achievements by competition, is to monitor
the activities in the academic world. Eventually, the academic achievements
worth commercializing will be taken forward by the private sector, and as long
as government-funded research is commonly open so is the access to
scientific journals – gathering market knowledge is possible
even from the lab.
With the open access to the relevant events/conferences, it is also important
to send the internal R&D capacity out there for physical meetings, pitching,
and communicating with the market – this is a push & pull strategy
helping the firm to reach for the knowledge and for the potential knowledge to
know the place of the firm.
Befriend and Partner Up with Academia
A working practice to access the up-and-coming R&D, is to partner up
with academia and get an inside track to research as opposed to the
competition – the firm that has proper partnership relations with academia
does not have to wait (sometimes for years at a time) for the results of
research to be published in scientific journals.
Even though corporate partnership gives academia more flexibility, at the
same time it is now much closer to a proper business relationship, thus the
pressure of results is higher, and academia is expected to DO MORE , than in a usual
government-funded R&D project. Firms here use their negotiating power and
lawyers to access the first right of refusal as well as the opportunity to stop
the funding if set milestones aren’t met.
Putting your internal challenges out there to find an external solution may
sound risky for an extra careful one, however, this is another practice of
accessing R&D knowledge both from within and outside of academia, from
sophisticated companies and startups, open innovation calls make it possible for the firms
to access targeted solution for the specific challenge while gathering insight
of the topic and other market players in the vicinity of the topic.
Open Innovation brings us to startups, especially deep-tech ones, where both
academia finds freedom and ability for applied research, and the firm is able to
access/outsource the R&D necessary to create its edge in the ongoing
Especially for the big players and their subsidiaries, looking to
create revolutionary solutions, exploratory yet targeted research is the way to
pass through the competition.
Startups as the Novel Corporate R&D
Both academia and startups, especially within the high-tech and med-tech
contexts – are particularly relevant to each other, given the fact that both
of these entities represent two core factors involved in entrepreneurship as
such – competitive advantage and driving power to capitalize on that
Often firms prefer the short-term fixed volumes of innovation that tend to
bring some value which keeps them from larger investments, and the scientists
with R&D capacity of game-changing solutions find themselves without proper
financing from neither Government funds or the larger firms.
Facing increasing competition – firms prefer to protect the existing
knowledge and keep the investments in commercial applications rather than risk
and innovate on a large scale.
In the past decades (starting around the 70s) The inherent unpredictability
of basic research has been harder to calculate, monitor and control for the
firms, thus decreasing the motivation to deploy assets towards unclear
For the aforementioned reason, more and more scientists find themselves on
the path of becoming founders and having to access the entrepreneurial world as
well. With this, startups are increasingly becoming the faster route to
commercializing academic research – just from 1996–2017 over
14000 academia-based startups were formed and the figure gets added on by at
least 1000/year from then on.
Why Is It Relevant for the Scientist
Usually, the Ph.D. programs of scientists do not cover entrepreneurial
skills, marketing or selling is not a common trend to focus on and the final
solution is usually not envisioned from the customers’ point of view, thus
accessing a business partnership or becoming a scientist-founder becomes an
alternative to the usual scientific journey (Ph.D., postdoc, doctoral degree,
professorship/getting accommodate in an industrial setting).
Now, there is nothing wrong with the usual way – the Academic
Prestige, Basic Research focus, Predictability of the daily operations, access
to great technology and resources covered by government or private-funded
institutions – these are all fine and have the palace to be.
However if the scientist has a certain discovery and vision for it, wants
an intellectual freedom, trust and agility in their own process, prefers fast
pace, is ready to interact and align with the potential business needs and
requirements – startups are a perfect solution. And eventually, the startups
are usually in much higher demand of a scientists ,
whereas in academia there are usually few professorships for so many
Why Is It Relevant for the Startup
With the kind of culture startups bring out for academics – it is now not
expected to be of a certain middle age, to have been through decades of academic
achievements to be able to access the scientific progress – with more women
in science and better access to education in the world, the landscape is
changing and there are more professionals for startups to partner up with.
Startup is a riskier step of the entrepreneurial journey, thus for the
startup and investors, being sure of their service/product’s bulletproof
performance is of utmost importance – scientific and academia-based research
is the better PR to communicate the goods, thus finding potential investors,
customers and early adopters becomes an “easier” challenge to solve.
Hiring consultants is costly, thus directly accessing the R&D knowledge
in the source of the future service/product is a huge benefit for startups.
Even though it can be costly to hire scientists, it is eventually more
bulletproof and saves on other fronts, such as finding new talent, which now can
be done through the network of the academic personnel employed in the
Finding capital can be cooperatively beneficial for the marriage of startups
and academia, as there are various grants that are better attracted and handled
through academics while being a startup gives additional access to VCs.
Why Is It Relevant for the Firm Which Potentially Employs or Partners
Larger firms gradually rely on startups more and more for innovation
development. They intend to finance a few research projects, Proofs of Concept,
to access the potential solutions of their internal challenges through external
entities such as Academia, Research-based startups, or deep-tech startups in
Be this in the form of outsourcing R&D within strategic verticals,
through buying out startups or through Open Innovation calls – eventually the
larger firm has the upper hand through the negotiating power, thus can navigate
their way to access the Tech Startups services or products in highly
competitive, or even exclusive terms. This, of course, when they manage to
properly locate the startup and the issue to solve.
Not to forget also the flexibility and speed of work with startups which tend
to be superior to the usual corporate operations, especially when it comes
Often the outsourcing itself does the magic: corporate has a need for very
specific technical solution, they outsource an R&D startup and get the
solution and training for their internal R&D capacity. Now the company has a
more cost-effective solution to their R&D issues, and a more competent
internal R&D resource.
So, the larger firms seek unique innovative startups, which in their turn
look for continued access to R&D, research, and academic “manpower”:
Firms(Science + Startup) = R&D with the highest RoI
eventually Startups Become the Corporate R&D of the