Spillovers and Risk of R&D Projects, and Targeting of Public R&D Support

This paper analyzes what types of R&D projects and R&D firms generate important spillover effects, and which are subject to funding constraints. It also analyzes what types of projects and firms are targeted for public support and whether the selection of targets is consistent with spillovers. Using data collected in an inventor survey conducted by the Research Institute of Economy, Trade and Industry and those in the Basic Survey of Business Activities by the Ministry of Economy, Trade and Industry, we focus primarily on corporate research projects. Major findings are as follows:

Corporate research projects generate substantial spillovers. For example, about 20% of such projects involve basic research. At the same time, however, about 10% of corporate research projects have been delayed or scaled down due to funding constraints, and one quarter of them have faced constraints in funding commercialization investments. It has been also found that only 3% of Japanese corporate R&D projects receive public support, and 5.6% of the financially constrained projects receive such support.

Our statistical analysis suggests that although the estimated conditions explaining public support for R&D are largely consistent with the estimated conditions explaining the spillovers as measured by the publication of scientific papers and the occurrence of serendipity, there are some gaps. Although a firm's highly intensive R&D and participation of a PhD inventor are estimated to be significant sources of spillovers, apparently they are not given high weights in terms of factors related to public support for R&D.