TABLE 4.5 – Public R&D funding by sector of performance – in %
A. Funding sector Share of public R&D funding Compound annual growth rate
2005 2008 2011 2005-2008 2008-2011 Difference Business sector 10.4 10.8 9.4 11.1 2.6 -8.5 Public sector 74.9 71.9 72.1 8.1 7.8 -0.3 Government sector 66.4 62.4 62.7 7.4 7.8 0.4 Higher education 8.5 9.5 9.4 13.7 7.5 -6.2 Abroad 13.2 15.8 16.8 16.3 10.0 -6.3 Business sector 7.0 9.4 9.1 21.0 6.8 -14.3 Public sector 6.2 6.4 7.7 10.6 14.5 3.9
Total funding public R&D 100.0 100.0 100.0 9.6 7.7 -1.9
B. Funding sector Share of government R&D funding Compound annual growth rate
2005 2008 2011 2005-2008 2008-2011 Difference Business sector 9.2 10.8 9.6 17.8 -18.4 -36.2 Public sector 58.7 51.5 51.2 4.5 4.8 0.3 Abroad 31.5 37.5 38.8 15.6 5.1 -10.5 Business sector 24.1 28.0 30.5 17.4 3.8 -13.6 Public sector 7.3 9.4 8.3 9.3 9.9 0.5
Total funding government R&D 100.0 100.0 100.0 9.4 2.7 -6.8
C. Funding sector Share of funding R&D higher education Compound annual growth rate
2005 2008 2011 2005-2008 2008-2011 Difference Business sector 10.9 11.3 11.1 5.4 7.4 2.0 Public sector 80.9 78.5 79.3 6.1 6.2 0.1 Abroad 6.4 7.6 7.2 10.0 14.2 4.2 Business sector 0.2 0.2 0.2 16.1 107.8 91.8 Public sector 6.2 7.4 7.0 9.9 9.2 -0.6
Total funding R&D higher education 100.0 100.0 100.0 6.3 7.1 0.8
Source: CFS/STAT (2013). Notes: Growth rates are calculated in constant prices (2005=1.000). The sums of shares differ from 100% because the public-private non-profit organisations have been discarded.
Public R&D expenditure in 2011 amounted to 2.4 billion € and rose steadily from 1.3 billion € in 2000. In 2011 16.8% of public R&D funding came from sources abroad. More than half of these sources, 53.9%, stem from foreign located enterprises, and about 40% (38.2%) came from foreign government levels or agencies (mostly from the European Commission).
In 2011 1.7 billion €, or 70.4%, of public R&D is funded by governments, i.e. the European Com- mission, federal authority, regional authorities. Public R&D funding rose continuously for all sectors. However, the share of government public R&D funding diminishes gradually from 2000. From 2004, the share of enterprise funding of public R&D rose until 2008 and declined in 2009. In monetary terms, the amount of enterprise funding still grew in 2011 to reach 460 million €.
Panel A in Table 4.5 shows the funding of public R&D by each sector of performance. In 2011 the bulk of funding, 72.1%, stems from the domestic public sector; whereas 9.1% comes from foreign public sources, bringing total public involvement to well over 80% (81.2%). The remainder of the public R&D funding comes from domestic (9.4%) and foreign (9.1%) enterprises, implying that the attractiveness of public R&D is about equally divided between Belgium and abroad. This is related to the fact that many government research centres, such as IMEC, do not limit their activities to national boundaries. How- ever, the evolution of the shares of public R&D funding by the business sector varies. First, the domestic business sector grew steadily between 2005 and 2008 (from 10.4% to 10.8% at a rate of 11.1% annually), but the economic crisis reduced public R&D funding by business by 8.5 percentage points to an annual growth rate of 2.6% in order to realise a share of funding of 9.4%. Foreign firms showed a similar pattern, although the growth rates in the post-crisis period remained high. Since business R&D is cyclical, these reductions of growth rates were to be expected.
Within the public sector as a funder the roles of government and higher education differ. Govern- ment funding of public R&D amounts to about two thirds. Yet, its growth rates remain at high levels, 7.4% between 2005 and 2008 and 7.8% between 2008 and 2011. The higher education has a more mod- erate share in funding public R&D, but its growth rate declined in the post-crisis period to 7.5%.
A special case is the funding by the foreign public sector, which consists mainly of the European Commission. Its share has risen from 6.2% in 2005 to 7.7% in 2011. This clearly shows that R&D is a key issue in the policy objectives at the European level, as stated in the Lisbon strategy. this explains why growth rates in the post-crisis period are 3.9 percentage points higher than those before the outbreak of the crisis, and that the annual growth remains in double digits, even when expressed in real terms.
