This brief examines the funding and performance of agricultural research and development (R&D) 

to assess the evolving roles of the public and private sectors in the U.S. agricultural research system. 

There is a clear long-term trend toward greater private-sector funding and performance of R&D. 

In 2007, the private sector performed 53 percent of total food and agricultural research in the 

United States, and privately funded R&D has grown faster than publicly funded R&D over the 

long term (fig. 1). 

•	 The increase in agricultural R&D conducted by the private sector reflects the increasing 

prevalence of public-private partnerships and other policies to enhance private returns on 

R&D, and the private companies’ incentive to capitalize on new opportunities for innovation 

from prior public investments in the agricultural sciences. 

•	 Most of the growing share of private-sector agricultural R&D supports researchers 

working in private companies who focus on topics and issues with the highest expected 

private returns. Relative to the public sector, this leads to a smaller portfolio of research 

topics and a greater emphasis on short-term research. 

•	 Public-sector funders and performers of R&D play a largely complementary role by 

emphasizing social returns in the selection of research topics and valuing rapid and 

widespread disclosure of new knowledge.

The Complementary Roles of the Public and 

Private Sectors in U.S. Agricultural Research 

and Development

John King, Andrew Toole, and Keith Fuglie

ECONOMIC BRIEF NUMBER 19 • September 2012

United States Department of Agriculture

Economic Research Service

Correction: On January 7, 2013, Figure 3 was corrected to reflect a units error in 

the original figure. The corrected figure shows agricultural R&D expenditures ranging 

from $0 to $3.5 billion depending on category of spending (previously, the figure 

misreported these expenditures by a factor of 10, or from $0 to $35 billion).
King, John, Andrew 

Toole, and Keith Fuglie. 

Complementary Roles of the 

Public and Private Sectors in 

U.S. Agricultural Research and 

Development, EB-19. U.S. 

Dept. of Agriculture, Econ. 

Res. Serv., September 2012. 

Recommended citation 

format for this publication:

ECONOMIC BRIEF The Complementary Roles of the Public and Private Sectors in U.S. Agricultural Research 

and Development

UNITED STATES DEPARTMENT OF AGRICULTURE 2

Public and private funds support research at different institutions

The U.S. agricultural research system receives funding from three primary sources: (1) Federal 

appropriations, (2) State appropriations, and (3) nongovernment sources (chiefly private-sector firms but 

also charitable foundations). These funds support research that is carried out by three main types of 

institutions: (1) Federal research facilities; (2) State-affiliated land-grant universities, State agricultural 

experiment stations (SAES), and other cooperating institutions such as schools of forestry, veterinary 

schools, and 1890 and 1994 land-grant institutions; and (3) private laboratories and experimental sites, 

nearly all of which are owned and operated by for-profit firms (fig. 2). Private institutions include firms in 

the food manufacturing, chemical, equipment, pharmaceutical, seed, and biotechnology industries that 

provide inputs to the farm sector and process agricultural commodities.

Federal research facilities receive funding almost exclusively through Federal appropriations, with a small 

contribution (less than 1 percent) from firms through Cooperative Research and Development Agreements 

and other arrangements. Firms performing agricultural R&D fund nearly all of it themselves, receiving 

very little funding from public sources except for Small Business Innovation Research grants and research 

contracts. By contrast, universities, SAES, and other State institutions draw on Federal, State, and private 

funds to support their R&D. According to what State institutions report to USDA (2007), Federal funds 

from USDA and other Federal agencies typically support 50 to 60 percent of the agricultural R&D at 

State institutions, and State-level appropriations support roughly another third.. Non-government sources 

of funds—including research contracts from private firms, technology licensing fees, and foundation 

grants—provide the remaining 20 percent of research funding for these State institutions.

Public and private R&D differ in goals, specialization

Private firms invest in R&D to earn the highest possible expected private returns, the economic 

benefits from new products and technologies that firms can appropriate as profit. But private returns 

do not fully reflect the benefits from R&D to customers, consumers, or competitors. Social returns to 

R&D investment include both the firm’s private returns as well as economic benefits to these other 

groups in society. 

