Statistics on research and development funding

Transcription

1 2001/1 14 February 2001 Statistics on research and development funding Executive Summary $1.1 billion was spent on R&D in 1997/98, a 53% increase on 1990/91. Government contributes about half of R&D funding in New Zealand. New Zealand s R&D expenditure is half that of the OECD average as a percent of GDP. This is mostly due to the very low level of funding from New Zealand s business sector. New Zealand mostly spends its R&D funds on research by industries. While R&D spending in agriculture changed little between 1992/93 and 1997/98, spending increased substantially in service industries. New Zealand s R&D activities in the manufacturing sector is mainly of a low level of technology. Resident patent application numbers grew 98% between 1990 and Introduction The definition of research and development (R&D) used by the OECD, and by the Ministry of Research, Science and Technology in their R&D survey, is as follows: "Research and experimental development comprises creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications." 1 This paper considers three aspects of R&D funding: the source of the funding; where the funds are spent; and their effectiveness. 1 This is the OECD definition, as noted in the Ministry of Research, Science and Technology publication, New Zealand research and development statistics 1997/98 (p. 30). 1

2 1. How is R&D funded? R&D funding in New Zealand Figure 1 shows expenditure on research and development (R&D) according to the source of funding. These and other R&D data have been collected by survey since 1990/91. Figure 1: Gross expenditure on R&D by source of funds ($ million) Government Business Others TOTAL Fiscal Year Source: Ministry of Research, Science & Technology, 1999, p.5 The graph shows Government to be the main source of R&D funding in New Zealand. Its share of total funding is down however, falling from 60% to 52% between 1990/91 and 1997/98. The next largest source of funding is the business sector at around 30% for both years. The category providing the smallest source of funding others was also the one which increased the most. This category includes universities 2, non-profit organisations, and overseas-sourced funding. Its share rose from 10% to 17%. Overall, R&D funding increased 53% between 1990/91 and 1997/98. Government funding rose 33%, business funding 59%, and other funding 154%. The public funding system Much of the central government s R&D funding is given through Vote Research, Science & Technology. This is estimated to have received $370 million in the 1999/2000 year, not including overhead and other funding which does not involve direct investment in science programmes. Vote Education is the other main source of public R&D funding, receiving an estimated $144 million. This is that part of Government s Equivalent Full- Time Student funding which universities use on R&D activities. Other Votes include, for example, Vote Agriculture and Vote Fisheries. In total, other Votes are estimated to have received $95 million for R&D. 3 2 University funding in the other category includes R&D activity funded, for example, by student fees. It does not include research financed by Government s Equivalent Full Time Student funding to universities (which is counted as Government) nor that financed by businesses (which is counted as Business). 3 MoRST, 1999, Briefing for Incoming Minister, p. 7. 2

3 Figure 2: Central government funding of R&D by Vote $370 m (61%) $144 m (24%) $95 m (16%) Vote Research, Science & Technology Vote Education Other Votes Source: Ministry of Research, Science & Technology, 1999, Briefing for incoming Minister, p. 7 Vote Research, Science & Technology The structure of the funding system through Vote Research, Science & Technology is shown in Figure 3. At the highest level, Cabinet sets the overall policy, including the level of funding to be allocated to each of the research, science and technology (RS&T) 4 programmes. The Ministry of Research, Science & Technology (MoRST) is then charged with managing the funding system. The funds are passed though MoRST to the purchasing agents, who in turn contract with various research organisations for the provision of RS&T services. Figure 3. The structure of the Vote Research, Science & Technology funding system Cabinet Sets policy, including: Science priorities Overall funding levels Ministry of Research, Science & Technology (MoRST) Develops policy Advises Government Manages publicly funded part of R,S&T system Purchasing Agents (Foundation for Research, Science & Technology; Royal Society; Health Research Council) Allocate research funding Manage research contracts Research Organisations (Crown Research Institutes; universities, other private and public research organisations) Provide RS&T services 4 RS&T is defined somewhat more broadly than R&D, with R&D being a subset of RS&T. 3

