Public R&D Policy: The Right Turns of the Wrong Screw? The Case of the German Biotechnology Industry

Abstract

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0560.pdf Non-technical SummaryThe biotechnology industry still has considerable expectations concerning its growth rates in employment, new products, patents and profits. In this paper we analyze if R&D policy in private business, respective public funding in biotechnology lost its origins, its mission and in the end its power. We assume that too many technologies and their increasing complexity overtax policy makers as much as their staff to follow their own strategies. It is assumed that authorities and public funding agencies neglect 'risk' as most important triggers for public R&D funding: it becomes arbitrary. We assume that public R&D funding degenerates in a public policy without discriminating between firms which suffer from financial risk, technical risk or market risk. Today, and especially in biotechnology, every firm which likes to be funded will be funded, because the R&D policy does not care for different risks any longer. Bureaucrats and experts decide by their own which projects and firms will be funded and become totally screwed on the target population.This study combines data of all German biotech companies and all publicly funded R&D We assume that R&D policy was driven blind by the idea to catch up with world's biotech leaders and analyse if Germany's R&D policy lost its origins. We do examine, if Germany sacrifice economic funding principles, in particular not discriminating different kinds of 'risk' in the field of biotechnology. The study combines survey data of German biotech companies and public R&D funding data on the firm level. The results shed light on the factors which determine public R&D funding and firm's probability of being funded.