INDUSTRIAL RESEARCH INSTITUTE’S
R&D TRENDS FORECAST FOR 2009
Following two years of growth, IRI member companies
anticipate flat R&D expenditures in 2009.
Member companies of the Industrial Research Institute
generally anticipate flat investment in research and
development in 2009, following several years of signifi-
cant increase. However, some sectors do anticipate
growth while other sectors anticipate significant reduc-
tions in R&D investment.
Across all sectors, the trend of the past few years has
been a continued shift in R&D focus toward new
business projects and away from supporting existing
lines of business. Also, IRI member companies antici-
pate reduced internal directed basic research and
increased support for external technology activities,
including participation in technology alliances, joint
ventures, university engagements, and technology-
focused merger and acquisition activities.
Trends Analysis—Looking to 2009
This is the 25th IRI R&D Trends Forecast. The survey
focused on expectations for industrial R&D investment
in 2009, and is based on responses from just under half of
the 182 IRI member companies that conduct R&D in the
United States. These companies also have 187 research
centers outside the U.S. in 35 countries. The survey
responses were collected in July and August of 2008.
Because this is a voluntary survey and the IRI member-
ship changes due to business events such as mergers, it is
inevitable that the mix of companies changes from year
to year. Nevertheless, we believe that there are a suffi-
cient number of responses from the R&D community for
the data to be meaningful.
The results of this survey are discussed in three areas:
• Responses to the basic survey questions and compari-
son with past years’ responses.
This report was written by Raymond R. Cosner, director
of R&D process in the Advanced Systems Division of the
Boeing Company, and chair of IRI’s Research-on-
Research Committee. He holds a Ph.D. from the Califor-
nia Institute of Technology. Cosner’s report is based on
the forecast conducted annually by the ROR committee,
with the assistance of Kimberly Williams, on staff at the
IRI. Raymond.r.cosner@boeing.com.
January—February 2009
0895-6308/09/$5.00 © 2009 Industrial Research Institute, Inc.
• Breakdown of responses in various segments.
• Responses to questions about “your biggest R&D
problem.”
The survey questions and the distribution of responses
are presented in Table 1. This table shows that there were
seven possible responses to questions 1 through 8 in the
2008 survey. “Not applicable (N/A)” was a possible
response; these responses were omitted in our tabulation
of the data.
One useful way to examine trends over the years from
2000 forward is the Sea Change Index, Table 2.
The Sea Change Index is calculated by taking the differ-
ence in the sum of the last two responses (more than
5 percent growth) and the sum of the first two (zero or
negative growth). The first two categories are considered
negative because they include no growth or a decrease;
the last two categories are considered positive because
they expect a growth of more than 5 percent. It is likely
that this index understates the absolute value of change
but we believe it to be a good indicator of the direction of
change. The Index is expressed as a percentage of the
total responses.
The Sea Change Index indicates that no substantial
change in total R&D expenditures is expected among IRI
member companies in 2009 (Question 1). However, this
index foretells a wide reduction in capital spending in
2009 (Q2), following a pattern set in 2002. The one
exception was in 2008 when capital spending increased.
Among IRI member companies, R&D in support of
existing business and directed basic research are both
projected to decrease in 2009. However, R&D support-
ing new-business projects is expected to rise signifi-
cantly. All three of these projections have been similar
over the last 8–10 years. Also, a number of IRI member
companies anticipate a reduction in the R&D/sales ratio
for 2009 (Q9a).
Recent trends in the Sea Change Index for anticipated
total R&D spending are presented in Figure 1, and trends
for selected components of total R&D spending are
presented in Figure 2.
Text continues p. 23
19
 Table 1.—Results of 2009 Trends Forecast for Companies with R&D Located in the United States
Relative Change (% of Respondents Reporting)
Expected Changes in 2009 −5% >0 to >2.5 to 5 to
Compared with 2008 Experience <−5% to 0 2.5% <5% 10% >10%
1. Total company R&D expenditures 7 10 44 21 13 5
2. Capital spending for R&D operations 10 13 50 16 4 7
3. Relative distribution of R&D costs:
a) Support of existing business 7 18 53 17 4 1
b) Directed basic research 10 19 44 16 9 2
c) New-business projects 4 7 29 28 25 7
4. R&D professional personnel level 5 16 48 19 10 2
5. Hiring new graduates 10 10 48 17 13 2
6. Outsourcing R&D to other companies 1 2 57 28 7 4
7. Licensing technology from others (dollar volume) 3 6 65 21 3 3
8. Licensing technology to others (dollar volume) 1 4 68 20 5 1
9. How will 2009 compare with 2008 for the following? % Decrease Same % Increase
a) Your targeted R&D/sales ratio 22 58 20
b) Grants, contracts, etc. for university R&D 8 53 40
c) Participation in consortia for pre-competitive university research 12 64 24
d) Contracts with Federal Laboratories 5 75 20
e) Participation in alliances and joint R&D ventures 2 37 60
f) Acquisition of technological capabilities through M/A 5 56 39
g) Your new spin-offs based on developed technology 0 77 23
h) Outside-customer technical-service efforts relative to total R&D
(in time or dollars) 5 71 24
A scale of 1 to 6 was used, with 1 representing “significantly less” (below −5%), 2 “slightly less” (−5% to 0), 3 “approximately the same” (0 to
+2.5%), 4 “slightly more” (+2.5% to +5%), 5 “somewhat more” (+5% to +10%), and 6 “significantly more” (more than +10%). “N/A” also was a
response option.