4 The Government has specified four goals for its RS&T funding, and each has one or several funding instruments associated with it. A total of $474 million has been appropriated to Vote Research, Science & Technology for 2000/2001, including overheads. How this is to be distributed across the four goals is shown in Figure 4. These goals and the associated funding instruments (or outputs/programmes) are described in the appendix. The appendix also states the appropriation for each funding instrument in 2000/01 and the purchasing agent responsible. Figure 4: 2000/01 appropriations for Vote Research, Science & Technology by Goal $263 m (55% ) $85 m (18% ) $84 m (18% ) $42 m (9 % ) Innovation G oal Econom ic G oal Environm ent G oal Social G oal Source: Estimates of Appropriation for the Government of New Zealand for the year ending 30 June Figure 5 shows the total amount appropriated for Vote Research, Science and Technology through MoRST and the Department of Science and Industrial Research (DSIR) each year since In inflation-adjusted terms, the level of funding jumped in 1992/93 and 1997/98, and has risen steadily from 1998/99 onwards. As a percentage of total Government spending, these Votes have risen from 0.72% in 1986/87 to an estimated 1.25% in 2000/01. As a percent of GDP, the figures are respectively 0.27% and 0.43%. 5 Figure 5: Appropriations for Vote Research, Science and Technology and Vote Science and Industrial Research 500, ,000 ($000) 300, , , N o m in a l Inflation-adjusted (1999/2000 $s) Fiscal Year Source: Estimates of Appropriation for the Government of New Zealand Not included in these figures are re-allocations of money from other Votes such as Health and Education. Including these re-allocations would not significantly affect the trends shown in Figure 5. 4

5 Private funding of R&D Private businesses funded $337.5 million of R&D in 1997/98. Most of this was spent within the business sector (73%), with an additional 21% being spent in the Government sector and 6% on R&D provided by universities. Producer boards and research associations dominated business funding of R&D, being responsible for a quarter of the funding in 1995/96. The top ten firms provided a further 20% of funding, the next top 60 firms a further 29%, leaving 26% from the remaining firms. 6 International comparisons The level of R&D expenditure 7 in New Zealand is considerably less than in most other OECD countries, as can be seen in Figure 6. At 1.1% of GDP, New Zealand has the ninth lowest expenditure of the 28 OECD countries listed. Its level is half the 2.2% OECD country average. Figure 6: Gross expenditure on R&D as a percent of GDP OECD countries Mexico Turkey Greece Portugal Hungary Poland Spain Ita ly NEW ZEALAND Czech Rep. Ir e la n d Belgium Canada Austria Norway Australia Iceland U.K. Denm ark Netherlands France OECD AVERAGE Germ any Switzerland U.S. Korea Japan Finland Sweden (Percent) Source: OECD, Main Science and Technology Indicators, 1999:2, p MoRST, New Zealand research and development statistics 1995/96 (p. 8). 7 The difference between each country s R&D funding and R&D expenditure is its net funding from abroad. This section uses expenditure rather than funding figures because expenditure data are more readily available. 5

6 The main factor pulling New Zealand s ranking down is the short-fall of business funding of R&D, as can be seen clearly in Figure 7. Figure 7 also shows the importance of Government in R&D funding in New Zealand. Figure 7: Gross expenditure on R&D as a percent of GDP by sector of funding: New Zealand and OECD average (Percent) New Zealand OECD average Business Source: OECD, 1999:2, p. 16, 20, 21 Government Others TO TAL Comparing New Zealand with similar countries does not change its relative position. The Ministry of Research, Science and Technology uses six reference countries when examining New Zealand s comparative performance: Australia, Denmark, Finland, Ireland, Norway and Sweden. These countries were chosen as having a number of similar characteristics to New Zealand regarding population, size of the economy, and stage of economic development". 8 However, the averages 9 for the reference countries and the OECD are very similar, both for total R&D expenditure (as a percentage of GDP) and for funding by the different sectors. In 1997/98, New Zealand s expenditure on R&D was equivalent to 0.153% of total expenditure in the OECD, up from 0.138% in 1995/96. New Zealand makes up smaller proportion of business funding of R&D in the OECD. Its share of business funding was 0.075% in 1997/98, down slightly from 0.077% in 1995/96. 8 MoRST, 1999, p The OECD average is a weighted average, with each country being weighted by its size. OECD average figures are given in the OECD publications. The reference countries average is an unweighted average, with each country contributing an equal share to the combined average. 6

