US and EU Research Funding Systems - Different Paths to Innovation (Part 1)

1. Introduction

This study initiates a two-part series analyzing the grantmaking structures of the United States and the European Union. It seeks to elucidate these intricate systems for researchers, organizations, and policymakers, offering a comparative framework to enhance understanding and navigation of these funding landscapes. By examining the distinct characteristics of each ecosystem, this research aims to provide a comprehensive overview that can inform strategic decision-making in pursuit of research and innovation funding.

Our paper presents the main features of US and EU grant systems and their key differences. The numbers and data cited come from published sources but may not match current official statistics. For exact figures, readers can check the National Science Foundation (NSF) and European Commission's Research & Innovation databases directly. We look at how these systems work and what makes each one distinct, rather than doing a deep statistical analysis.

A grantmaking ecosystem comprises the network of funders, recipients, regulatory bodies, and supporting institutions that allocate financial resources for specific goals or initiatives. This intricate system determines how resources are distributed, projects are funded, and societal challenges are addressed.

Comparing the US and EU systems is important for several reasons:

1. It offers insights for organizations seeking to diversify their international funding sources.
2. It highlights different approaches to addressing similar societal challenges.
3. It can help policymakers and funders refine their strategies to maximize global impact.

The US and EU systems have developed along different paths, influenced by their respective historical, cultural, and political contexts. The US system features a combination of federal funding and a strong private philanthropy sector, reflecting a tradition of individual giving and decentralized governance. In contrast, the EU system emphasizes fostering European integration and addressing continent-wide challenges, resulting in a more centralized approach at the EU level, complemented by diverse national systems.

This analysis explores the key differences and similarities between these two major grantmaking systems, examining their structures, priorities, and processes. Our goal is to equip stakeholders with the knowledge to navigate these complex ecosystems more effectively, fostering greater collaboration and impact across the Atlantic and beyond.

2. The US Grantmaking Ecosystem

The United States' grantmaking ecosystem is characterized by a diverse mix of federal, state, and private funding sources.

2.1. Structure and Key Players

At the federal level, several major agencies play crucial roles:

1. National Institutes of Health (NIH): The primary funder of biomedical research worldwide.
2. National Science Foundation (NSF): Supports fundamental research and education in science and engineering.
3. Department of Energy (DOE): Funds research in physical sciences, energy, and advanced technologies.
4. Department of Defense (DOD): Supports research related to national security and military applications.

At the state level, initiatives such as the California Institute for Regenerative Medicine and the Texas Cancer Prevention and Research Institute demonstrate how individual states contribute to the funding ecosystem.

Private foundations also play a significant role, with organizations like the Bill & Melinda Gates Foundation, the Howard Hughes Medical Institute, and the Ford Foundation providing substantial funding across various sectors.

2.2. Funding Priorities and Budget

The US grantmaking ecosystem focuses on several key areas:

1. Health and biomedical research
2. Defense and national security
3. Energy and environment
4. Basic science and engineering
5. Education and workforce development

In terms of research and development (R&D) spending, the United States is a global leader. As of 2021, total US R&D spending reached approximately $720 billion, with the federal government contributing about $150 billion.

The percentage breakdown across major federal agencies for R&D funding in fiscal year 2021 was approximately:

• Department of Defense: 41%
• Department of Health and Human Services (including NIH): 27%
• Department of Energy: 11%
• NASA: 8%
• National Science Foundation: 4%
• Other agencies: 9%

2.3. Administrative Processes

The US federal grant lifecycle typically follows these stages:

1. Funding Opportunity Announcement
2. Application Preparation and Submission
3. Application Review
4. Award Decisions
5. Award Notification
6. Grant Implementation
7. Reporting and Monitoring
8. Closeout

Grants.gov serves as the central portal for finding and applying for federal grants, providing a standardized system for over 1,000 grant programs across federal grant-making agencies.

2.4. Strengths and Challenges

The US grantmaking ecosystem has several notable strengths:

1. Diverse funding sources: The combination of federal, state, and private funding provides multiple avenues for support.
2. Substantial resources: The US allocates significant financial resources to R&D, particularly in areas like health and defense.
3. Established peer review system: Particularly in federal agencies, this system promotes high standards and fairness in grant allocation.

