Anecdotes abound regarding the decline of basic research in industrial and governmental settings, but very little empirical evidence exists about the phenomenon. This article provides a systematic and historical analysis of the contribution of various institutional sectors to knowledge production at the world and country levels across the past four decades. It highlights a dramatic decline in the diffusion of basic research by industrial and governmental sectors across all countries—with a corresponding increase in the share from universities—as well as an increase of partnerships between universities and other sectors. Results also shows an increase in the relative share of industries in applied research, as measured through patents. Such divergence in university and industry research activities may hinder industries’ ability to translate basic knowledge into technological innovation, and could lead to a growing misalignment between doctoral training and future job expectations. Industries and universities must rethink strategies for partnerships and publishing to maximize scientific progress and to ensure the greatest gains for society.