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Chemical R&D Investment Pays Off
Representing ten percent of U.S. manufacturers and accounting for the largest trade surpluses of the non-defense sectors, the chemical industry remains an important contributor to the U.S. economy. Despite substantial growth in R&D investments by chemical companies during the past decade – R&D investment as a percentage of sales grew from 2.47 percent in 1980 to 4.70 percent in 1999 – the industry remains below the national average for several indicators of R&D expenditures.
Measuring Up: Research and Development Counts in the Chemical Industry, a new study commissioned by 27 chemical companies, laboratories, and government agencies and released by the Council for Chemical Research, reveals the importance and benefit of increased private and public R&D investment for the sector. The study includes econometric, bibliometric and historical analyses of chemical research investment.
Major findings include:
- On average, each dollar invested in chemical research produces nearly $2 in corporate operating income over the next six years, achieving an average annual return of 17 percent after taxes.
- “Despite this [high rate of return], the future does not portend great changes in chemical company R&D budgets, so one key is further productivity improvements could come from scalability.
- “Any large industry surges will necessitate more ingenious use of current level R&D budgets, intensified efforts to attract new customers, and renewed initiative to form more alliances.”
The third point suggests some policy roles for state and federal government to encourage increased investment and research partnerships. The study concludes:
- “Business performs better when public policy, including government R&D funding, is consistent.
- “Publicly funded science makes significant contributions to new technologies in the chemical industry. A very high percentage of science links come from scientific papers generated by academic researchers receiving public funding.”
Separately, the Council has openly opposed the Bush Administration's proposed budget cuts to the Advanced Technology Program and the Department of Energy Program's Industries of the Future Program.
The full report can be purchased from the Council for Chemical Research for $150. The six-page executive summary can be downloaded from http://www.ccrhq.org/news/study_purchase.htm