Panel B in Table 4.5 zooms in on the funding of government organisations in particular. The do- mestic business sector funds slightly less than 10% of R&D in government research centres. But in the case of foreign businesses, this share rises to 30.5%. The remainder of the R&D in the government sector is financed by public means (51.2%). This shows that much of the R&D performed in government re- search centres serves to stimulate applied R&D that is of interest for enterprises in order to be developed further. Since business R&D reacts pro-cyclically, the growth rate in the post-crisis period is far less (-18.4% for domestic firms and 3.8% for foreign firms) than the one before the crisis. The involvement of the public sector, on the other hand, has risen slightly: from 4.5% to 4.8% for the domestic agents and 9.3% to 9.9% in the case of foreign agents. However, the final upshot is that, in real terms, the growth rates of funding government research organisations in the post-crisis period is only 2.7% annually, as opposed to 9.4% per annum in the pre-crisis period.
Panel C in Table 4.5 focuses on the higher education institutes. These institutes are mainly funded by the public sector, with the shares around 80%. Their growth rates remained stable throughout the eco- nomic crisis. Funding from the domestic business sector did even rise, to 7.4% annually in the post-cri- sis period, even though the business sector seemed more reluctant to fund public R&D. This might point to the need for domestic firms to tap into basic research and knowledge at universities in order to innovate and build up a competitive edge. One tenth of the R&D funding in the higher education comes from domestic businesses. The involvement of the foreign business sector is far less outspoken. They are assumed to tap into the knowledge stock of their home universities. Their small shares also account for the extraordinary growth rates. In sum, the higher education sector did not seem to suffer from the crisis. As indicated earlier, this might be partly explained by the fact that they received additional public funding through the fiscal measure. But it could also be explained by the fact that society and science policy are confident that the crisis might be tackled by investing more in basic research performed at universities.
This section compares Belgium to a selection of other countries in terms of R&D activities. The cen- tral focus is on the place of the public sector in the innovation system and its reaction to the economic crisis.
Table 4.6 gives an overview of the evolution of gross domestic product (GDP) of the selected coun- tries as an indication of the extent to which the crisis has had an impact. After all, this is the background against which one of the most important indicators – the R&D intensity – has to be interpreted, in conjunction with the evolution of R&D expenditure.
TABLE 4.6 – Compound annual growth rates of GDP and gross R&D expenditure (in %)
Gross domestic product Gross expenditure on R&D
2005-2008 2008-2011 Difference 2005-2008 2008-2011 Difference Belgium 2.2 0.4 -1.7 4.7 4.4 -0.3 France 1.7 -0.6 -2.3 1.9 1.3 -0.7 Germany 1.3 -0.2 -1.5 3.7 2.2 -1.5 Netherlands 2.7 -1.3 -4.0 0.1 0.2 0.1 United Kingdom 2.2 0.0 -2.2 3.4 -0.1 -3.5 Austria 2.5 0.3 -2.2 5.4 1.3 -4.1 Denmark 2.0 -1.0 -3.0 7.1 1.7 -5.4 Finland 3.3 -1.1 -4.3 5.5 -0.3 -5.8 Ireland 0.8 -5.5 -6.3 6.2 -0.6 -6.8 Sweden 2.6 1.2 -1.4 3.9 -1.8 -5.7 Source: OECD (2013). Notes: Growth rates are calculated in constant prices (2005=1.000). Netherlands 2010 instead of 2011. Based on the annual growth rates in Table 4.6, the impact of the crisis may be interpreted according to the differences between pre- and post-crisis periods. Belgium started from an annual growth rate in real terms of 2.2% of GDP between 2005 and 2008, which stagnated to 0.4% between 2008 and 2011. Compared to its nearest trade partners – France, Germany, the Netherlands and the UK – the Belgian economy performs relatively well. The impact of the crisis was, with -1.7 percentage points, relatively modest. Only Germany and Sweden had a similar impact. Since GDP and R&D expenditures are linked, those are bound to experience an impact of changing growth performance in GDP (European Commis- sion, 2011). The fact that the correlation between the differences of GDP and gross R&D expenditure is 0.43 is partly due to the existence of a time lag, but also to the fact that the policy level gives high priority to the issue of R&D since it is explicitly stated as one of the Lisbon targets. Notwithstanding the importance of R&D, the annual growth rates are lower in the post-crisis period, which is shown in the last column of Table 4.6. Comparing the growth rates of the gross expenditure on R&D clearly reflects the negative effect of the financial and economic crisis: for all selected countries (except for the Nether- lands) the annual growth rates are lower than before the outbreak of the crisis. Belgium, however, scores, with -0.3%, relatively well in this respect, especially since its annual growth rates were already high in the pre-crisis period (4.7%).