The Real Returns on Public Research Investments
New Ways to Measure Accurately the True Value of Federally Funded R&D
Jeffrey M. Alexander
Director, Innovation Policy
Center for Innovation and Applied Economics
RTI International
Sponsored by PSW Science Member Frederica Darema
About the Lecture
The US federal government spends over $170 billion per year supporting research and development (R&D). Proponents of government funding for scientific research face new challenges to show a positive “return on investment” (ROI) from that spending. There are multiple fallacies implicit in using ROI, a term from finance, to analyze the benefits from public research investments. A more comprehensive understanding of the value of the Federal government’s scientific research programs and institutions goes beyond simple quantitative metrics to capture more fully the longer-term benefits of publicly funded research to the nation.
The National Institutes of Health (NIH) is one science agency that historically enjoyed bipartisan support but recently has been called on to show why its operations are a good use of public tax dollars. Much of the attention focuses on its funding of external research organizations, totaling over $35 billion in fiscal year 2023. Less well publicized and understood is the substantial research conducted within the NIH’s own laboratories, which accounted for $8.5 billion in research spending that year. Conducted almost entirely on the NIH campus in Bethesda, Maryland, the intramural research program supports federal scientists and postdoctoral scholars in pursuing fundamental biomedical research. When that research generates an invention with potentially useful applications, the NIH’s technology transfer offices work with the private sector and others to transform that knowledge into products and solutions that lengthen and improve the lives of residents of the US and the world.
NIH granted a team at the Research Triangle Institute (RTI International) access to internal NIH data on technology licenses, which the team then matched with public data to show how intramural research results improve the biomedical innovation system, the nation’s economy, and national and global health. The results suggest that the value of federal R&D transcends simple financial estimates. Together with emerging work in the field of the “science of science,” RTI and other institutions are generating evidence to accurately determine the true value of public research investments.
This lecture will discuss methods traditionally used to assess the impact and value of federally funded R&D and will describe better ways to accurately measure the true value of these investments.
Selected Reading & Media References
(1) Alexander, Jeffrey, and Rossana Zetina-Beale. “The Real Returns on NIH’s Intramural Research.” Issues in Science and Technology 41, no. 4 (Summer 2025): 36–39. https://doi.org/10.58875/YZSL6513
https://issues.org/nih-intramural-research-irp-real-numbers-alexander-zetina-beale/
(2) RTI International, Public Health & Economic Impact Study of NIH Technology Transfer Licensing: Final Project Report. Report prepared for MSC Guidehouse and NIH, December 2022. Available at https://www.techtransfer.nih.gov/reports/public-health-and-economic-impact-study
About the Speaker
Jeffrey M. Alexander is the Director of Innovation Policy in the Center for Innovation and Applied Economics at RTI International. Previously he was Senior Manager and before that Associate Director for Innovation Policy at RTI. In addition he is President of the Washington, DC Chapter of the Technology Transfer Society and is a member of the Steering Council of the Section on the Societal Impacts of Science and Technology of the AAAS.
Jeffrey’s research focuses on evaluating the efficacy and impact of public investments in science, technology, and innovation. He leads projects using advanced analytics and novel datasets to forecast emerging scientific fields and technologies. His work encompasses projects funded by the National Science Foundation, the National Institutes of Health, the US Department of Energy, the US Department of Defense and the Gordon and Betty Moore Foundation, among others.
Jeffrey led assessments of major federal research and innovation programs, developed machine-learning and text-analytics approaches to classify research grant records, and applied big-data methods to R&D management and innovation policy. His policy work has informed the design of institutions for research commercialization and the assessment of regional innovation clusters.
Jeffrey is an author on numerous peer-reviewed publications and a number of book chapters and edited volumes. His article “Big Data and the Future of R&D Management” explored how analytics will shape innovation management, and he contributed to the volume “In pursuit of smart growth: Technology transfer theories, policies and practices”.
Among other honors and awards, he is a Non-Resident Fellow at New America, and a member of the Polaris Council.
Jeffrey earned a BA in International Relations at Stanford University, and a PhD in Management and Technology at The George Washington University School of Business.
Social Media
Webpage – https://www.rti.org/expert/jeffrey-m-alexander
LinkedIn – http://www.linkedin.com/in/jeffalex
X – https://x.com/techiewonk
Bluesky – https://bsky.app/profile/techiewonk.bsky.social
Minutes
On November 21, 2025, Members of the Society and guests joined the speaker for a reception and dinner at 5:45 PM in the Members’ Dining Room at the Cosmos Club. Thereafter they joined other attendees in the Powell Auditorium for the lecture proceedings. In the Powell Auditorium of the Cosmos Club in Washington, D.C., President Larry Millstein called the lecture portion of the 2,525th meeting of the Society to order at 8:02 p.m. ET. He began by welcoming attendees, thanking sponsors for their support, announcing new members, and inviting guests to join the society. Scott Mathews then read the minutes of the previous meeting which included the lecture by John Sunderland, titled “Medical Imaging with Anti-Matter: High Resolution Positron Emission Tomography”. The minutes were approved, pending a minor correction.
