April 2014 Newsletter Article

New Study Measures Economic Impact Of University Research

Few have doubted that university research is a key component of the US economic ecosystem, providing enormous public value and impact on employment, business, and manufacturing nationwide. But until now there have been few rigorous ways to measure the return on the investment.

study published recently in the journal Science uses new data from several Midwestern universities, including the University of Michigan and Michigan State University, has taken an important initial step by providing the first detailed information about the short-term direct economic impacts of federal research spending, shedding light on the breadth of the scientific workforce and the national impact of the research supply chain funded largely by federal grants.

“The main purpose of science funding isn’t as a jobs or stimulus program, but this study shows there are also major short-term economic benefits to science funding,” said Bruce Weinberg, co-author and professor of economics at Ohio State.

The universities in this study received a total of about $7 billion in research and development funding in 2012, and about 56 percent of that came from the federal government. The great majority was spent on salaries, and one key insight was that faculty members accounted for fewer than 20 percent of the people supported by federal funding.  About one in three workers is either a graduate student or an undergraduate.  One in three is either research staff or a staff scientist, and about one in ten is a post-doctoral fellow.

The study also sheds light on where universities spend the federal funding they receive for procurement. In 2012, almost $1 billion of total research expenditures were spent on goods and services from U.S. vendors and subcontractors. Of those expenditures, 15 percent went to vendors in the university’s home county, 15 percent in the rest of the home state and the balance to vendors across the United States.

The researchers noted that universities bought goods and services from a wide range of contractors in a variety of industries: everything from test tubes to telescopes and microscopes to gene sequencing machines. Many of the purchases came from large U.S companies.  But as the researchers examined the websites of some of the tens of thousands of vendors, “we were struck by how many are small, niche, high-technology companies…” they wrote.

The researchers conclude that federal funding has a wider impact than is often assumed. “The process of scientific research supports organizations and jobs in many of the high skill sectors of our economy,” the researchers wrote in Science.

Study data came from the STAR METRICS project, a partnership between federal science agencies and research institutions to document the outcomes of science investments to the public. Data from nine universities were used in the study–Michigan, Wisconsin-Madison, Minnesota, Ohio State, Northwestern, Purdue, Michigan State, Chicago and Indiana.

The study is part of a continuing project conducted by researchers from the American Institute of Research, the Committee on Institutional Cooperation (a higher education consortium that incudes the members of the Big Ten Conference and the University of Chicago), University of Michigan, University of Chicago, and the Ohio State University.

As Julia Lane, Senior Managing Economist at the American Institutes for Research and a lead researcher on the project, summarized, “This study provides evidence that while science is complicated, it is not magic. It is productive work.  Scientific endeavors employ people.  They use capital inputs. Related economic activity occurs immediately. Policy makers need to have an understanding of how science is produced when making resource allocation decisions, and this study provides that information in a reliable and current fashion.”

For more on the study, please see the full article.