Economists have long touted the importance of research and development (R&D) – investment in science and technology -- in driving economic growth and innovation. If you compare the top 20 countries which are top spenders in R&D* as percent of GDP with the top 20 innovators**, you'll find the list is strikingly similar. Countries in the list include Israel, Sweden, Finland, Japan, South Korea, Switzerland, Iceland and the United States. Investing in R&D clearly pays off. Right now, these countries pursue largely similarly R&D models, but which approach to R&D is going to be the most effective in the 21st century?

Traditionally, the troika of government, business and academia has ruled the R&D funding model. In the 1960s, over 60% of the R&D funding in the US came from the government. Fast forward half a century, and the same percentage comes from the business sector.

If we focus on the the "R" (research) in R&D, we believe that three new funding models will dominate research in the next ten years: the MIT Media Lab model; the Corporate Buyout model; and the DIY (Do-It-Yourself) model.

The MIT Media Lab model represents the perfect tango between academic research and corporate money. Every year corporate sponsors like AT&T assess projects at the Lab and fund research that is most pertinent to their industries. Corporate money spares professors from the mind-numbing ‘publish or perish’ rat race in academia, and gives them the freedom to focus on researching fresh ideas. (The Lab prevents an excessive bias towards product development by reserving a fair percentage of its funding from the University.)

The Corporate Buyout model is now the dominant innovation acquisition model in Silicon Valley, and will spread to more companies across industries. In this model, large companies like Google and CISCO “out-source” their innovation to small startups, which they buy as soon as they see a promising product or service emerge from them.

The DIY model relies on private individuals to drive research. Increasingly, the garage has become a laboratory for innovations in biotechnology, robotics and communications. The reason for this is the modularization of all things that were previously industrial. You can buy a whole lab off eBay for about $20,000.

While Research is disaggregating in this fashion, it is likely that Development will continue to take place within large corporations that have the money and infrastructure to scale and mass produce them.

The US is particularly concerned about losing its innovation capital in the global market. President Obama has repeatedly articulated his support of science and technology education, while widely read columnists like Tom Friedman have bemoaned an immigration policy that risks losing innovative immigrants to other countries. To harness the full potential of the diverse types of research underway today, the Obama government needs to give tax breaks to smaller companies, to companies that partner with university labs, and especially to individuals who are tinkering in their garages.


Ayesha and Parag Khanna explore human-technology co-evolution and its implications for society, business and politics at The Hybrid Reality Institute.

* OECD report Science and Innovation, 2008

** Global Innovation Index report, Mar 2009