The Business of Technology Research – Who Funds It, And What‘s Being Done

Technology has become the primary driver of economic growth and improvements in quality of life over the past century. Nearly every industry has been disrupted and transformed by technological innovation, from transportation and manufacturing to healthcare and finance. Behind each of these world-changing innovations is extensive research and development to push the boundaries of science and engineering.

But cutting-edge research is expensive and becoming more so by the day as the low-hanging fruit gets picked and new breakthroughs require increasingly complex and resource-intensive efforts. Gone are the days when a lone genius tinkering in his workshop, supported perhaps by a wealthy patron, could drive the frontiers of human knowledge. Today, research budgets are measured in the billions of dollars and projects often span multiple institutions and even countries.

So who is funding all this costly technological research and what are they working on? Let‘s take a look.

From Renaissance Patrons to Government Grants

Centuries ago, groundbreaking research was largely the domain of individual scientists, inventors, and mathematicians. Their work was often supported by wealthy benefactors who saw value in expanding human knowledge, even if the practical applications weren‘t always immediately clear.

The quintessential example is the Medici family of the Italian Renaissance. This powerful banking dynasty funded the work of luminaries like Leonardo da Vinci, Michelangelo, and Galileo Galilei. The Medicis were effective venture capitalists of ideas, enabling visionaries to push art and science forward.

However, this model of private research patronage became untenable in the 20th century as the cost and complexity of ambitious research projects exploded. Technological innovation, especially in the first half of the century, became increasingly intertwined with national security as the two World Wars and the Cold War arms race drove unprecedented government investment in R&D.

The shining (or terrifying) example is the Manhattan Project to develop the first atomic bombs during World War II. This massive research effort, equivalent to about $23 billion in today‘s dollars, brought together the top scientists from around the Allied world in a race to harness the power of nuclear fission before Nazi Germany. The project‘s success ushered in the Atomic Age and signaled the new central role of government in directing and funding scientific research.

Who Funds Research Today?

In the 21st century, research and development is funded by a combination of government agencies, private corporations, charitable foundations, and academic institutions. However, the lion‘s share still comes from public coffers and corporate profits. It‘s estimated that around 30% of total R&D spending originates from government sources, primarily in the form of research grants to universities and funding for government labs. Private industry accounts for the other 70% as companies invest huge sums in developing new products and technologies to stay competitive.

Here‘s a breakdown of the key players:

Government Funding

Pretty much every developed country has government agencies dedicated to funding and conducting scientific research. In the US, major examples include:

• National Science Foundation (NSF): With an annual budget of $8.5 billion, the NSF funds about a quarter of all federally-supported basic research at American colleges and universities. It has a broad mandate spanning the physical sciences, biology, computer science, engineering, and the social sciences.

• Defense Advanced Research Projects Agency (DARPA): This Department of Defense agency is focused on developing breakthrough technologies for the military but much of its work has profound impacts on the civilian world. DARPA is famous for catalyzing development of the internet, GPS, and autonomous vehicles, among many other innovations.

• National Institutes of Health (NIH): The NIH is the largest public funder of biomedical research in the world with an annual budget of over $40 billion. In addition to supporting medical research at universities and hospitals, the NIH also conducts its own research through 27 institutes and centers.

Other key US funders include the Departments of Energy, Agriculture, Commerce, Homeland Security, and Transportation, and many others listed here.

In Canada, the Natural Sciences and Engineering Research Council (NSERC) supports university research and student training with a $1.3 billion annual budget. The National Research Council of Canada is the government‘s top R&D organization, conducting research in fields spanning health, aerospace, marine, transportation, construction, and energy.

Most other developed nations have comparable government research funding bodies that collectively distribute hundreds of billions in public funds each year. Politicians may argue over the details, but there is broad bipartisan consensus on the importance of funding scientific research for the public good.

Private Industry

For leading technology companies, maintaining a competitive edge depends on continuously developing innovative new products and improving existing ones. Many top tech firms spend 10-20% of their revenue on R&D – an enormous investment considering that companies like Amazon, Apple, and Google have annual revenues in the hundreds of billions.

