Finnish research shows public funding drives private R&D

One euro of public funding in R&D results in one euro more in privately financed R&D

While the Lisbon Treaty aims for 3 per cent of the gross national product of EU member countries to be spent on R&D, it will remain the case that the majority of R&D is financed and carried out by companies.

The research indicates that public R&D funding does not supersede company-financed R&D but rather complements, or amplifies it. According to Ali-Yrkkö, one euro of public R&D funding results in a one euro increase in privately financed R&D. The impact is greater for large companies than for small companies.

Public R&D financing also influences employment levels in private companies, though the effects are limited to R&D staff.

Ali-Yrkkö also considered the impact of technology development on company productivity, showing that while investment in R&D can boost output, the effect takes several years to be manifest. It takes, on average, three to five years until the result of R&D activities can be observed in productivity figures.

This delay in seeing benefits of R&D needs to be taken into account in government and public policies that aim to boost corporate R&D activity.

In addition, the research shows that intellectual property makes companies attractive to foreign investors. According to Ali-Yrkkö, foreign companies show particular interest in buying Finnish enterprises with patents, while patents do not seem to attract potential domestic purchasers.