An Evaluation of Federal Policy Instruments to Stimulate Basic Research in Industry

Abstract

A model of the resource allocation behavior of a group of firms demonstrates that unaided industry allocation to basic (inappropriable) research is suboptimal. Furthermore, provision of seed money is generally counterproductive, while the provision of a matching subsidy is not very cost-efficient in increasing the allocation. Innovative policy alternatives are proposed.research and development, government, engineering, economics

Integrative Publicness: A Framework for Public Management Strategy and Performance

“…Many such programs are premised on underlying policy logic, one that has some support in theory and research. The logic is as follows: (a) there is a shortfall of basic research owing to the inability of firms fully to reap their investments in research closer to the public spectrum (Arrow 2000;Nelson 1959), (b) increased basic research will ultimately lead to increased innovation (Joglekar and Hamburg 1983;Pavitt 2001;Salter and Martin 2001), and (c) more innovation will lead to regional economic growth, including not only more sales and direct stimulation of the regional economy (Cooke 2001;Malecki 1991) but also, ultimately, more jobs and increase yield in state revenue (through increases in income, corporate and sales taxes) (Feldman et al 2005).…”

Political Economy of Research and Development: An Institutional Analysis

“…Seed money can actually reduce a firm's contribution to R&D, and matching subsidies increase the contribution, but not by much (Joglekar and Hamburg 1983). Mansfield and Switzer (1985) found that each dollar in foregone tax revenues resulted in 30 to 40 cents worth of R&D.…”

“…Tax credits provide more direction than general subsidies creating industry-university ties and expanding industrial allocations for more generic research. The proposed tax subsidy for joint-venture research (Bozeman and Link 1983;Joglekar and Hamburg 1983) would also encourage generic research and information dissemination and, thus, yield relatively greater social value than a general subsidy. Congress, however, has been reluctant to enact this subsidy because joint-venture research generally violates antitrust laws.…”

Public Support for Private R&D: The Case of the Research Tax Credit

“…Any such shift, whether toward more applied research or more basic research, would have uncertain effects on the generation of social value. 33 In all likelihood, such effects-assuming they could be measuredwould vary from firm to firm and industry to industry.…”