An Inside Look at Innovative Companies and Their Struggles With Government Policies

R&D directors at major, innovation-driven companies in America believe that the inconsistency of the R&D tax credit, a lack of access to science and engineering talent, and intellectual property licensing issues are some of the biggest obstacles to R&D success in the United States. These are some of the findings of a new staff report from the American Energy Innovation Council, Unleashing Private-Sector Energy R&D: Insights from Interviews with 17 R&D Leaders, by Jeffrey Rissman and Maxine Savitz.

The report investigates an issue that is central to technological progress in the energy sector: the role of private companies in researching and commercializing new technologies. Rissman and Savitz interviewed top R&D executives at some of the largest and most innovative companies in America, like IBM, Ford, BP, and Philips.  Their insights shed light on how these companies integrate research and development into a successful business model. They also reveal how government and business can work together to accelerate innovation and solve America’s energy challenges.

How R&D is funded and managed in private companies is the subject of the first chapter.  The authors compare centralized vs. decentralized research structures and highlight factors that are driving companies to increasingly perform their R&D activities overseas.  Gating mechanisms” companies use to redirect funds away from poorly performing research projects to more fruitful options are discussed, as well as the benefits and challenges companies face when entering research partnerships with universities and national labs.  

Interviewees’ views of public policies that effectively promote private-sector R&D comprise the second chapter, such as grants and contract research, which account for 32% of all federally-funded R&D in the U.S.  

Finally, the last chapter discusses obstacles private companies face to greater R&D success in the United States.  The most often-cited obstacle is a lack of access to talent, caused by insufficient science, technology, engineering, and mathematics education combined with the difficulty of securing green cards and visas for immigrants with technical skills.  Inconsistent or insufficient tax credits, such as the R&D tax credit (which has been extended by Congress 14 times since its introduction in 1981), and difficulties associated with licensing intellectual property from universities were also major concerns.

This report offers a rare look into the management of R&D in successful corporations and makes clear the policy environment necessary to enable U.S. companies to make bold, transformative investments in R&D.  If government and business can work together to foster a climate that promotes innovation, then private-sector R&D can help set us on a path to an affordable, secure, and clean energy future.