7 2. How are the R&D funds spent? R&D funds and expenditure compared Figure 8 compares the source of R&D funding with where the funds are actually spent. It shows a net transfer of R&D funds from the other sectors to the universities. While universities provide 23.9% of R&D funding, they receive 36.4% of the funding (see footnote to Figure 8). Figure 8: Gross expenditure on R&D in 1997/98 by performer and source of funds ($ million) Government by Performer by Source of Funds Business Universities Note: Adjustments have been made from the funding data shown in Figure 1. First, the $144.2 m Equivalent Full Time Student funding spent on R&D has been transferred from Government to Universities. Second, the non-universities funding ($70.0 m) has been removed from the Universities & Others category. As a result of the latter adjustment, the sum of the dark columns is $70 m less than the sum of the white columns. Source: OECD, 1999:1, p. 317 Spending by output class Most R&D expenditure in New Zealand is spent on research by industries. Of total expenditure in 1997/98, 56% went to industrial R&D, 23% to health and other social areas, and 21% to other areas such as fundamental, climate, and earth resources research. A detailed breakdown within each sector is given in Figure 10. As Figures 9 and 10 show, the universities were dominant R&D providers in the area of health and other social R&D; business was dominant in the secondary and services industries; and government in primary industry. Figure 9: Gross expenditure on R&D in 1997/98 by performer and sector Business Government University ($000) Primary Industry Secondary Industry Services Industry Health & Other Social Source: Ministry of Research, Science & Technology, ed data Other 10 The industries within each sector are shown in Figure 10. 7

8 Figure 10: Gross expenditure on R&D in 1997/98 by performer and output PRIMARY INDUSTRY Sheep research Beef research Dairy animal research Business Government University Other animal research Generic animal research Forage plant research Horticultural crop research Arable crop research Tree and plantation research Fish harvesting research SECONDARY INDUSTRY Meat and fish processing research Dairy processing research Food processing research Fibre and skin processing research Wood and paper processing research Industrial processing research Engineering processes research Computing and electronic research Construction research Energy research SERVICES INDUSTRY Comercial and trade services research Transport research Information and communications research HEALTH & OTHER SOCIAL Urban and Rural Planning NZ history and cultural research Social and personal development research Political research Educational research Health research OTHER Environmental research Geological research Flora and fauna research Marine research Climate research Space research Antarctic research Fundamental research* ($000) 0 20,000 40,000 60,000 80, , ,000 * fundamental research : fundamental information in the natural sciences, engineering, social sciences and humanities (where no end use has been identified). Source: Ministry of Research, Science & Technology, ed data 8

9 Figure 11 shows that R&D expenditure rose in all sectors of the economy between 1995/96 and 1997/98, with one notable exception primary industries. Primary industries research fell 1.4%, with fisheries R&D dropping 49%, sheep R&D dropping 44%, and forestry R&D rising 24%. Agriculture as a whole rose 1.5%. The highest percentage growth was for services industry research (up 127%). This was driven by the 162% ($41 million) increase in information and communications R&D. Health and other social research rose 45%, with education, knowledge and training R&D rising 187% ($34 million) and health R&D rising 22% ($21 million). Other research rose 22%, with land use, flora & fauna R&D rising 83% ($17 million), fundamental R&D rising 42% ($22 million), and environmental protection R&D falling 44% ($10 million). Secondary industry research rose 18%, with energy R&D rising 81% ($11 million), electronics & instruments R&D rising 55% ($21 million), and fibre, textiles & skin processing R&D falling 34% ($9 million). Figure 11: Gross expenditure on R&D 1992/ /98 by output Primary Industry Secondary Industry Services Industry Health & Other Social Other ($m) Source: Ministry of Research, Science & Technology, New Zealand research & experimental development statistics (for 1993 and 1996) and ed data (for 1998) Spending by level of technology R&D in New Zealand s manufacturing sector is of a low level of technology compared with other OECD countries. New Zealand s ratio between R&D expenditure on high and medium-high technology and low and medium-low technology was 0.6 : 1 in 1994/95. This compares with an OECD average 6.8 : 1 and an average for the reference countries 2.8 : 1. These differences are seen clearly in Figure 12. The situation has since improved, with 1997/98 figures showing the share of high tech in New Zealand to have almost doubled (from 12% to 22%) and the share of low tech to have fallen (from 59% to 49%). 9