Some major corporate research centers include:

• Google Research: With thousands of computer scientists and engineers, Google‘s research arm tackles ambitious challenges in artificial intelligence, quantum computing, healthcare, robotics, and internet access. Practical applications include enhancing the company‘s ubiquitous search, advertising, and cloud computing services.

• IBM Research: One of the largest and most storied industrial research organizations in the world, with over 3,000 researchers across 19 locations. IBM‘s scientists have earned numerous Nobel Prizes, Turing Awards, and patents over the decades. Current focus areas include AI, blockchain, quantum computing, and cloud-powered business solutions.

• Microsoft Research: Founded in 1991, Microsoft‘s research division employs over 1,000 scientists and engineers working on both basic and applied research. Key areas include AI, systems and networking, programming languages and software engineering, computer vision, and gaming. Many MS Research innovations end up integrated into the company‘s software products.

• Bell Labs: Now owned by Nokia, Bell Labs was long the research hub of the Bell System / AT&T monopoly. Over the years, its researchers developed groundbreaking technologies like the transistor, information theory, the Unix operating system, and cellular networks. The lab continues to innovate in areas like 5G/6G wireless, edge computing, and network automation.

Many other major tech companies like Apple, Facebook, and Oracle also invest heavily in both centralized research labs and distributed R&D throughout their engineering teams. Even companies in more traditional industries are ramping up R&D spending to avoid disruption – major automakers now have sizable research budgets to compete in the race towards electrification and autonomy.

Academia and Philanthropy

Although smaller in scale than government and corporate funding, academic institutions and charitable foundations still play an important role in the research ecosystem. Top research universities generally spend over a billion dollars annually on R&D, with funds coming from a combination of public grants, corporate partnerships, philanthropic gifts, and income from endowments.

For example, MIT‘s annual research budget of $771 million comes from:

• 67%: US government agencies
• 17%: Private foundations and corporations
• 13%: Internal university funds
• 2%: State, local, and foreign governments
• 1%: Other

Many research universities use distributions from multi-billion dollar endowment funds to support faculty and student research not covered by external grants. Wealthy donors often earmark major gifts for research in a particular department or field that aligns with their interests.

On the philanthropic side, private foundations fund research through competitive grants, prizes, and direct gifts to universities. The Bill and Melinda Gates Foundation, for instance, has given billions to support research on global health and poverty. Other major foundation research funders include the Howard Hughes Medical Institute, the Ford Foundation, and the Alfred P. Sloan Foundation.

While the dollar amounts may be smaller than government and corporate funding, targeted grants from universities and foundations often support more exploratory research that may not have obvious short-term applications. This basic research lays the groundwork for future breakthroughs and demonstrates the value of a diversified research funding ecosystem.

Hot Areas in Technology Research

Those are the key players driving technological progress – now let‘s look at some of the most exciting and impactful areas they‘re pursuing. Of course, the full scope of active research is far too vast to cover here, spanning countless sub-disciplines of science and engineering. But a few fields are attracting especially large investments due to their transformative potential:

Quantum Computing

Classical computers manipulate bits of information, each representing a 0 or 1. Quantum computers instead use qubits – quantum bits that can exploit the principle of superposition to represent both 0 and 1 simultaneously. In theory, this allows quantum computers to solve certain complex problems exponentially faster than any classical computer.

Although still highly experimental, quantum computing could eventually enable breakthroughs in fields like drug discovery, financial modeling, encryption/code breaking, materials science and more. Tech giants like Google, IBM, Microsoft, Honeywell, and Amazon are investing heavily in developing stable, large-scale quantum computers. Governments are also providing major quantum funding, including over $1 billion from the US National Quantum Initiative.

AI and Robotics

Artificial intelligence, and especially the subfield of machine learning, has progressed rapidly over the past decade. Applications like facial recognition, language translation, autonomous driving, and strategy gaming (Go, chess, video games) have already achieved superhuman levels of performance in narrow domains. Further advancements could transform industries as diverse as healthcare, finance, manufacturing, transportation, and education.

