R&D Investment Opportunities and Public Funding

This paper describes the result of the recent design of an R&D economic impact assessment framework developed to meet Canadas National Research Councils (NRC) strategic planning and performance evaluation needs. In Canada, not only there are a considerable number of science parks and incubators, but also a huge fund are available for R&D projects every year. Although R&D spending has for some time been acknowledged as an economic engine for growth, through technological diversification and commercialisation, the political requirement to quantify the economic return on R&D investments is relatively recent. What we propose is a method for comparing the return in terms of economic contributions from various investment options and a tool to help measure the performance of existing R&D programs. Prior to being considered by NRC for further expansion and adoption as a strategic planning and evaluation tool, our quantitative R&D economic impact model was tested by comparing seven pre-defined expenditure options. The resulting analysis ranked each option according to its relative economic impacts and contributions. This paper focuses primarily on the modeling methodology, generalized results and proposed improvements. The framework itself is adapted from several trusted quantitative methods including econometric, benefit-cost, input-output and economic impact analysis. Both static and dynamic elements of R&D\nexpenditure impacts were incorporated. The results of the analysis provided the components and data on which two separate R&D comparison indexes were created: An R&D Economic Impact (EI) Index involving eleven coefficients and multipliers, including: four R&D multipliers (one backward and three forward multipliers for Investment, Consumption, and Export); six general impact multipliers (Output, GDP, Exports, Imports, Employment and Labour Income); a total factor productivity (TFP) coefficient (estimated using capital stock, intermediate inputs, labour, production and R&D expenditures) A Benefit-Cost (BC) Ratio was developed from the present value of forecasted benefit streams, using lags from the dynamic productivity coefficients and the economic multipliers for Output to value the investment impacts. Primary data was collected both from Canadas National Accounts and Input-Output Matrices, as compiled by Statistics Canada, as well as from the OECD. Both the EI index and BC ratio where calculated for each of the seven R&D investment options and the\nresults were presented as a ranking from least to most important economic contributors. As expected, the ranking reflected existing Canadian strengths in production/receptor capabilities, domestic inputs and established comparative advantages. Confidence in the results was strengthened by the similarities in the two separate rankings by the indicators as well as by the results of an independent ranking analysis using bibliometric methods. The methodology of this paper can be used to the subject of science parks and technological incubators in the way that it provides a methodology of R&D project evaluations. In other words, the methodology presented in this paper can be applied to anywhere (related to R&D) that the government has a role in. Generally, public sector can interfere in science parks for two main objectives; participating in some projects (in terms of financing) and providing assistantship in general in order to preparing the suitable infrastructure and environment for incubators. Governments participation in R&D projects is usually due to lack of private sector participations existing in those fields of research, just like as market failure.