Lhe productivity of our economy is the most important determinant of our standard of living. How to increase it? What respective roles should the private sector and the government play in this process, in particular through the financing of research and development (R&D)? This question often pits supporters of a very interventionist state against defenders of private innovation.
Research work in France and the United States has provided nuanced answers: we now know that the government and the private sector are allies in financing R&D, not enemies. However, they must each focus on what they do best: fundamental research in government, commercial development in businesses. If everyone focuses on their strengths and a permanent dialogue between public and private is maintained, public R&D spending can be a powerful tool for increasing productivity.
There are two important differences between public R&D and private R&D.
First, public R&D is generally more fundamental: it funds projects whose goal is to understand phenomena rather than find commercial applications. In 2020, in the United States (where detailed data is available), 33% of public R&D financed projects considered fundamental, compared to only 7% for private R&D.
Although it is not directly useful for the creation of a product or service, public fundamental research is rich in lessons for concrete applications.
Between one and three additional patents generated
Its technological benefits are multiple and significant: for each patent resulting from research funded by the American government, between one and three additional patents are generated by companies which did not directly receive this funding, but which took advantage of the beneficiaries’ discoveries , sometimes in completely different fields (“Estimating spillovers from publicly funded R&D: Evidence from the US department of energy”Kyle Myers and Lauren Lanahan, American Economic Review No. 112/7, 2022; “Public R&D investments and private-sector patenting: Evidence from NIH funding rules”Pierre Azoulay, Joshua Graff Zivin, Danielle Li and Bhaven Sampat, The Review of Economic Studies No. 86/1, 2019).
The second difference is that public research funding contracts are generally more flexible than those of the private sector. A recent study showed that university researchers funded by the US government have more freedom to disseminate their results and create start-ups themselves that use the fruits of their research.
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