The Impact of Public R&D Expenditure on Business R&D

This document attempts to quantify the aggregate net effect of government funding on business R&D in 17 OECD Member countries over the past two decades. Grants, procurement, tax incentives and direct performance of research (in public laboratories or universities) are the major policy tools in the field. The major results of the study are the following: Direct government funding of R&D performed by firms (either grants or procurement) has a positive effect on business financed R&D (one dollar given to firms results in 1.70 dollars of research on average). Tax incentives have a positive (although rather short-lived) effect on business-financed R&D. Direct funding as well as tax incentives are more effective when they are stable over time: firms do not invest in additional R&D if they are uncertain of the durability of the government support. Direct government funding and R&D tax incentives are substitutes: increased intensity of one reduces the effect of the other on business R&D. The ...