Private research and development (R&D) jobs have been declining in the Chicago region for the past decade according to data from the Illinois Innovation Index for February 2012.  This month's newsletter, which focuses on private R&D activity in the state, calls attention to the challenges and opportunities the region faces in industry-driven research.  GO TO 2040 stresses the importance of innovation in fostering sustained economic growth to maintain the region’s position as a global economic center. R&D plays a vital role in spurring innovation, facilitating the process by which new ideas are transformed into goods and services.

Between 1970 and 2000, the Chicago region saw steady growth in private R&D employment, peaking at about 38,000 employees in 2000. Starting after 2000, however, the region experienced a significant decline in private R&D, dropping from second to eighth in the nation as measured by total private R&D employment. This downward trend mirrors other troubling regional innovation indicators: At the same time that R&D employment has been dropping, the region has shown steady declines in R&D real GDP and total patents granted, while venture capital funding has also fallen dramatically.

All these indicators suggest that something happened to encumber the region’s previously established growth in R&D and innovation beginning around the new millennium. Several factors may have contributed to this hindrance, yet the root causes are not yet clear. As policymakers, business leaders, and civic stakeholders work to rejuvenate metropolitan Chicago’s status as a center for R&D and innovation, they could be aided by a thorough understanding of what precipitated the region’s decade-long underperformance in the key markers of innovation.

While the private R&D data certainly indicate some challenges for the region, the February edition of the Illinois Innovation Index also highlights opportunities that may presage an upswing in innovative activity. Despite the decrease in regional private R&D employment in the past decade, the number of research establishments in metropolitan Chicago has remained stable. There are over 430 companies with R&D operations in the region, anchored by global powerhouses such as Wrigley Innovation Center, Alcatel-Lucent, and BP Global Fuels Division. Regional R&D is concentrated in industries with high growth potential: over a third of all private R&D establishments in the region are in biotech, while further specializations exist in electrical equipment, machinery, and chemicals. Due to the nature of the research being conducted by experienced firms, the region is well-positioned to capture new R&D investments as the economy rebounds. Recent legislation may provide an addition incentive to bring private research back to the region by extending the Illinois R&D tax credit for five years.

Data from this month’s Illinois Innovation Index is available at MetroPulse.