Study: Overseas R&D Spending Hurts US Manufacturing

A new report suggests that China and other nations are increasingly capitalizing on product development breakthroughs from the U.S.

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A newly released study suggests that China and other nations are capitalizing on product development breakthroughs in the U.S. — to the detriment of the domestic manufacturing sector.

The report from Boston Consulting Group showed that China eclipsed the U.S. in late-stage research and development spending for the first time in recent years.

The U.S., however, continued to lead the world in overall R&D investment — an indication, USA Today reports, that other countries are reaping the rewards of technology that was pioneered in the U.S.

“Other countries are free-riding on the U.S. investment," study co-author Justin Rose told the paper.

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The report found that about one-third of U.S. R&D spending was dedicated to bringing new technology to market; in China, that late-stage investment comprised 84 percent of R&D spending.

In addition, China's commercialization investment is growing about four times as fast as that of the U.S.; by 2018, USA Today noted, China is expected to double the U.S.

Those patterns combined to erase tens of billions of dollars and thousands of jobs from the U.S. manufacturing economy over the past decade, the report said.

Analysts blamed the discrepancy in large part on the vast differences between the R&D climates in the two nations.

The Chinese government often directs industry goals, and companies controlled by the state are better able to absorb potential losses. The country was also criticized for failure to protect intellectual property.

In the U.S., by contrast, most early-stage research is conducted by universities — with help from federal grants — and the private sector spends money bringing new technology to market.

BCG analysts suggested that the U.S. could reverse the current trend by increasing cooperation between universities, companies and other research groups.

USA Today, meanwhile, noted that the budget proposal from the Trump administration would cut federal R&D spending — which could further complicate the White House's efforts to reduce the nation's trade deficit.

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