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Show f . MM RESEARCH AND DEVELOPMENT TO RISE FURTHER IN 1980 For the second consecutive year, spending for research and development in the U.S. is expected to rise in real terms (constant dollars). Furthermore, Fur-thermore, the Battele Memorial Institute, In-stitute, a highly respected independent research organization, estimated that real R&D outlays will increase at an average annual rate of about 3 percent (as a percentage of gross national product, adjusted for inflation). The Battelle forecast projects a total of $61.8 billion to be spent for research and development during 1980, an increase in-crease of almost 20 percent over the $51.6 billion for last year. This is based on a 12.1 percent inflation rate and a moderate business recession in 1980. Thus, overall, it will represent about a 7 percent real advance in spending. Although the upward trend over the past two years has been gradual, the Research Department of Babson's Reports believes that this continued spending boost could be signaling a definitive turnaround in our lagging outlays for R&D by industry and government alike. If the U.S. is to improve its productivity, more stress must be placed on both basic and applied ap-plied research. INDUSTRIAL R&D EXPECTED TO GAIN Although the Federal Government will again be spending the largest part of the aggregate this year, namely 49.5 percent vs industry's 47 percent, we look for industry's share to show substantial growth during this new decade. Industry-sponsored R&D is actually 71.9 percent of the total since government allocates about half of its R&D outlay to industry. Thus, industry figures are expected to reach $44.4 billion in 1980, up by a considerable amount from the $37.5 billion of 1979. By 1982, a big push should boost the gross outlays to $55 billion. A decade ago. Uncle Sam's input amounted to 60 percent of the nation's total R&D annual an-nual spending. The reduced share of our resources devoted to research, the declining number of patents issued, our foreign trade imbalance, and the sharp drop in the number of small high-technology high-technology companies are all now prompting President Carter and Congress to implement programs for stimulating innovation by private industry. in-dustry. These efforts should make for a marked increase in R&D spending by . corporations. SEVERAL INDUSTRIAL SECTORS TO BENEFIT The Battelle report specified, for the first time, several industries slated to bo the beneficiaries of the increased federal funding in 1980. Among these, the leaders were aerospace with $11 billion 1 78. 1 percent federally funded) and electrical machinery and communication com-munication $8.5 billion (46.1 percent). Other top spenders were all from in-house in-house or industry funds and included machinery, autos, chemicals, instruments, in-struments, and petroleum, in that order. In addition, industrial support of research is expanding in fields affected by government regulation, particularly in those sectors most directly influenced in-fluenced by the need for more energy-efficient energy-efficient products and processes. Manufacturing companies carry on most of their R&D themselves, with only 34.9 percent supported by the federal government. Industry outlays for energy-related R&D will probably amount to 16 percent of total R&D expenditures in 1980. Pollution control and energy are expected to account for 24 percent of all R&D funding in the private sector. RECOMMENDATIONS Companies involving high technology have historically been sizable spenders in the area of research and development develop-ment and are, for the most part, responsible for their own funding. At the present time, the Research Department of Babson's Reports has a number of these companies among its purchase recommendations. We currently favor the purchase of the common stock of Beckman Instruments, In-struments, Burroughs Corporation, Corning Glass, International Business Machines, Texas Instruments, Upjohn, and Xerox. The issues of these firms, traded on the New York Stock Exchange Ex-change are for long-term investment. |