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U.S. Federal Nanotech R&D Funding

A Foresight Nanotech Institute Policy Issues Brief

by Jacob Heller and Christine Peterson

The United States federal government leads the world in nanotechnology research and development funding. The National Nanotechnology Initiative (NNI), the federal government’s R&D program that coordinates multiagency efforts in nanotech science, allocates over $1 billion annually to 14 agencies. Since its inception in 2000 it has been largely regarded a success. Most recently, the President’s Council of Advisors on Science and Technology (PCAST) found that the funding is "very well spent", and that "the program is well managed".1 However, some fear that the United States is beginning to lose its lead in nanotechnology research funding, and that the current structure of federal R&D is not optimally designed to promote the most innovative output. To maintain international leadership in the field of nanotechnology and promote the discovery of beneficial nanotechnology, the NNI will probably require more funding and a reevaluation of its structure.

The NNI has already made valuable contributions to the development of nanotechnology. With NNI funding, researchers have been working on gold nanoshells that can target the destruction of malignant cancer cells, low-cost hybrid solar cells, quantum dots that can open the door to much faster computing, and nanoscale iron particles that can reduce the costs of cleaning up contaminated groundwater.2 Due largely to this high level of funding, the United States leads the world in nanotech patents, startups, and papers published.3

However, more can and should be done. The United States is beginning to lose its lead in government-sponsored nanotech R&D relative to the rest of the world. When adjusted for purchasing-power-parity (a comparison of how much a dollar can buy in different countries), non-US governments are spending more per-capita on nanotech research and development than the United States. Using this scale, the United States spent $5.42 per capita in government funding for nanotech R&D in 2004, while South Korea spent $5.62, Japan, $6.30, and Taiwan, $9.40.4 Other countries are quickly catching up. China spends $611 million annually (after adjusting for purchasing-power-parity) on nanotech research, nearly 40 percent of U.S. federal funding.5

Instead of expanding government spending on nanotech to meet the challenge, funding increases for the NNI have not even kept pace with inflation. The proposed budget for FY 2006 was actually lower than FY 2005 funding when adjusted for inflation;6 FY 2007 will likely have a similar decrease in funding.

It has been argued that the private sector, not government, should fund all nanotechnology research and development.7 However, even many libertarians — the group most skeptical of government involvement — take the position that private firms are unlikely to engage in long-term basic research when those firms will be unable to reap the full benefits of their investment. This type of basic research may constitute a public goods problem, in which market processes working alone may not function optimally.8 Foundation funding can make a difference, but is generally focused on specific applications such as the nanoemulsion-based vaccine delivery system recently funded by the Gates Foundation.

Sustained expansion in federal R&D funding may be critical to the development of US nanotech-based industries. The federal government can fund long-term and risky research that companies are unwilling and unable to conduct; these types of research usually have the largest payoff for society in the long-run. Also, at current budget levels, the federal government cannot fund many meritorious research efforts. The ratio of serious proposals to funded projects is too high; for example, in 2004 the NSF received 48 proposals for funding nanotech research centers, but could only afford to finance six.9 Even when researchers do receive federal funding, the amounts are usually inadequate to completely and fully research a subject.10

Besides the amount of funding, the structure and duration of most NNI funded research is problematic. Because NNI budget pressures have made the peer review process more conservative and because most grants are given for only one year, many researchers essentially do the experiment before writing the grant to ensure year-after-year funding. This necessarily constrains risk-taking and creativity, both of which are essential for large-breakthroughs in nanotech research. The federal government should consider following Japan’s example and fund research projects for durations as long as five years, or even more.

A triennial review of the National Nanotechnology Initiative issued by the National Research Council in 2006 also advocated changes to the research areas being covered. In addition to more focus on environmental, health, and safety concerns, the NRC looked specifically at the field of molecular manufacturing (molecular machine systems), recommending improved coordination between experimental and theoretical work in this highly promising area of nanotechnology.11

There are also other ways to encourage nanotech research and innovation besides directly funding R&D efforts that the federal government should consider. For example, the federal government could offer prizes for specific innovations, or make commitments to purchase nanotechnological products if they are produced.

More must be done — in both the amount of funding and the way that nanotech research is financed — for US nanotech-based industries to stay apace with the rest of the world and quickly grow to maturity.

1Kvamme, E. Floyd. "Hearing on: Nanotechnology: Where Does the U.S. Stand?’". The Research Subcommittee of the Committee on Science of the United States House of Representatives. June 29, 2005. Pg. 41.

2Lane, Neal and Thomas Kalil. "The National Nanotechnology Initiative: Present at the Creation". Issues in Science and Technology Vol. 21 No. 4, Summer 2005. Pg. 51-52


4Nordan, Matthew M. "Hearing on: Nanotechnology: Where Does the U.S. Stand?’". The Research Subcommittee of the Committee on Science of the United States House of Representatives. June 29, 2005. Pg. 67

5Ibid, Pg. 69

6Lane and Kalil, supra note 2

7Crews Jr., Clyde Wayne, "Washington's Big Little Pork Barrel: Nanotechnology". Cato Institute Daily Commentary, May 29, 2003. http://www.cato.org/dailys/05-29-03.html, accessed Feb, 16, 2007.

8"Public good". Wikipedia, http://en.wikipedia.org/wiki/Public_good, accessed Feb. 16, 2007.

9Lane and Kalil, supra note 2


11National Research Council. "A Matter of Size: Triennial Review of the National Nanotechnology Initiative". National Academies Press, 2006.