policymakers demonstrate

Innovation and Growth: The Schumpeterian Perspective 57
the report also complains about the lack of research studies that actually quantify
the extent of this underinvestment and about the lack of data. 23
For similar reasons governments introduce programmes to promote collaboration
between basic academic researchers and private firms, with the hope that
synergies generated from these interactions could lead to breakthrough technological
advances. For instance, the US government has aggressively promoted
collaboration between universities and industrial researchers through specific
funding programmes. Among many others, the National Science Foundation
(NSF) sponsors the Fundamental Research Program for Industry-University
Cooperative Research (FRP), the Industry-University Cooperative Research
Centers Program (I/UCRC) and Grant Opportunities for Academic Liaison
with Industry (GOALI).
Although the different characteristics of basic and applied research on the
one hand, and academic and corporate research on the other hand have been
widely recognized to be of first-order importance by policy-makers, these
issues have received insufficient attention in the economic literature on productivity
and economic growth. In particular, the endogenous growth literature has
mainly considered a uniform type of (applied) research and overlooked basic
research investment by private firms.
What are the key roles of basic and applied research for productivity growth?
How should R&D policy be geared towards basic versus applied research?
What are the incentives of private firms to conduct basic research? How does
academic research contribute to innovation and productivity growth? Akcigit
et al. (2014a) provide a first attempt at answering these questions. In order to
understand the potential inefficiencies involved in different types of research
investments and to design appropriate industrial policies to address them, it
is necessary to adopt a structural framework that explicitly models the incentives
for different types of research investments by private firms. Akcigit et al.
(2014a) take an important step towards developing this theoretical framework,
identifying the potential spillovers, and studying their macroeconomic implications
for innovation policy.
Their analysis starts from the observation that countries allocate a significant
share of their GDP to R&D (around 2–3%). The question then is: which fraction
of it goes to basic versus applied research? The interesting fact is that almost
half of overall spending goes into basic research. 24
Akcigit et al. (2014a) first test Nelson’s (1959) view that ‘firms which support
research towards the basic-science end of the spectrum are firms that have
fingers in many pies’. According to this argument, as the range of its products
and industries gets more diversified, a firm’s incentive for investing into
basic research relative to applied research should increase due to better appropriability
of potential knowledge spillovers. To measure multi-industry presence,
the authors count how many distinct SIC codes a firm is present in.