Table 2.—“Sea Change Index” (Percentage of Responses)

Survey Question 2000 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
1. Total company R&D expenditures 0 5 −4 −15 −16 −2 4 12 27 1
2. Capital spending for R&D operations 4 3 −17 −18 −18 −15 −3 −2 27 −12
3. Relative distribution of R&D costs:
a) Support of existing business −20 −10 −6 −24 −20 −5 −13 −19 −13 −20
b) Directed basic research −9 −21 −11 −21 −17 −21 −8 −6 4 −17
c) New-business projects 34 44 30 7 1 8 31 31 33 22
4. R&D professional personnel level −3 −2 −4 −22 −24 −9 1 0 8 −8
5. Hiring new graduates −5 2 −16 −14 −22 13 4 2 1 −4
6. Outsourcing R&D to other companies 11 11 −6 −8 −8 6 4 10 20 7
7. Licensing technology from others (dollar volume) 10 4 0 −2 −5 1 10 9 11 −4
8. Licensing technology to others (dollar volume) 20 10 17 8 1 9 10 6 0 1
9. How will 2009 compare with 2008 for the following?
a) Your targeted R&D/sales ratio N/A −1 −5 −8 −15 −7 −7 1 23 −3
b) Grants, contracts, etc. for university R&D 8 3 −1 12 10 30 33 32 51 32
c) Participation in consortia for pre-competitive university research −14 −12 −19 0 20 18 20 24 42 12
d) Contracts with Federal Laboratories −9 −13 −8 28 38 29 22 28 33 15
e) Participation in alliances and joint R&D ventures 40 40 33 49 44 50 60 55 60 58
f) Acquisition of technological capabilities through M&A N/A 33 35 18 15 29 28 34 50 35
g) Your new spin-offs based on developed technology N/A 19 19 20 11 8 14 4 18 23
h) Outside-customer technical-service efforts relative to total R&D
(in time or dollars) −19 −6 −3 18 20 22 10 15 21 19
NOTE: The Sea Change Index for the 2008 data presented in RTM’s January–February 2008 issue (pp. 19–23) was presented incorrectly. The 2008
data was stated to be percentage of responses, but was actually the count of responses. That error has been corrected here.

20 Research 䡠 Technology Management

 Figure 1.—Sea Change Index for R&D Spending.

Figure 2.—Sea Change Index for Categories of R&D Spending.

January—February 2009 21
Figure 3.—Comparison of 2009 R&D Investment Characteristics, By Segment (presented as “Sea Change Index”).

