The Socio-Economic Importance of Scientific Research To Canada

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The Socio-Economic Importance of Scientific Research to Canada Page 17© David A. Wolfe and Ammon Salterconsider the full costs of commercialization (US Congressional Budget Office 1994, p. 15). 8The most important failing of his approach is that it offers only a social rate of return, not amarginal rate. It can not inform policy makers about the marginal benefits of adding fundingto research or development. “In this sense, these studies (including Mansfield's) offer littleguidance for policy makers, other than by stressing the importance of investments in basicresearch in general” (US Office of Technology Assessment 1986, p. 4). “Like many costbenefitcalculations, it is more useful as an ex post rationale for historical public researchinvestments, rather than as a criterion for future investments” (David et al. 1992, p. 79).The figures generated by Mansfield’s studies are also hard to compare with other financialfigures on rates of return. If the benefits of investment in R&D are so high, then, why dogovernments and firms not invest more in research? The lack (from a social point of view) ofinvestment might be related to the risk of R&D. More likely, however, these estimates can notbe realistically compared with the estimates for other rates of return, such as that on capitalequipment. They do not provide a meaningful yardstick to measure such benefits, but merelysuggest that there are some considerable benefits arising out of past investments by governmentin publicly–funded basic research.A new approach to evaluating the benefits of publicly–funded scientific research is found in thework of Narin et al. They measured the academic citations in US patents to conclude that overthe past six years there has been a tripling in the knowledge flow from US science to USindustry. Their study is based on an analysis of the front pages of over 400,000 US patentsissued between 1987 and 1994. Narin et al. traced the 430,000 non–patent citations containedin these patents. Of these 430,000 non-patent citations, 175,000 were references to paperspublished in the 4000 journals covered by the Science Citation Index (SCI). They undertook alibrary search of 42,000 matched papers with at least one US author. They located thesepapers and were able to determine the sources of US and foreign research supportacknowledged in the papers.Using this methodology, they demonstrated a secular increase across countries (UK, France,German, and Japan) in citations of science in patent records. Patents also tend to cite theirown country's papers two or three times more often than expected, when adjusted for the size8 In a review of Mansfield's work the Congressional Budget Office suggested that such an approach is misleading for policy-makers. Mmakers as they allocate research funding or even determine the amount of funding devoted to R&D (CBO 1994). However, this criticisfrom citing Mansfield's work as a justification for an increase in basic research funding.17
The Socio-Economic Importance of Scientific Research to Canada Page 18© David A. Wolfe and Ammon Salterof a country's scientific publications. Of the institutions cited in the patent records, AT&TLabs and IBM were among the most frequently cited. Large US funding agencies were alsohighly listed as sources of funding for the citations included in the patents. Narain et al.suggest that this indicates a strong reliance by US industry on the scientific results of researchfunded by the public sector.This study suffers from a serious limitation in its research methodology. Patent citations aremade by both the firms submitting the patent application and the patent review officer at theUS patent office. The researchers made no attempt to differentiate between these two sourcesof citations. It may be that the increase of citations in US patents simply reflects a policy atthe Patent Office to promote academic citations. It could also reflect the availability of newCD–Rom's at the Patent Office listing academic papers by subject which has led to the massiveincrease in academic citations. The tremendous increase — three fold over six years —indicates that there may be more going on here than Narin et al. acknowledge in their study. Itis questionable whether there could have been such a shift in the relationship between USindustry and science over such a short period of six years (Narin et al. 1997).Spillovers and Localization:One of the most prominent lines of recent research into the benefits of publicly–fundedresearch has been that investigating the spillovers from government funding to other types ofactivities, such as industrial R&D. The existence of these spillovers augments the productivityof one firm or industry by expanding the general pool of knowledge available to it. There aretwo main forms of spillovers identified in the literature: 1) geographical spillovers and 2)spillovers across sectors and industries (Griliches 1995).Geographical spillovers imply benefits for firms located near research centres, other firms, anduniversities. Evidence from bibliometric studies indicate a strong tendency for basic researchto be localized. Katz has shown that research collaboration within a country is stronglyinfluenced by geographical proximity. As distance increases, Katz found that collaborationdecreased. This indicates that research collaboration often demands face–to–face interaction(Katz 1994). Hicks et al. also found that research across countries is localized (Hicks et al.1995). At a regional level in Canada, Godin and Ippersiel found that papers published inMontreal tend to be cited by other papers published in the city as opposed to papers publishedin other parts of Quebec (1995).18
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