Public research and development

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Since the 1960s, private businesses in the U.S. have provided an increasing share of funding for research and development, as direct federal funding waned. 1953- Funding for research and development - US.svg
Since the 1960s, private businesses in the U.S. have provided an increasing share of funding for research and development, as direct federal funding waned.

Public research and development (Public R&D) refers to the R&D activities related to public sectors, including governments, colleges and non-profit organizations. [2] Public R&D include academic fundamental research, applied research and R&D grants and contracts to private sectors, where later two are known as 'R&D subsidy'. Public R&D could be understood as a funder or a performer of an R&D activity. According to National Science Foundation in U.S., in 2015, R&D expenditures performed by federal governments, local governments, colleges and non-profit organizations are 54, 0.6, 64, and 20 billions of dollars, respectively. Meanwhile, industries perform R&D expenditures of 356 billion dollars. Moreover, R&D expenditures funded by federal governments, local governments, colleges and non-profit organizations are 121, 4.3, 17, and 19 billions of dollars, respectively. R&D expenditures funded by industries are 333 billion dollars. [3] In terms of R&D funders, public R&D to private R&D ratio is about 0.5.

Contents

Israel is the world leader as a percentage of GDP in public spending in research and development, the United States leads in total sums spent.

Economic impacts

Economists have made significant strides to understand the dynamics of public R&D, along with its cascading effects.

Productivity

Scholars generally propose that public R&D enhances industrial productivity (e.g., Levy and Terleckyj, 1983; [4] Nadiri and Mamuneas, 1994 [5] ).However, the improvement of productivity could result in R&D spill-over of public sectors, researcher movements and co-operation between public and private sectors.

R&D investment of private sectors

Economists are particularly concerned about whether public R&D stimulates or crowds out the private sector R&D. It is generally known as a 'policy success', if the public R&D (especially the government R&D subsidy) could stimulate the R&D investment of private sectors. So far, there is no conclusive viewpoint in the literature (e.g., Toole, 2007; [6] Cohen, Coval, and Malloy, 2011; [7] Azoulay, Zivin, Li, and Sampat, 2018 [8] ).

Stock returns

Public R&D is also positively related to stock returns of industrial firms (Chen, Chen, Liang, and Wang, 2020). [2] Although they show that abnormal returns based on public R&D ratio generate about 0.9% abnormal returns per month, and suggest that the positive relation could be interpreted by increased cash flow risks.

Government R&D programs

European Union

The EU spent €352 billion on R&D in 2022, 2.22% of EU GDP. [9] R&D as a percentage of GDP was highest in Belgium (3.44%), followed by Sweden (3.40%), Austria (3.20%) and Germany (3.13%) as of 2022. [9]

Israel

Israel leads the world in spending as a percentage of the economy on Research and development. [10] Israel spent 6.02% of its GDP on R&D. [11] Israel has focused on development on human capital investment with significant investment going toward knowledge based sectors of the economy. [12]

United States

The United States spends the most on R&D in pure terms of investment. Federal research and development budget in the fiscal year of 2020 was $156 billion. [13]

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References

  1. Anderson, G.; Moris, F. (2023). "Federally Funded R&D Declines as a Share of GDP and Total R&D". National Science Foundation, National Center for Science and Engineering Statistics. Archived from the original on 3 October 2023. NSF 23-339
  2. 1 2 Chen, Sheng-Syan; Yan-Shing Chen; Woan-lih Liang; Yanzhi Wang. (2020). "Public R&D spending and cross-sectional stock returns". Research Policy. 49 (1): 103887. doi:10.1016/j.respol.2019.103887.
  3. "Research and Development: U.S. Trends and International Comparisons, National Science Foundation" (PDF).
  4. Levy, David M.; Nestor E. Terleckyj (1983). "Effects of government R&D on private R&D investment and productivity: A macroeconomic analysis". The Bell Journal of Economics. 14 (2): 551–561. doi:10.2307/3003656. JSTOR   3003656.
  5. Mamuneas, Theofanis P.; M. Ishaq Nadiri (1996). "Public R&D policies and cost behavior of the US manufacturing industries" (PDF). Journal of Public Economics. 63: 57–81. doi:10.1016/S0047-2727(96)01588-5.
  6. Toole, Andrew A. (2007). "Does public scientific research complement private investment in research and development in the pharmaceutical industry?". The Journal of Law and Economics. 50: 81–104. doi:10.1086/508314. S2CID   44436555.
  7. Cohen, Lauren; Joshua Coval; Christopher Malloy (2011). "Do powerful politicians cause corporate downsizing?" (PDF). Journal of Political Economy. 119 (6): 1015–1060. doi:10.1086/664820. S2CID   3148523.
  8. Azoulay, P.; Graff Zivin, J. S.; Li, D.; Sampat, B. N. (2019). "Public R&D investments and private-sector patenting: evidence from NIH funding rules". The Review of Economic Studies. 86 (1): 117–152. doi:10.1093/restud/rdy034. PMC   6818650 . PMID   31662587.
  9. 1 2 "EU expenditure on R&D reaches €352 billion in 2022 - Eurostat". ec.europa.eu. Retrieved 2024-07-03.
  10. "R&D as a percentage of GDP by country 2022". Statista. Retrieved 2024-07-03.
  11. "R&D as a percentage of GDP by country 2022". Statista. Retrieved 2024-07-02.
  12. www.neaman.org.il https://www.neaman.org.il/Investments-Civilian-R-D-in-Israel-Background-Data-Development-National-Policy-HEB . Retrieved 2024-07-03.{{cite web}}: Missing or empty |title= (help)
  13. "Federal Research and Development (R&D) Funding: FY2021". 17 December 2020. Retrieved 20 February 2021.