I run a small industrial applied research lab (<100 researchers). The truth is that, except in fairly specific cases, we don't need PhD level staff either. Just like in a university lab, the bulk of the hard work is done by people with Graduate (or in some cases Undergraduate) degrees. Practical experience in the field is also about 50% of what we need (since we're ultimately figuring out things that can go into engineering and deployed operationally, knowing what the end-state environment looks and runs like is critical). The role of PI is more often filled in our case by the corporate leadership.

I honestly think that the lack of large industrial research labs and the drying up of good academic research positions is very much an issue of what would be R&D funding going to other things that provide better near term ROI: VC, stock market, etc.

R&D is very much an investment like anything else and for whatever reason (patents, existing IP portfolios, etc.), it's just not a place that gets much attention at the moment as the money handlers have found that they have more ROI opportunity elsewhere.

I think the modern substitute for old fashioned R&D is the modern tech startup. The siren call of these ridiculously inflated "valuations" is simply too much for investment managers and it locks up more and more money that could go towards other investments. There's more parallels there as well, R&D and Startup investment is a high-failure game. But the outcome of successful startups is likely to be much larger than the outcome of a successful R&D venture (which still has very long tails of IP capture, product development, marketing, etc.)

I think it's a shame in the sense that, while we end up with dozens of photo sharing sites and social network startups, there's very few actual world changing ones out there. Most of what we get are not "hard" technical areas and their value derives from their faddish popularity - they're kind of the Karashians of technology.

But I guess that's the way of the world.