However, it also faces some challenges:

1. Complexity: The diverse funding landscape can be difficult to navigate, especially for new or small organizations.
2. Intense competition: High demand for limited resources leads to low success rates in many funding programs.
3. Administrative burden: Extensive paperwork and compliance requirements can be challenging, particularly for smaller entities.

Understanding these strengths and challenges is crucial for organizations seeking to effectively navigate the US grantmaking ecosystem and maximize their funding opportunities.

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3. The EU Grantmaking Ecosystem

The European Union's grantmaking ecosystem is characterized by an interplay of EU-wide programs, national funding initiatives, and public-private partnerships.

3.1. Structure and Key Programs

At the heart of the EU's research and innovation funding is Horizon Europe, the EU's primary funding program for research and innovation with a budget of €95.5 billion for 2021-2027. It succeeds Horizon 2020 and represents the world's largest transnational funding program for research and innovation.

Within Horizon Europe, the European Research Council (ERC) plays a crucial role. The ERC funds investigators and their research teams, using a bottom-up approach that allows researchers to identify new opportunities in any field of research.

Individual EU member countries also contribute significantly to the ecosystem through their national funding agencies and programs. These often complement EU-level initiatives and focus on country-specific priorities.

Public-private partnerships, such as the ?Innovative Health Initiative (IHI), bring together industry, academia, and public bodies to accelerate innovation in specific sectors.

3.2. Funding Priorities and Budget

The EU's funding priorities align closely with its broader strategic goals. Key priorities include:

1. Climate change mitigation and adaptation (European Green Deal)
2. Digital transformation
3. Health innovation and pandemic preparedness
4. Strengthening European industrial competitiveness
5. Fostering inclusive and creative societies

A distinctive feature of the EU's approach is its emphasis on 'mission-oriented' research. This involves setting defined goals and working backwards to identify the research and innovation needed to achieve them. Horizon Europe includes five mission areas: cancer; adaptation to climate change; healthy oceans, seas, coastal and inland waters; climate-neutral and smart cities; and soil health and food.

The total EU Research and Innovation (R&I) budget under Horizon Europe is €95.5 billion (in current prices), broken down across three main pillars:

• Excellent Science: 25% (including 17% for ERC)
• Global Challenges and European Industrial Competitiveness: 56%
• Innovative Europe: 14%

The remaining 5% is allocated to "Widening participation and strengthening the European Research Area."

3.3. Administrative Processes

The European Commission plays a central role in managing EU research and innovation funding. It sets overall strategy, adopts work programs, and makes final funding decisions.

To increase efficiency, the Commission delegates the implementation of specific programs to Executive Agencies. For instance, the European Research Council Executive Agency (ERCEA) manages ERC grants, while the European Innovation Council and SMEs Executive Agency (EISMEA) handles SME-focused programs.

The Funding & Tenders Portal serves as the single entry point for finding and managing EU grants and procurement contracts. It provides functionality similar to the US Grants.gov, offering information on funding opportunities, online submission of proposals, and project management tools.

3.4. Strengths and Challenges

The EU grantmaking ecosystem has several notable strengths:

1. Transnational collaboration: It promotes cross-border partnerships, facilitating knowledge sharing across Europe.
2. Alignment with strategic goals: Funding is closely tied to broader EU objectives, ensuring research impact.
3. Diverse funding mechanisms: From basic research (ERC) to innovation (EIC), it covers the entire R&I spectrum.

However, it also faces some challenges:

1. Complexity: The multi-layered system of EU and national funding can be difficult to navigate.
2. Administrative burden: Despite efforts to simplify, the application and reporting processes can be time-consuming.
3. Balancing priorities: Addressing both excellence and geographical balance in funding allocation can be challenging.

Understanding these strengths and challenges is crucial for organizations seeking to effectively navigate the EU grantmaking ecosystem and maximize their funding opportunities.

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"The US system lets each federal agency run its own programs, with NIH having 27 separate research groups and NSF having 7 main divisions. In contrast, the EU uses one set of rules and a single portal for all its programs."