2

Figure 1

Long-term growth in funding for U.S. food and agriculture research and 

development (R&D) is higher in the private sector

1970 1980 1990 2000 2010

0

1

2

3

4

5

6

7

Public R&D

Private R&D

Constant 2007 US$ (billion)

Source: Fuglie et al., 2011.
ECONOMIC BRIEF The Complementary Roles of the Public and Private Sectors in U.S. Agricultural Research 

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3 ECONOMIC RESEARCH SERVICE

The argument that private returns to R&D do not fully reflect the benefits of technological progress to 

society suggests the private sector underinvests in R&D from a societal perspective and supports the use 

of public policies to encourage additional private research. Some policies provide incentives that increase 

private returns to R&D such as patent protection, other intellectual property rights, technical assistance, 

and R&D tax credits. Public funding and performance of R&D can also address private underinvestment 

by expanding the knowledge base to create new opportunities for innovation. 

Social returns to R&D include an important element not reflected in private returns: the cumulative 

contributions of discoveries and inventions to subsequent R&D performed by other researchers in society. 

The potential for cumulative contributions depends on the disclosure and diffusion of new knowledge 

through various channels such as scientific publications. Professional norms at publicly supported 

research institutions encourage open, rapid publication of science, which enables other researchers to 

replicate, validate, and contribute to new knowledge. Universities also combine their research mission 

with the education and training of future scientists, which further enhances society’s capacity for 

cumulative contributions. A study of 200 top R&D performing firms found that university research is 

an important source of knowledge for industrial scientific publications (Adams and Clemmons, 2008). 

Scientists affiliated with 110 top universities communicated research findings in nearly 200,000 articles 

in agriculture journals from 1981 to 1999, compared with fewer than 6,000 by scientists affiliated with 

200 top R&D firms. While the market-oriented nature of private firm research may limit publication 

opportunities in scientific journals, private firms also have incentives to limit the availability of new 

technology and knowledge through trade secrets, patent protection, and other efforts to appropriate 

a greater share of R&D benefits. Such intellectual property protection encourages investment but can 

hamper social benefits to R&D from scientific exchange.

Figure 2

Federal, State, and private institutions both funded and performed food and agricultural research in 2007

Funders and performers of U.S. food and agricultural research in 2007 ($ million) 

Total U.S. food & agricultural R&D performed: $11,110 million ($5,163 million public + $5,948 million private)

USDA

Intramural

$1,395

Federal

$3,037

Industry

$5,948

(52% by ag input sectors, 48% by food sector)

States

$1,365

Private sector 

$6,709

$769 

$11 million

$19 NSF, NIH, 

etc.

$1,005

$1,343

USDA

$2,032

$5,997 

$670 $965 $40

LGU-SAES 

and cooperating institutions

$3,768 

The U.S. Food and Agricultural Research System

Source: Public research and development (R&D) is from U.S. Department of Agriculture (2007) except for USDA grants to industry, 

which is from the NSF (2009). Private R&D is from Fuglie et al. (2011). Numbers may not sum due to rounding. NSF = National Science 

Foundation; NIH = National Institutes of Health; LGU = land-grant universities; SAES = State agricultural experiment stations.
ECONOMIC BRIEF The Complementary Roles of the Public and Private Sectors in U.S. Agricultural Research 

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UNITED STATES DEPARTMENT OF AGRICULTURE 4

Public and private R&D have different complementary roles 

Beyond differences in how new knowledge is disclosed, public and private funders tend to invest in 

different “portfolios” of agricultural research topics. Private firms specialize in fewer topic areas and focus 

their R&D in areas with established product markets, such as food, agricultural inputs like crop seed 

and chemicals, farm machinery, and veterinary pharmaceuticals (fig. 3). Public institutions invest in a 

broader portfolio of topics than private firms. For instance, public R&D investment addresses areas such 

as the environment and natural resources, human nutrition and food safety, and social and community 

development. Research in these areas provides social benefits that are widely diffused and difficult to 

capture through private innovation. 

Crop research and development is one area that receives a significant amount of both public and private 

investment, so public and private sector roles are more difficult to delineate. Public investment may 

crowd out private investment by supporting research that otherwise would have been done by private 

organizations. Or public investment may complement private R&D by expanding the knowledge base 

needed to create possibilities for innovation. 