22 Research 䡠 Technology Management

 Table 3.—Survey Responses, By Segment expected to decline, except in the food and tobacco
Segment Responses
segment. Across the board, the level of R&D personnel is
expected to change little, although increases are antici-
All Responses 84 pated in the petroleum and revenue-high segments, with
Chemicals 23
Consumer Products 12
reductions foreseen in the consumer products segment.
Food and Tobacco 7
Petroleum 5 External Collaboration
No U.S. 5
R&D Low 8 Anticipated changes in R&D collaboration with external
R&D High 9 parties are presented in Figure 4 as the Sea Change Index.
Revenue Low 13
Revenue High 10 The most dramatic shift anticipated in 2009 is a signifi-
cant increase in outsourcing R&D to other companies
within the petroleum segment. The revenue-high
segment also anticipates materially increased R&D out-
sourcing in 2009, compared with the average among all
Segment Data survey respondents.
Text continues p. 26
At the request of the IRI membership, we collected data
this year to allow us to analyze responses in various
industry segments. We only present data for which we
had at least five responses in each segment. Table 3
presents the number of responses in each segment.

Eighty-four companies responded to our survey.

However, some companies did not respond to every
question. There were sufficient responses to present data
in four industry segments: chemicals, consumer
products, food and tobacco, and petroleum. Additional
segmentation was done for the following categories of
interest:

No U.S.—Companies without major operations in the

United States.

R&D Low—R&D expenditures no more than $10 million.

R&D High—R&D expenditures of at least $1 billion.

Revenue Low—Corporate revenue no more than

$1 billion.

Revenue High—Corporate revenue of at least $50 billion.

Figure 3 compares responses by segment for certain

gross characteristics of expected 2009 R&D investment.
The reader is cautioned that the vertical scales differ
among the charts in this figure. In several of these invest-
ment categories, the 2009 expectations of the food and
tobacco, petroleum and revenue-high segments are sub-
stantially higher than those of the other segments. On the
other hand, the 2009 R&D expectations for the consumer
products segment are somewhat dismal. The expectation
for capital spending is generally less robust, but follows
similar segment trends as the net R&D investment.

There is a clear trend in all segments to reduce R&D in

support of existing products in favor of new-product
development. Directed basic research is generally Figure 4.—Anticipated Shifts in R&D Sourcing.

January—February 2009 23
Figure 5.—Anticipated 2009 Change in R&D Investment Characteristics, By Segment.

24 Research 䡠 Technology Management

 Table 4.—IRI’s “Biggest Problems” Facing Technology Leaders from 1993 through 2008 (Expressed As Percentage of
Total Responses)
2008 ’07 ’06 ’05 ’04 ’03 ’02 ’01 ’00 ’99 ’98 ’97 ’96 ’95 ’94 ’93
Growing the business through innovation 33 22 29 32 33 41 37 20 20 16 14 17 10 6 N/A N/A
Accelerating innovation 14 22 23 17 16 12 12 26 23 5 6 3 9 8 11 11
Attracting and retaining talent 10 13 8 4 4 2 2 2 N/A N/A N/A N/A N/A N/A N/A N/A
Balancing long-term/short/term R&D
objectives/focus 8 15 16 15 17 12 12 14 14 19 18 19 17 15 17 14
Integration of technology planning with
business strategy 8 6 3 6 3 5 8 7 13 13 12 13 11 7 10 11
Manage innovation cycling local/global
economic conditions. 6 3 0 7 0 2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Management of global R&D 5 1 2 5 5 2 2 5 4 4 3 6 5 4 3 4
Measuring and improving R&D
productivity/effectiveness 4 4 2 2 4 5 3 7 5 6 6 4 12 12 15 15
Leadership of R&D within the
corporation 3 1 8 5 9 5 12 8 8 13 8 8 8 5 6 7
New business ventures 3 6 2 4 4 3 3 4 2 N/A N/A N/A N/A N/A N/A N/A
Sustainability in response to climate
change and environmental issues 3 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Gathering/evaluating competitive
intelligence; sensing disruptive
technologies 1 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Improving knowledge management 1 3 4 3 4 2 3 1 4 N/A N/A N/A N/A N/A N/A N/A
Organizational structure of the company 1 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Total Responses: 78 78 101 102 99 133 151 113 191 230 174 223 242 258 193 248

Figure 6.—Top Two “Biggest Problems” Facing R&D Leaders.

