U.S. research and development funding has shifted from government-led support during the Cold War to industry-dominated investment today.

In 1957, the U.S. government funded nearly two-thirds of the nation’s research and development, largely driven by defense needs following the launch of Sputnik. Today, that dynamic has inverted, with industry now providing approximately three-quarters of all research and development funding while the federal government's share has fallen to less than one-fifth.

Changing Roles in Innovation

Because the commercial sector now drives the technological frontier, the Pentagon must adapt to and court private innovation rather than acting as the primary driver. While industry funds the majority of research, it also performs a significant portion of it, accounting for about 77 percent of research and development activity in 2023, including work conducted under federal contracts.

Defense and Civilian Funding Trends

Defense-related research and development accounted for approximately 85 percent of total federal funding during the Sputnik era, compared to roughly 49 percent today. This shift is primarily attributed to a surge in civilian funding, particularly from the National Institutes of Health for biomedical research. When the focus is restricted specifically to engineering, the Department of Defense remains the primary funding source.