The evidence favors a complementary relationship. For example, a 2001 survey of U.S. seed companies 

found that three-fourths of private crop breeding investment was directed at just three commodities—

corn, soybeans, and cotton (Traxler et al., 2005, personal communication). These are the largest U.S. crop 

seed markets, where large private returns encourage the most private R&D. Public R&D is spread more 

evenly across the full set of crops, including crops such as wheat where social returns to research justify 

public investment but high development costs and low appropriability reduce private returns. Public 

R&D is also more geographically dispersed, with experiment stations in each State. Because agriculture 

is heavily influenced by factors that vary across regions such as climate, natural resource quality, and 

transportation costs, the geographic dispersion of public R&D addresses challenges in a broader set of 

agricultural production systems. 

Public R&D focuses more heavily on basic or “pre-technology” research that is difficult to patent and 

commercialize, while most private R&D emphasizes applied research and product development. For 

Figure 3

Public research addressed a broader set of research topics than private 

research in 2006

Research expenditures ($ billion)

*Private-sector investment is likely to be greater than zero, but reliable figures could not be obtained.

Source: Public R&D is from the U.S. Department of Agriculture (2007) based on Knowledge Area 

classifications. Private R&D figures are from Fuglie et al. (2011). 

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Private sector

Public sector

Environment

& natural 

resources*

Food

manufacturing

Crops Animals Farm 

machinery & 

engineering

Human 

nutrition &

 food safety*

Economics, 

statistics, 

& policy*

Social & 

community 

development*
ECONOMIC BRIEF The Complementary Roles of the Public and Private Sectors in U.S. Agricultural Research 

and Development

5 ECONOMIC RESEARCH SERVICE

example, decades of publicly funded research in molecular genetics and biotechnology in the latter 

half of the 20th century enabled private firms to develop new techniques with commercial potential 

in agriculture. Complemented by new policies that strengthened intellectual property rights over crop 

varieties and genetic traits, these scientific and technological advances led to a surge in private-sector 

investment in crop breeding and biotechnology R&D (Fuglie et al., 1996). Between 1980 and 2010, 

R&D spending by U.S. seed and crop biotechnology companies rose from $100 million per year to more 

than $2 billion annually in constant 2010 dollars (Fuglie et al., 2011). 

A comprehensive survey of public and private plant breeding in 1996 found that most private crop 

breeding R&D focused on downstream development of cultivars (cultivated crop varieties) while public 

R&D tended toward long- and medium-term research projects on plant breeding methods, identification 

of new traits, and germplasm enhancement to improve parent breeding materials (fig. 4). As the private 

sector increased investment in applied breeding, public research shifted to more basic R&D activities 

(Fuglie and Walker, 2001). Other studies of plant breeding (Pardey et al., 1996; Lesser and Kolady, 

2011) emphasize the contributions of genetic material from publicly maintained elite germplasm used to 

develop private cultivars.

Other studies that have looked at public and private R&D throughout the U.S. agricultural research 

system also found their relationship to be complementary rather than duplicative. Both Wang et al. (2009) 

and Tokgoz (2006) found that private investments in agricultural R&D were significantly correlated with 

past trends in public spending on agricultural and life sciences research. The authors of these studies 

attributed this correlation to (1) scientific advances from public R&D that created new technological 

opportunities for private firms to commercialize, and (2) the higher education and training function of 

university research that expanded the pool of scientific human capital for private firms to hire. A third 

study, using citations data from scientific publications, found that total citations from private research to 

university publications increased, and that firms citing more university research had a higher likelihood of 

producing patentable technologies (Toole and King, 2011).

The agricultural chemicals industry also demonstrates the complementarity of private and public R&D. 

Companies that develop new agricultural chemical products devote most of their R&D toward regulatory 

Figure 4

In crop breeding, the public sector emphasized longer term research and the 

private sector dominated development of cultivated varieties in 1996

Percent of scientist-years

Source: Frey (2000). Estimates are based on a survey of 90 Federal and State research institutions 

and 329 private seed companies. For each research area, the shares sum to 100 percent of the 

scientists reported in the survey to be working in that area.

