Keeping score

What is the payback to the economy, for investing in research and innovation? Here is a Science|Business summary of the major economic studies. Read the full report HERE.

Cumulative return on investment
Total amount gained or lost from the investment
11:1 The €55 billion EU Framework Programme 7 had a disproportionate impact on Europe’s economy, with each euro spent generating an estimated €11 in return (Fresco, Martinuzzi and Wiman, 2016).
14:1 Research conducted by the US National Institutes of Health ($16 billion) led to reductions in illness calculated to be save the economy $240 billion (Murphy and Topel; 2006 OECD, 2008).
44:1  Over a 10-year period, the $335 million invested in clinical trials carried out by the US National Institutes of Health generated $15.2 billion (2004 value). This is a gross return, excluding costs and depreciation (Johnston, et al., 2006).
140:1 Every $1 of US federal investment into the Human Genome Project contributed to the generation of $141 in the economy (Tripp, and Grueber, 2011).
By comparison in another sector…
<1:1 (0.4:1) The effects of the EU’s Common Agricultural Policy (CAP) are reviewed by the Australian Government. They look at its protectionist affects, and the opportunity costs of CAP expenditure (Costa, et al., 2009).
Annual rate of return
Average amount gained per year, as a percentage of the original investment
20% Three separate studies investigating the annual rate of return from public investment in R&I came up with the same number: 20%. If economics can be voted on, this number seems to win the election in Europe (European Commission, 2017a; Frontier Economics, 2014; Georghiou, 2015).
28% Surveys on the impact of public research on innovation in the US and Germany.  The three studies back 28% as being a likely annual rate of return (Mansfield, 1991;1998; Beise and Stahl, 1999).
30-37% Estimate of the financial impact of biomedical research in mental health and cardiovascular diseases in the UK; translating reduction of mortality/morbidity into GDP gains (Buxton, et al., 2008).
By comparison in another sector…
3.1%  10 year Euro Area (19 countries) Government Bonds (OECD, 2017).
Innovation dependence on public research
The percentage of innovations which could not have occurred (or would have been substantially delayed) without underlying public research
9-11% Looking at seven manufacturing industries in the US: information processing, electrical equipment, chemicals, instruments, drugs, metals and oil (Mansfield, 1991).
20% Mail survey of inventors, to discover how dependent private sector innovations (patents) are on public sector research across the Netherlands (Tijssen, 2002).

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