Massachusetts' research and development ecosystem supports more than 376,000 direct jobs, generates $347 billion in total economic activity and contributes over $13 billion in state and local taxes — but federal funding cuts could damage the state's economy for at least a decade, according to a new study from the University of Massachusetts Donahue Institute.

The report, "The Research and Development Ecosystem: Engine of the Massachusetts Economy," analyzes employment in scientific research and development activities and high-tech innovation industries including life sciences, semiconductors and computer systems. It draws on National Science Foundation data and U.S. Department of Labor Bureau of Labor Statistics figures, supplemented by interviews with policy, industry and academic leaders across the state.

Mark Melnik, director of economic and public policy research at the Donahue Institute, said the economic consequences of federal research funding uncertainty are real even where they are not 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."

The report follows a June 2024 study, "Economic Contributions of Research and Development Funding in Massachusetts." Melnik said the earlier report lacked the full suite of activities — from basic research and teaching hospitals through commercialization and entrepreneurship — that the new analysis covers.

Measured strength, measured slowdown

The data shows both scale and erosion. Federal research funding obligations in Massachusetts reached $10 billion in 2023, ranking the state fourth nationwide in total federal R&D funding and in per capita federal funding obligations. The National Institutes of Health supplies more than one-third of all federal R&D funds flowing to the state, and Massachusetts is the largest recipient of NIH funding on a per capita basis.

In job terms, the state's R&D ecosystem is a quarter the size of California's and just over half the size of Texas' — despite a fraction of either state's population. For every 1,000 Massachusetts residents, 52 people work in the R&D ecosystem, the highest concentration of any state.

Growth is another matter. Between 2014 and 2024, R&D ecosystem employment in Massachusetts grew 29%, below the national rate of 39%. Among nine comparison states — Florida, Texas, Washington, North Carolina, New York, Pennsylvania, California, Maryland and Illinois — Massachusetts outperformed only California, Maryland and Illinois. "Other states are gaining ground," the report states.

The slowdown coincides with declining federal support for early-stage research at Massachusetts universities and research hospitals, driven by shifting federal priorities. That funding typically develops and tests new technologies to the point of commercial viability, after which private investment carries products to market and scales production — a pipeline the report describes as symbiotic between academic and medical research and private-sector innovation.

Western Massachusetts bucks the trend

One regional exception stands out. While R&D ecosystem growth has concentrated in Greater Boston, western Massachusetts — the smallest region in total ecosystem jobs — was the only region outside Greater Boston to add R&D ecosystem employment between 2014 and 2024, gaining 6,000 jobs. The report credits assets including the Institute for Applied Life Sciences at UMass Amherst and the Berkshire Innovation Center in Pittsfield, and points to opportunities to expand entrepreneurship-supporting space. Melnik said UMass Amherst Chancellor Javier Reyes recognizes that providing incubator space can retain graduates in the region.

Reyes highlighted the report at a recent Faculty Senate meeting, citing the importance of federal support and what it demonstrates about UMass' value to the state and nation.

Headwinds: visas, costs, VC drift

Beyond federal budgets, the report identifies structural risks. Energy and housing costs weigh on the sector. Tighter restrictions on J-1 and H--B visas complicate recruitment of foreign researchers — a critical pipeline for a state dense with academic labs.

"If saddled with further restrictions, the international talent pipeline that benefits Massachusetts will divert their talents to competing nations," the report warns. "Already, China, Germany, the United Kingdom and Japan are all offering visa programs, among other incentives."

Venture capital investment in Massachusetts remains high in absolute terms, but the report flags that California and New York — driven largely by artificial intelligence investments — have pulled away over the past two years. Melnik also notes setbacks in clean energy nationally. Census Bureau data adds a demographic warning: domestic out-migration from Massachusetts is driven largely by 25-to-34-year-olds, the demographic most likely to staff and launch R&D ventures.

For R&D managers in the state, the report's implications are direct: a funding base that leans heavily on NIH and federal obligations is exposed to federal priority shifts, talent pipelines depend on visa policy, and regional alternatives to Greater Boston — western Massachusetts in particular — now have a decade of measured job growth behind them. The Donahue Institute projects that funding disruptions could constrain the state's economy for at least ten years, a window long enough to shape the next generation of scientific and engineering talent Melnik says is now at risk.