1. RESPONDING TO THE ECONOMIC CRISIS
1.4. Financing R&D during a recession
The business enterprise sector remains the main
source of R&D funding in most OECD countries,
R&D has various sources of financing. Five are gen-
accounting for around two-thirds of the total in 2007.
erally taken into account: the four R&D-perform-
Its role differs sharply across countries, from over
ing sectors mentioned above and funds from
three-quarters in Japan and Luxembourg to less than
 abroad . Flows of funds are measured using per-
35% in Greece and Poland. In recent years, its role has
formance-based reporting on the funds received
increased slightly in the main OECD regions to 55% in
by a unit, organisation or sector for the perfor-
the EU and 66% in the United States.
mance of intramural R&D. What is therefore mea-
R&D financed by the business enterprise sector is
sured are direct transfers of resources used to
also the component most affected by the business
carry out R&D; other government provisions to
cycle: over 1982-2007, the observed variations in the
encourage R&D, such as tax concessions, payment
OECD area were significantly larger than the varia-
of bonuses for R&D, exemption from taxes and tar-
tions in total R&D. This suggests that the current crisis
iffs on R&D equipment, etc., are excluded. For pur-
will affect business-financed R&D most strongly.
poses of international comparisons, public general
In the OECD area, business funding of R&D has been
university funds (GUF) are included in the sub-
growing on average at a faster pace than govern- total for government funds. These are the funds
ment-financed R&D over the last 25 years. Following
allocated by higher education establishments to
the economic upturns after 1993 and 2002-03, business- R&D from the general grant in support of their
funded R&D growth picked up much more rapidly than
overall research and teaching activities which they
government-funded R&D. Both sources of financing
receive from the Ministry of Education or the cor-
moved in parallel from 1982 to 1987, and they moved
responding provincial or local authorities.
in opposite directions in 1988-89 and 2001-02.
When assessing the contributions of the different
Based on a measure of  responsiveness , business- sectors to R&D performance and the changes over
financed R&D appears more volatile than other
time, it is important to take account of changes in
sources of financing in most countries. However, in
methods and breaks in series, as well as national
Austria, Ireland, Italy and Portugal the financing of
practices. For example, the transfer of public-
R&D by businesses is more stable than financing
sector organisations to the private sector would
from other sources. In these countries, the current
reduce the government sector s contribution and
crisis may result in a decrease in R&D financing by
increase that of the business sector. In the United
government unless recent stimulus packages
States, funds from abroad are included with
focused on R&D are implemented, like in the case of
financing by the business enterprise sector.
Portugal.
Responsiveness is measured as the estimated
elasticity of business enterprise-financed GERD to
total GERD. The estimation is based an OLS
regression on the first-order differences of natural
logs. Only coefficients significant at 10% level and
below are reported.
R&D performance and funding
The R&D effort (expenditure and personnel) is
Source
usually broken down among four sectors of
performance: business enterprise, higher educa-
OECD, Main Science and Technology Indicators Data-
tion, government and private non-profit institu-
base, June 2009.
tions serving households (PNP). This breakdown
is largely based on the System of National
Accounts, but higher education is viewed as a
Going further
special sector, owing to the important role
played by universities and similar institutions in OECD (2002), Frascati Manual: Proposed Standard Practice
the performance of R&D. for Surveys on Research and Experimental Development,
OECD, Paris, www.oecd.org/sti/frascatimanual.
OECD SCIENCE, TECHNOLOGY AND INDUSTRY SCOREBOARD 2009 © OECD 2009
28
1. RESPONDING TO THE ECONOMIC CRISIS
1.4. Financing R&D during a recession
R&D growth over the business cycle by source of financing, OECD area, 1982-2007
Average annual real growth rate, percentage
Business enterprise-financed GERD Government-financed GERD GDP
%
12
10
8
6
4
2
0
-2
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
1 2 http://dx.doi.org/10.1787/742112414180
Responsiveness of business-financed R&D R&D by source of financing, 2007
to the business cycle, 1981-2007
As a percentage of the national total
Poland Business enterprise Government
Other (other national sources + abroad)
Australia
Norway Luxembourg (2005)
Japan
Czech Republic
Israel (2005)
Korea
Sweden
China
United Kingdom Switzerland (2004)
Finland
Japan
Germany (2006)
United States
Mexico
OECD
Germany
Sweden (2005)
Slovenia
United States
Belgium (2005)
Denmark (2005)
Spain
Ireland (2006)
Slovak Republic
Australia (2006)
EU27
Korea
Czech Republic
Netherlands France (2006)
Netherlands (2003)
Turkey
Iceland
Canada
Finland
Turkey
Hungary
Austria
United Kingdom
Belgium
Spain (2006)
Mexico (2005)
Canada
Chile (2004)
France
Norway
South Africa (2005)
Greece
Hungary
Estonia
Denmark
Italy (2006)
Ireland
New Zealand
Portugal (2005)
Austria
Slovak Republic
Italy Poland
Greece (2005)
Portugal
Russian Federation
0 20 40 60 80 100
0.0 0.5 1.0 1.5 2.0
%
1 2 http://dx.doi.org/10.1787/742056057730
1 2 http://dx.doi.org/10.1787/742104412330
OECD SCIENCE, TECHNOLOGY AND INDUSTRY SCOREBOARD 2009 © OECD 2009
29