President Millstein then introduced the speaker for the evening, Jeffrey Alexander, of RTI International. His lecture was titled “The Real Returns on Public Research Investments”.
The speaker began by saying that when it comes to publicly funded research, he preferred the term “value of investment” over the term “return on investment”, or ROI. He indicated that ROI was a financial term, and value was “more all-encompassing”. Alexander presented data from the National Science Foundation, which estimated that the total US spending on R&D in 2022 was about $930 billion, with $172 billion spent by the federal government, as compared to approximately $709 billion spent by business. He said that of the $137 billion spent on basic research in 2022, the federal government funded approximately $56 billion.
The speaker then posed the question: “What are we getting for the $172 billion we spent in 2022?” He went on to describe possible ways to quantify R&D performance. The first was to express national spending on R&D as a share of gross domestic product, or “research intensivity”. He said that this method of measuring R&D performance was based on a linear model; the value of the output is proportional to the input. He indicated that research doesn’t work that way, and he labelled this as “The Fallacy of Causality”.
Alexander gave a specific example of the difficulty of measuring the ROI of research grants by discussing the $4.5 million grant awarded to two Stanford University professors, which enable development of the “PageRank” algorithm, and ultimately the creation of Google. In 2005, the year of Google’s IPO, Stanford sold its Google stock for $336 million. In 2020, Google’s market capitalization exceeded $1 trillion. Using the former number, the ROI is approximately 7,500%, while using the later number, the ROI exceeds 2.2 million%. The speaker referred to this as “The Fallacy of Attribution”; assuming that all of Google’s market value is attributable to the PageRank algorithm, and therefore to the $4.5 million NSF grant.
The speaker then discussed evaluating research ROI using input-output modelling. He gave the example of the NIH awarding approximately $37 billion in 2024, which led to “direct, indirect, and induced” follow-on spending. He claimed that this investment supported more than 400,000 jobs and generated more than $94 billion in economic activity. He presented what he called “The Fallacy of Uniformity”; the assumption that every dollar spent on research produces the same impact, regardless of type.
The speaker then discussed ways to estimate and quantify results at various phases of development: publications for basic research, patents for invention and initial design, prototypes for development and scale-up, and products for production. He discussed complex feedback mechanisms at each of these stages of development. He described how the sources of investment change with each of the phases of development: government agencies like NSF and NIH in early, basic research phases, “angel investors” and government agencies like DARPA during the design phase, and corporations and mission-based government agencies in the prototype and production phases. He said that the complexity of the system makes it difficult to ascribe any particular result or achievement to a specific investment. The speaker noted that in research, failure has value and that it is very difficult to quantify the ROI of failure.
At this point, Alexander stated his central thesis: “Attempting to calculate the financial return on investment from federally-funded research is a misleading, misguided, and incomplete assessment of the actual value generated by that research”. He provided specific arguments and specific examples to support this thesis. He then described his opinion of a better way to show the impact of federal R&D spending. This included ways to characterize outcomes, communicate benefits, and quantify results. He described specific quantitative and qualitative indicators, noting that these indicators are proxies for the actual value produced. He gave an example, from the technology transfer process at the NIH, using patents, licensing, and royalties as quantitative indicators, tracing the impact of the initial investment on outcomes including: follow-on R&D, new products or services, job creation, and public health benefits.
The speaker ended his talk by saying that any metric for quantifying the returns from federal R&D spending will always have shortcomings, but that focusing on purely financial analysis is misleading, misguided, and incomplete.
The lecture was followed by a Question and Answer session.
A guest asked if Alexander believed that the private sector has more of a responsibility to invest in basic research by virtue of the fact that they capture the majority of the economic returns. Alexander responded that large corporations had centralized research labs in the 1950’s and 60’s, but that they have largely disinvested in basic research for economic reasons. He mentioned that there has been a recent upsurge in R&D spending in the private sector, but that it was almost all attributable to three or four companies.
President Millstein asked the speaker if it was the case that a particular invention or therapy would not have made it to market without significant private investment, particularly with respect to clinical trials. Alexander responded that this was the case, and that the attributional benefit should be shared amongst all the investors. He indicated that for most vaccines and medical therapies, the private sector invested more than the federal government.
A member asked about “soft power”. Does the federal funding of R&D enhance the reputation or “brand” of the United States? Alexander responded that federal investment in R&D helps to demonstrate our good will, and that “science diplomacy” is a real thing.
After the question and answer period, President Millstein thanked the speaker and presented him with a PSW rosette, a signed copy of the announcement of his talk, and a signed copy of Volume 17 of the PSW Bulletin. He then announced speakers of up-coming lectures and made a number of housekeeping announcements. He adjourned the 2,525th meeting of the society at 9:59 pm ET.
Temperature in Washington, DC: 11.1° Celsius
Weather: Cloudy
Audience in Powell auditorium: 73
Viewers on the live stream: 21
For a total of 94 viewers
Views of the video in the first two weeks: 145
Respectfully submitted, Scott Mathews: Recording Secretary