Biomedical Engineering Reference
In-Depth Information
systems. High levels of funding for research and development activities
has traditionally strongly correlated to economic prosperity, with the
countries with the highest levels of research and development (R&D)
investment (from both public and private sources) as a proportion of
GDP showing strong innovation performance. Across the OECD,
R&D domestic investment as a percentage of GDP over the last eight
years has averaged between 3 and 4 per cent of GDP in Finland,
Sweden and Japan, nations with well documented strengths in
innovation (OECD, 2010). The only country performing higher than
this is Israel, averaging between 4.3 and 4.7 per cent since 2003
(OECD, 2010). By way of comparison, the OECD total ranged from
2.2 to 2.4 per cent for the same period, with the EU27 total averaging
less than 2 per cent of GDP (OECD, 2010).
Some debate exists concerning the impact of increased government
provision of R&D investment on private R&D investment (e.g.
Lichtenberg, 1987; David et al., 2000; Guellec and van Pottelsberghe
de la Potterie, 2003). The general assumption of much government
R&D policy since the early 1980s has been that increased government
expenditure on R&D results in increased private R&D (Lichtenberg,
1987). Yet the modelling on which this assumption is based has been
called into question, suggesting that there is no direct correlation
between government and private investment (Lichtenberg, 1987).
Moreover, while policies directed at increasing government
expenditure on research and development as a means of stimulating
economic growth date back to the end of the Second World War,
some evidence suggests that private R&D is actually the bigger
incentive for economic growth (David et al., 2000). One of the
reasons for this is thought to be due to the higher levels of risk and
expectation of return that goes into R&D activities for companies
(David et al., 2000).
Direct government investment in R&D is usually used in response to
a perception of market failure in some industries and the unreasonably
high risks posed to private firms (Guellec and van Pottelsberghe de la
Potterie, 2003). In some sectors, there may be a higher rate of social
return than private return, necessitating direct government intervention
(Guellec and van Pottelsberghe de la Potterie, 2003). Yet key criticisms
of this direct support include: (1) that it only serves to raise the real