January—February 2009 25
In general, reduced activity in licensing technology from
external sources is anticipated in 2009. However, both
the R&D-high and the revenue-high segments anticipate
increased in-licensing. It should be noted that there is
considerable commonality in the membership of these
two segments. Conversely, a significant reduction in
licensing technology from others is anticipated in the
consumer products, no-U.S., R&D-low, and revenue-
low segments.
Across all our responding members, no significant
change is expected in the 2009 level of licensing technol-
ogy to others. However, three segments do anticipate
increased out-licensing (food & tobacco, R&D-high, and
revenue-high), while five segments—most notably the
non-U.S. and the low-dollar R&D segments—anticipate
reduced out-licensing.
Anticipated trends in collaboration with external organi-
zations, other than licensing arrangements, are presented
in Figure 5. The vertical scales differ among the charts in
this figure. Increased activity is expected in almost all
segments in collaborations with universities—both in the
form of grants and contracts, and through participation in
consortia for pre-competitive university research.
Several segments also anticipate increased activity in
contracts with federal laboratories during 2009.
Substantially increased R&D collaboration with other
companies is also expected in 2009, via alliances and
joint ventures, through mergers and acquisitions, and by
spin-offs of technologies developed internally. These
expectations are broad-based, shared by all segments
responding to our survey.
Biggest Problem
Every year since 1993, we have asked our IRI member
companies to identify the biggest problem they face as
R&D leaders. The percentage response in each category
since 1993 is presented in Table 4. Every year since
2002, IRI member companies have reported that
“growing the business through innovation” is their
biggest problem. Other top problem areas include: accel-
erating innovation, attracting and retaining talent,
balancing long-term and short-term R&D objectives, and
integrating technology planning with business strategy.
This year, for the first time, we also asked the companies
to identify their second biggest problem (see Figure 6).
The two related categories of “growing the business
through innovation” and “accelerating innovation”
clearly dominate the responses.
26
Substantially more
R&D collaboration
with other companies
is expected in 2009.
2008 R&D Investment—Actual vs. Budget Projection
Survey respondents were also asked to assess their initial
plans a year ago for 2008 R&D investment, com-
pared with the reality of their 2008 R&D investment.
Forty-three IRI companies (55 percent) replied that their
actual 2008 R&D investment was about the same as their
initial plans for 2008, while the remaining 45 percent
said there was a meaningful difference from their initial
plans. The primary reason for differences from initial
plans was ascribed to decline in business conditions;
secondary issues were a change in strategy and lack of
appropriate personnel.
In Conclusion
Nearly half of the member companies of the Industrial
Research Institute anticipate flat R&D budgets in the
coming year, following growth the last three years.
Funding in support of existing products and directed
basic research is expected to drop, while funding for new
business projects is expected to increase in all sectors. A
broad increase in R&D outsourcing to other companies is
also expected.
One of the most notable messages is that across all
sectors, a significant increase is expected for 2009 in
participation in alliances and similar joint R&D ven-
tures, and in acquisition of technological capabilities
through mergers and acquisitions. Most sectors also
foresee an increase in grants and contracts for university
R&D. 䡩 䊱
Acknowledgements
Special appreciation is due to Kimberly Williams of the
Industrial Research Institute staff who conducted the
survey, with thanks to IRI members who took the time to
respond. Thanks also are due to Jim Scinta who wrote the
summary article the past two years and advised the
author, and to Tom Balsano and Phil Russell who
provided insights from reviewing the data and then
critiqued this article.
Research 䡠 Technology Management