Closely related is the field of advanced robotics – combining AI software with sophisticated hardware for sensing and manipulation. Although we‘re still far from the science fiction vision of humanoid robot butlers and companions, robotic systems are already ubiquitous in settings like factories, warehouses, and hospitals. Researchers are pushing to expand their dexterity, mobility, autonomy, and ability to work safely alongside humans.

AI and robotics are a top priority for most major tech companies as well as government initiatives like the US National Robotics Initiative. Billions in VC funding is also flowing to startups commercializing the latest breakthroughs from academic and corporate labs.

Biotechnology and Medicine

The life sciences are arguably undergoing a technological revolution as profound as the computer revolution of the past half century. Rapid advancements in fields like genomics, synthetic biology, stem cell therapy, precision medicine, and brain-computer interfaces could transform human health and longevity.

Some key focus areas:

• CRISPR gene editing to treat genetic disorders
• CAR-T cell therapy and other immunotherapies for cancer
• Stem cell and tissue engineering for regenerative medicine
• Optogenetics and neural implants to understand and manipulate the brain
• AI-driven drug discovery and personalized medicine

Major research funders include the NIH, biotech and pharma companies, and philanthropic groups like the Chan Zuckerberg Biohub. With an aging global population and soaring healthcare costs, the potential impact is enormous for both patient outcomes and the trillion dollar healthcare industry.

Clean Energy and Climate

With the existential threat of climate change looming, there is an urgent need for clean, reliable, and affordable energy technologies that can rapidly decarbonize the economy. Despite substantial progress in wind, solar, and battery technology over the past decade, much more work remains to be done.

Key research priorities include:

• Next-generation solar cells and wind turbines
• Long-duration grid-scale energy storage
• Nuclear fusion and advanced fission reactors
• Geothermal power and other renewables
• Carbon capture and sequestration
• Hydrogen production and fuel cells
• Smart grid and energy efficiency technologies

Government research funding is substantial in this area as climate change becomes a bigger political priority. Many major energy companies are also investing in clean tech R&D to diversify their businesses away from fossil fuels. Breakthrough Energy Ventures, a $1 billion fund led by Bill Gates, is catalyzing entrepreneurial efforts to commercialize the most promising technology.

These are just a few of the research domains attracting serious money and talent. Others include space technology, advanced materials and nanotech, 5G and beyond, blockchain, IoT, 3D printing, and augmented/virtual reality. The pace of progress can be dizzying, but one common thread is the convergence of previously distinct fields into new interdisciplinary approaches.

Research as a Business

Beyond the lofty goal of expanding the frontiers of human knowledge, scientific research is ultimately a business – one that fuels innovation, creates millions of jobs, and offers tantalizing investment opportunities. Globally, an estimated $2.4 trillion was spent on R&D in 2021, equivalent to around 2% of world GDP.

For companies, universities, and even governments, R&D is both a major expense and a profit center. Corporations justify large research budgets with the promise of incorporating cutting-edge technology into market-leading products. Top research universities attract more students, faculty, and funding with each high-profile paper or patent. Governments aim to stimulate their economies and gain a geopolitical edge by out-innovating rival nations.

With so much money sloshing around, there are ample opportunities for entrepreneurs and investors to cash in. Each new field of research spawns a wave of startups racing to commercialize the technology, often with VC backing and dreams of a big IPO or acquisition. On the long-term investing side, many leading research universities have generated outstanding endowment returns by allocating parts of their portfolio to VC/PE funds and internal research-derived startups.

Of course, most research does not yield an immediate profit; it‘s an investment in the future. Failure and iteration are part of the process. But when those wild ideas do pay off, the rewards can be immense, both financially and for humanity as a whole. As sci-fi author William Gibson once said "The future is already here – it‘s just not evenly distributed." Technological research is what turns today‘s science fiction into tomorrow‘s reality for all.