The Effectiveness of R&D Policies: A Study on the Business Enterprise Expenditure on R&D and the Patents
MIPLC Master Thesis Series (2014/15)
110 Pages Posted: 7 May 2016
Date Written: 2015
Innovation stands for the most important key for the sustainable economic growth for today’s knowledge based economies. Yet, it is a risky business because of the uncertainty of success of its outcomes. Although the firms are aware of its importance for their economic performance, they can remain reluctant to make investments on innovative activities because of its inherent risk. However, for the economic growth of a country, the private sector’s R&D efforts are of crucial importance. This is where governments release policies in order to support the private sector for further R&D efforts and to foster the economic growth of their countries.
This thesis aims to analyze the effectiveness of such policy releases by examining two main indicators of innovation: business enterprise R&D expenditures (BERD), as an input indicator, and the number of patent applications, as an output indicator. It also refers to the share of public, or government, funds in BERD in order to analyze the effects of introduced policies. With the country of main focus being Turkey, Poland and Germany are also examined to provide implications about certain policies.
The methodology of this study is based on plotting the changes in BERD with respect to both the number of patent applications and the share of public funds in total BERD and analyzing the reactions of these indicators during the periods of policy releases. This analysis is carried out for each country both in an aggregate, or country, basis and partly for the industries which were defined as “priority fields of technology” by certain national policy documents.
The aggregate analysis reveals that support schemes introduced by governments usually suggest a complementary, or crowding-in, effect on R&D spending and a positive effect on patenting behaviors of the private sector, regardless of whether the support is direct or indirect. However, their magnitudes vary with respect to the type of the support measures; and even more with respect to the support measures’ effective periods. It is also observed that introducing too many different schemes might result in some inefficiencies and having a comprehensive national strategy has proven to be favorable. The industrial analysis reveals that the effectiveness of the policy measures is highly dependent on the R&D and patenting behavior of the industries. In industries for which investing in R&D is already common and important, policy changes do not change their behavior significantly and simply provide some additional effect, whereas some others are undertaking R&D efforts only when there are available support measures and basically substituting their efforts with public R&D funding. Patenting behavior is more dependent on propensity to patent of an industry than the introduction of an R&D policy measure.
Keywords: MIPLC, R&D policies, innovation, patent, subsidies, BERD
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