Plant breeding research

(long-term)

Germplasm enhancement

(medium-term)

Cultivar development

(short-term)

0

20

40

60

80

100

Public

Private
ECONOMIC BRIEF The Complementary Roles of the Public and Private Sectors in U.S. Agricultural Research 

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UNITED STATES DEPARTMENT OF AGRICULTURE 6

testing, product registration, and product marketing, and many producers of existing “generic” products 

do minimal R&D. Public R&D in crop protection often addresses basic research questions about the 

biology of crops and crop pests and applied research on the use of chemicals in production systems, 

development of resistance, and integrated pest management practices (Fuglie et al., 2011). 

Animal agriculture has not seen a similar surge in private R&D investment, but public and private roles 

are nonetheless complementary. The public sector performs a majority of animal breeding and genetics 

R&D, while most of the private spending on animal agriculture shown in Figure 3 targets pharmaceutical 

animal health products (Fuglie et al., 2011). Private R&D in breeding and genetics is lower in animal 

agriculture relative to crops in part because of incentives that vary markedly among animal commodities 

(higher for poultry, lower for large ruminants) and consumer acceptance and regulatory frameworks for 

genetically modified animals that remain unsettled.

Policies and partnerships combine strengths to enhance the 

agricultural research system 

With a shift of overall food and agricultural R&D toward the private sector, public research institutions 

have developed new strategies for partnering with private firms. New laws and policies provide vehicles 

for formal collaboration between public and private research institutions. Technology transfer policies 

encourage interaction of public and private R&D at different phases of technological development. When 

researchers at publicly funded institutions produce discoveries with commercial potential, they can obtain 

patents on these discoveries and license them to companies interested in further commercial development. 

This allows public researchers to focus on their public research missions and hand off commercialization to 

private technology partners. Exclusive licenses of patented technology reduce appropriation risks and raise 

private returns for commercial partners, thereby increasing incentives for firms to invest in downstream 

development, marketing, and production. 

When the nature of R&D requires closer interaction, Cooperative Research and Development Agreements 

(CRADAs) provide a contractual mechanism for public and private researchers to collaborate. The use of 

both patent licensing and CRADAs by the USDA has grown since these arrangements were first enabled 

Figure 5

USDA uses public-private R&D partnerships to facilitate technology transfer

Number

Source: Data from 2001 are from Annual Reporting on Technology Transfer in USDA, Office of 

Technology Transfer, Agricultural Research Service. Earlier data are from Heisey et al. (2006).

Constant 2007 US$ (millions)

1987 92 97 02 07

0

50

100

150

200

250

300

350

0

1

2

3

4

5

6

Active CRADAs

Active patent 

licenses (left axis)

Patent royalties (right axis)
ECONOMIC BRIEF The Complementary Roles of the Public and Private Sectors in U.S. Agricultural Research 

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7 ECONOMIC RESEARCH SERVICE

through legislation in the 1980s (fig. 5).Through these agreements, government-owned and operated 

labs can partner with private firms to share data, facilities, and research results (Guston, 1998; DayRubenstein and Fuglie, 2000). Firms engaged in a CRADA are able to protect proprietary information 

and negotiate exclusive licenses for CRADA inventions. While the use of CRADAs, patenting, and other 

technology transfer instruments could potentially divert public research away from its central mission 

(National Research Council, 1995), such arrangements may also draw private capital into areas that serve 

important societal needs but where market failures are most evident, like human nutrition and natural 

resource conservation (Day-Rubenstein and Fuglie, 2000). 

Another mode of public-private cooperation is when private interest groups, such as farmer commodity 

organizations, levy a small assessment on their sales to support research at public institutions. Federal 

legislation has permitted agricultural producer groups to make such “checkoffs” mandatory for research 

and promotion, but support for research through this mechanism in the United States has been minimal 

(Alston and Pardey, 1996). Some countries, notably Australia, have experimented with a model in which 

the government matches producer levies for public research. Recently, Australia has also instituted a system 

of end-point royalties based on sales of improved varieties as a way of enforcing intellectual property 

rights and encouraging more private investment in crop development. In the Australian experience, 

these institutional innovations appear to have strengthened private support for agricultural research and 

improved its efficiency and coordination (Alston, Gray, and Bolek, 2012).

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