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4. Comparative Analysis: US vs EU Grantmaking Ecosystems

This section provides a direct comparison between the US and EU grantmaking ecosystems, highlighting key differences and similarities across several important dimensions.

4.1. Funding Scale and Scope

The US and EU differ significantly in their overall research and development (R&D) investments:

• US: In 2021, total R&D spending reached approximately $720 billion, or about 3.5% of GDP. [Source: National Science Foundation, "The State of U.S. Science and Engineering 2022"]
• EU: For 2021-2027, the Horizon Europe program allocates €95.5 billion (about $113 billion), or roughly 0.1% of EU GDP annually. [Source: The future of European competitiveness Part B | In-depth analysis and recommendations ]

For example, the National Institutes of Health (NIH) in the US had a budget of $41.7 billion for FY2020, exceeding the entire seven-year budget for health research in Horizon Europe. [Source: NIH Budget Office]

4.2. Administrative Efficiency

Both systems have made efforts to streamline their processes, but differences remain:

• US: NIH grant applications have a success rate of about 20%, with a time-to-grant period of 10-11 months. [Source: NIH Data Book]
• EU: Horizon 2020 had an overall success rate of 12%, with time-to-grant generally capped at 8 months. [Source: European Commission, "Horizon 2020 in full swing - Three years on"]

For instance, the NSF in the US typically issues decisions within 6 months, while the European Research Council often takes 9-10 months for its main grant schemes. [Sources: NSF Proposal & Award Policies & Procedures Guide, ERC Work Programme 2023]

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5. Co-financing Requirements and Models

The co-financing approaches of US and EU funding systems reflect fundamental differences in their philosophical and operational frameworks.

5.1. US Co-financing Framework

1. Federal Grant Requirements:

• Research grants (e.g., NIH, NSF) typically require institutional cost-sharing
• Infrastructure projects often demand 40-60% matching funds
• DARPA contracts might require significant industry cost-share for technology transition

2. Tiered Cost-Sharing Structure:

• Basic research: Often minimal or no cost-sharing required
• Applied research: 20-50% cost-sharing typical
• Demonstration projects: Up to 50-80% cost-sharing
• Commercialization: Higher private sector contribution expected

3. Source Flexibility:

• Cash contributions from institutional funds
• In-kind contributions (equipment, facilities, personnel time)
• Third-party contributions
• State/local government matching funds
• Private sector investments

4. Special Programs:

• SBIR/STTR: No matching required in Phase I, but Phase II may require matching
• Manufacturing USA institutes: 1:1 minimum cost-share requirement
• State-level programs: Often require local matching funds

5.2. EU Co-financing System

1. Horizon Europe Framework:

• Research and Innovation Actions (RIA): 100% funding for all beneficiaries Focus on creating new knowledge or exploring feasibility
• Innovation Actions (IA): 70% funding for profit-making entities 100% for non-profit organizations Emphasis on closer-to-market activities
• Marie Sk?odowska-Curie Actions: 100% funding plus fixed-amount allowances Special provisions for mobility and training

2. Strategic Co-financing Requirements:

• European Partnerships: Co-programmed: Partners commit to their contributions upfront Co-funded: Member states provide matching funds Institutionalized: Partners make long-term commitments

3. Regional Development Funds:

• European Regional Development Fund (ERDF): Co-financing rates vary by region's development level More developed regions: Up to 50% EU contribution Less developed regions: Up to 85% EU contribution
• Cohesion Fund: Up to 85% co-financing for eligible member states Focus on environmental and transport infrastructure

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6. Programme Management Architecture

The architectural differences between US and EU funding systems reflect their distinct approaches to governance and implementation.

