Growth in the stock of knowledge has been the most important factor behind the dramatic rise in living standards in the United States and other countries over the past 100 years. Systematic efforts made by firms, universities, governments, and other organizations to increase the stock of knowledge are referred to as research and development (R&D). The purpose of this paper is to provide an overview of the entire system of R&D in the United States—or as it is sometimes called, the national innovation system. Special emphasis will be placed on basic research. This is the component of R&D that is most likely to be underprovided by the private sector and the one that figures most prominently in public policy toward science and technology. The report also emphasizes the role of universities that, in the United States, perform the lion’s share of basic research.

The report provides a variety of basic statistical indicators of R&D effort and identifies recent trends in sources of R&D funding. The report also reviews classic arguments on the appropriate role of government in supporting R&D and the strengths and weaknesses of universities as performers of R&D. The U.S. national innovation system is compared with those in other major industrialized countries.

This paper provides a review of studies that examine the extent to which university research promotes local economic growth and development. The primary focus of the paper is on economic impacts that derive from the innovative outputs of faculty. this paper evaluates Arizona State University and the Phoenix metropolitan area in terms of factors that enhance the local economic impact of university research. The potential for local impacts from ASU’s research and graduate programs is greatly aided by the fact that ASU is located in a major metropolitan area with a climate and other natural amenities that mobile professional workers find attractive.