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Public investment in R&D and
innovation in times of crisis
Andrea Bonaccorsi
University of Pisa
Coordinator, Group of experts for Research and innovation
policies on Structural Funds, MISE-DPS
Member, High Level Expert Group on The role of European
research policy in the knowledge-based economy, DG Research
Outline
• Rationale for public expenditure on R&D
and innovation under the financial crisis
• Conditions for success
• Policy instruments
• The Italian case
Rationale (1)
Private investment pro-cyclical
• Investment of companies into R&D tends to be
pro-cyclical, being based on budget decisions
proportional to (expected) turnover
• In times of financial crisis, the risk-return profile
of R&D investments may be tilted towards less
risky projects
• Public expenditure should be less sensitive to
considerations of budget or turnover and risk
avoidance
• Anti-cyclicality of public investment needed to
compensate
Rationale (2)
Short term impact of public expenditure
• Public investment in R&D and innovation may
have an impact on GDP even in the short-tomedium term
– Short term impact
–
–
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High value added
Well paid jobs
Highly skilled young workers
Credibility of the government commitment to innovation
– Medium term
– Incentives to industrial R&D and innovation have an impact on
GDP per capita within 3 years (DPS research, 2005)
Rationale (3)
New types of products needed to reestablish consumer trust
Durable consumer goods hit by the collapse of consumer
trust
In durable goods, the substitutes for new purchases are
existing products. After a long crisis, consumers learn they
can avoid new goods
To establish new trust for the future, consumers need to find
“new functionalities” in products, not the old ones (which
they know can be sacrificed).Bread and roses psychology
This requires companies to credibly announce now they will
be ready to introduce new products with significant
innovations (e.g. low cost car, new energy solutions, Life
Cycle efficiency, Design for Environment etc.).
This attitude should be supported by public policies.
Conditions for success (1)
Credibility
Government initiatives must be considered credible by
economic actors.
This implies
- timeliness of decision
- commitment to reduce the burden of bureaucracy
- fast implementation
Conditions for success (2)
Concentration
Expected impact more important if resources are
concentrated on a few visible areas
Concentration also helps in controlling for results in the shortto-medium term
By rising the visibility of programmes there will be more
political commitment and orientation to results
Conditions for success (2)
Additionality
Companies may be tempted to trade-off liquidity from
public sources with own investments
Empirical evidence shows the net effect of public
incentives to industrial R&D is usually positive and
additional, although the size of additionality is largely
dependent on policy design and administrative
efficiency
Recent Italian experience with Structural
Funds (1)
Quality of policies
There is no alternative to continuous effort to improve
the quality of policies and to maximise policy learning
at national and regional level
This requires extensive interaction between policy
makers, administration, and experts from academia
and industry
2008-2009 Programme on R&D and innovation policies
on Structural Funds- DPS
Recent Italian experience with Structural
Funds (2)
Framework agreement MIUR
In order to accelerate expenditure in less developed regions,
the Ministry of Research signed Framework Agreements
with Regional governments, allowing rapid implementation
of programmes using national policy tools, already notified
to the EU and approved, e.g.
- Technology districts
- Incentives to industrial R&D
- Research infrastructures
Recent Italian experience with Structural Funds
(2)
Technology forecasting and
roadmapping for Southern regions
MISE recently launched an exercise to prioritize research
and innovation programmes in all Southern regions.
This exercise (“Analisi fattuale”) has covered:
1. Energy
2. Nanotechnology
3. Life science
4. ICT
already delivered, plus (in preparation)
4. Materials
5. Agro-food
6. Transportation