6.1. US Decentralized Management

1. Agency-Level Independence:

• Each federal agency maintains autonomous programs: NIH: 27 institutes with independent funding strategies NSF: 7 directorates with distinct priorities DOE: Multiple program offices with separate budgets
• Benefits: Rapid response to sector-specific needs Specialized expertise in review processes Flexibility in program design

2. Multi-layer Implementation:

• Federal oversight with distributed execution
• State-level program management
• Regional coordination through Federal Regional Councils
• Local implementation through: Universities and research institutions Federal laboratories State agencies Private sector partners

3. Administrative Framework:

• OMB Uniform Guidance provides baseline requirements
• Agency-specific regulations and procedures
• State-level administrative requirements
• Institutional policies and procedures

6.2. EU Centralized Management

1. Strategic Framework:

• European Commission central coordination
• Common Implementation Strategy: Standardized procedures across programs Unified evaluation criteria Harmonized reporting requirements Centralized audit approach

2. Operational Structure:

• Executive Agencies: European Research Council Executive Agency (ERCEA) Research Executive Agency (REA) European Innovation Council and SMEs Executive Agency (EISMEA)
• Implementation Bodies: National Contact Points Programme Committees Expert Evaluators Network

3. Coordination Mechanisms:

• Strategic Planning: Multi-annual Work Programmes Annual Work Plans Strategic Research Agendas
• Implementation Tools: Funding & Tenders Portal Participant Register Project Management Tools

4. Quality Assurance:

• Centralized evaluation process
• Standardized reporting templates
• Common audit methodology
• Unified IT systems and databases

These detailed structural differences significantly impact how organizations approach and manage funding opportunities in each system. Understanding these distinctions is crucial for successful navigation of either funding landscape.

6.3. International Collaboration

Approaches to global research partnerships differ significantly:

• US: Traditionally focused on domestic collaboration, with international partnerships often requiring a clear benefit to the US. [Source: Congressional Research Service, "U.S. Research and Development Funding and Performance: Fact Sheet"]
• EU: Strongly encourages international collaboration, with many programs requiring multi-country partnerships. [Source: European Commission, "Horizon Europe Programme Guide"]

For example, Horizon Europe is open to participants from non-EU countries, while many US federal grants are restricted to US-based institutions or require special justification for international components.

6.4. Unique Strengths

Each system has distinct advantages:

US Strengths:

1. Diverse funding landscape: Mix of federal, state, and private sources provides multiple avenues for support.
2. Strong support for high-risk, high-reward research: Programs like DARPA and the NIH's High-Risk, High-Reward Research program. [Source: NIH Office of Strategic Coordination]

For instance, the BRAIN Initiative, launched in 2013, combines federal agencies and private foundations to advance neuroscience research.

EU Strengths:

1. Emphasis on cross-border collaboration: Facilitates knowledge sharing and resource pooling across countries.
2. Alignment with broader societal goals: Research priorities closely tied to EU-wide objectives. [Source: European Commission, "Horizon Europe Strategic Plan (2025-2027)"]

For example, the European Green Deal Call under Horizon 2020 mobilized €1 billion for climate-related research and innovation.

These differences reflect the unique characteristics of each ecosystem, shaped by their respective historical, political, and cultural contexts.

“US grant seekers deal with separate rules and reviews at each funding agency, from DOE to NSF. EU researchers work through one portal, follow one set of forms, and face one review system - no matter which program they target.”

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7. Key Takeaways and Future Outlook

Our analysis reveals three key differences between US and EU grantmaking systems:

1. Scale of funding (US significantly larger)
2. Approach to international collaboration (EU more encouraging)
3. Administrative processes (EU generally faster but more competitive)

Two notable similarities include:

1. Emphasis on addressing grand societal challenges
2. Increasing focus on interdisciplinary research

For researchers navigating these landscapes:

1. Consider the alignment between your research goals and the strategic priorities of each system
2. Evaluate the potential benefits of international collaborations, particularly for EU funding

In Part 2 of this series, we will examine a comparative case study of two significant initiatives in the manufacturing sector: ManufacturingUS and Horizon Europe, Cluster 4. This analysis will offer practical insights into how these systems operate in a specific domain.

Comparison Preview

Both initiatives aim to boost manufacturing competitiveness and innovation, but they operate differently:

• ManufacturingUS works through a network of physical institutes and partnerships.
• Horizon Europe, Cluster 4 operates primarily through competitive grant funding.

Our upcoming case study will explore these differences in depth, providing guidance for researchers and organizations looking to optimize their funding strategies across both ecosystems. This examination will offer insights for those in the manufacturing sector navigating these complex funding landscapes.