AMHERST — Reductions in federal funding for research and development could negatively impact the Massachusetts economy for at least a decade, according to a new study released by the University of Massachusetts Donahue Institute.
In a state where such funding is critical and has a greater impact than previously recognized, and at a time when other states are beginning to catch up to Massachusetts, the “The Research and Development Ecosystem: Engine of the Massachusetts Economy” report provides a detailed analysis of the current situation, as well as warnings about headwinds the state is facing.
The report includes a deep dive into jobs in scientific research and development activities and the high-tech innovation industries such as life sciences, semiconductors and computer systems.
Mark Melnik, director of Economic & Public Policy Research group at the Donahue Institute, said the economic consequences of federal research funding uncertainties are real, even if they may not be fully understood.
“Research is the engine of the Massachusetts economy, and any funding disruptions will not only stymie innovation but also threaten the development of the next generation of scientific and engineering talent in the state,” Melnik said, adding that Massachusetts has often punched above its weight. “This is a threat to our global competitiveness now and in the long term.”
Melnik said the report follows one released last June titled “Economic Contributions of Research and Development Funding in Massachusetts.” What was missing in that report, he said, was the full suite of activities, from basic research and teaching hospitals to commercialization and entrepreneurship.
This sector thrives, the report notes, due to cutting-edge research underway in the state, and supports more than 376,000 direct jobs, $347 billion in total economic activity and more than $13 billion in state and local taxes.
But there has been a slowdown in both overall jobs and job growth within this research and development ecosystem.
The report’s authors point out that the research underscores the symbiotic relationship between early-stage scientific research in the academic and medical fields, and different elements of the innovation economy in the private sector.
The report comes as federal support for early-stage research—especially from Massachusetts universities and research hospitals—has declined due to shifting federal priorities. Such funding has often been used to develop and test new technologies that, once commercially viable, attract private investment to bring products to market and scale production.
UMass Amherst Chancellor Javier Reyes called out the report at last week’s Faculty Senate meeting, observing the importance of federal support and how it shows UMass’s worth to both the state and nation.
WMass analysis
Aspects of the report also illustrate how western Massachusetts, broken out from the rest of the state, has been benefiting.
While growth in the research and development ecosystem has largely been “concentrated in the Greater Boston area,” the report states the west region, “while the smallest in total numbers of research and development ecosystem jobs, was the only region outside of Greater Boston that saw any increase in research and development ecosystem employment between 2014 and 2024.”
The region added 6,000 jobs and has key strengths, including the Applied Life Sciences Center at UMass and the Berkshire Innovation Center in Pittsfield, along with opportunities to expand spaces that support entrepreneurship. Melnik said Reyes also understands how providing incubator space can keep graduates in the region.
The main cautions in the report come as it compares Massachusetts to nine other states: Florida, Texas, Washington, North Carolina, New York, Pennsylvania, California, Maryland and Illinois.
“Over the last decade, employment in the research and development ecosystem in Massachusetts grew 29%, slower than the nation overall, which grew 39% in the period between 2014 and 2024,” the report finds.
Massachusetts exceeded only California, Maryland and Illinois among its peers.
“This was the seventh fastest rate among competitors, suggesting that while Massachusetts is far ahead on many metrics of research and development ecosystem performance, other states are gaining ground.”
Many positives are noted, with federal research funding obligations in Massachusetts valued at $10 billion in 2023, ranking fourth nationwide for total federal research and development funding, as well as for per capita federal funding obligations. The National Institutes of Health accounts for more than one-third of all federal research and development funds, and the state is the largest recipient of NIH funding on a per capita basis.
And Massachusetts’ research and development ecosystem, in terms of job numbers, is a quarter of the size of California’s and just over half the size of Texas’ despite having a fraction of the population of either state. For every 1,000 residents in Massachusetts, 52 people are employed in the research and development ecosystem, the highest of any state.
Headwinds facing state
Headwinds include the high costs of energy and housing and challenges in attracting foreign researchers due to increased restrictions on J-1 and H1-B visas.
“If saddled with further restrictions, the international talent pipeline that benefits Massachusetts will divert their talents to competing nations,” the report reads. “Already, China, Germany, the United Kingdom, and Japan are all offering visa programs, among other incentives.”
Although the value of venture capital invested in Massachusetts is high, there is concern that both California and New York, driven by investments in artificial intelligence, have been pulling away from Massachusetts in the last couple of years. Melnik notes that clean energy has also had some setbacks nationally.
And data from U.S. Census Bureau shows that domestic out-migration from Massachusetts is largely driven by those who are 25 to 34 years old.
The report drew from the National Science Foundation and the U.S. Department of Labor’s Bureau of Labor Statistics, and is further informed by interviews with leaders in policy, industry, and academia throughout the state.
