PhillyInc: Phila. area's top R&D rival: Maybe not Boston, but Beijing

Anyone doing business in the Philadelphia area knows it has a big footprint in brainy activities that require spending on research and development.

Until now, it's been difficult to put an overall figure of just how much is spent on R&D in the region.

Select Greater Philadelphia estimates the amount at $10.5 billion, or 2.9 percent of Philadelphia's gross regional product.

A report released Thursday by the economic development marketing organization said that level of spending - by private industry, academia, and government sources - placed the region among the top five nationally. Boston and New York ranked higher, while Washington and Los Angeles placed below Philadelphia.

The ranking mirrors previous studies that have tried to illustrate the robust "life-sciences cluster" that runs from Wilmington to Princeton.

Philadelphia is a big beneficiary of annual spending by the National Institutes of Health, with the University of Pennsylvania alone receiving $577 million in 2010. Plus, with a high concentration of large pharmaceutical companies, it stands to reason that some of Big Pharma's billions spent on R&D flow to local operations.

Still, this most recent statistical analysis does reveal that the R&D spending locally encompasses much more than just the life sciences.

Phil Hopkins, Select Greater Philadelphia's vice president of research, said significant amounts were spent on R&D by the region's chemical, telecommunications, software, and industrial instrument firms. In all, private industry accounted for 85 percent of the amount spent on R&D.

Select Greater Philadelphia undertook the effort to quantify the size and scope of the 11-county region's R&D activities in part to answer questions often asked by corporate prospects considering locating operations here, Hopkins said.

Because companies are reluctant to disclose much about what happens in those offices and labs, Hopkins said, he thinks that the report underestimates the extent of R&D activity in the region.

So why should people who don't wear white lab coats care about this? Hopkins said that metro areas increasingly compete by emphasizing their regional competitive advantages.

"In this area, we are extremely competitive in terms of the size and diversity of the research-and-development sector," he said. "In the long run, it translates into good things for the economy."

Thus, research today should produce jobs tomorrow.

One caveat about the report. It incorporates a lot of data from 2008 and might not reflect the downdraft from the recession. That gives me renewed concern about how recent cutbacks by Merck & Co. Inc., Glaxo-SmithKline P.L.C., Pfizer Inc., and AstraZeneca P.L.C. may be affecting Philadelphia's competitiveness.

After all, on Tuesday, Merck proudly trumpeted plans to invest $1.5 billion in R&D in China over the next five years. It might not be disinvesting in its huge West Point complex in Montgomery County, but new resources are going to faster-growing regions, such as Asia.

To me, it's the most striking example that Philadelphia region's greatest rival for R&D investment, talent, and assets isn't Boston, but Beijing.