10 Figure 12: The percent of manufacturing R&D expenditure in each level of technology in 1994/ (Percent) OECD average 0 Reference countries High Medium high Medium low Low New Zealand Source: Ministry of Research, Science & Technology, 1999, p. 14 Spending by industry Figure 13: R&D as a percent of sales of manufactured products in 1997/ TOTAL MANUFACTURING 0.4 O ther Manufacturing Professional Goods Motor Vehicles Shipbuilding, Aircraft & O ther Transport Equip Radio, TV & Com m unication Equipm ent Electrical Machinery Non-Electrical Machinery Metal Products Iron & Steel & Non-Ferrous Metals Non-Metallic Mineral Products Petroleum R efineries, R ubber & Plastic OECD average NZ D rugs & Medicines C hem icals excl. D rugs Paper, Paper Products & Printing W ood Products & Furniture Textiles, Apparel & Leather Food, Beverages & Tobacco Source: Ministry of Research, Science & Technology, 1999, p. 17 The picture of New Zealand s low level of R&D technology is reinforced when the R&D intensity of each industry in the manufacturing sector is examined. Figure 13 shows that, in manufacturing overall, New Zealand s R&D expenditure was equivalent to only 0.4% of sales in 1997/98. This is well below the OECD average of 6.6%. What is more, the only two industries where New Zealand s R&D intensity is equivalent to the OECD 10

11 average s food, beverages, tobacco and textiles, apparel, leather are low tech industries with very low levels of R&D intensity. Furthermore, these two low R&D industries make up a far higher proportion of New Zealand s manufacturing added value than is the case overseas: 38% in New Zealand, 22% in the reference countries and even less for the OECD average 11. R&D staff levels As with overall funding in New Zealand, the number of people involved in R&D work has risen over the last decade. This is especially the case with the number of researchers. Researchers made up 64% of all people involved with R&D in New Zealand in 1997/98, and their number grew 69% from 1990/91. The number of technicians, however, remained fairly constant over the period. Figure 14: Full-time-equivalent R&D personnel ($ million) Researchers Technicians Support TOTAL Fiscal Year Source: Ministry of Research, Science & Technology, 1999, p. 9 International data shows that, in the case of researchers, New Zealand is far closer to the OECD average than in the case with R&D expenditure. New Zealand had 4.5 researchers per thousand people in the labour force in 1997/98. This compares with an OECD average of 5.5 and an average for the reference countries of This partially reflects the fact that New Zealand has a larger proportion of its R&D undertaken by universities than is the case with the OECD average, and universities tend to have both a greater proportion of their R&D expenses as wages and salaries and a greater proportion of their R&D staff as researchers. 11 The OECD unweighted average is 26%. However, with the values of the world s two biggest economies (US and Japan) being 15% and 14% respectively, the weighted average is likely to be a lot less. 12 OECD, 1999:2, p

12 3. How effective is the R&D spending? Measuring effectiveness There is a growing body of evidence linking R&D to economic performance. This has led the OECD to state in a recent report that innovation and technological change are without doubt the main drivers of economic growth. 13 Studies show that there is typically a 10% to 20% rate of return to the individual people and organisations making the R&D investment. The return to society as a whole from such investment is even higher, often ranging between 20% and 50%. 14 Unfortunately, it is very difficult to accurately measure the effectiveness of R&D, especially at a national level. At a micro level, R&D in a particular business may result in new products or processes, the net benefits of which can be estimated in terms of increased productivity or higher sales revenue. However, at a national level, it is impossible to specify useful measures that are not also affected by other factors. For example, R&D spending by businesses may result in increased productivity of the business sector, but other factors are also likely to impact on productivity (such as Government policy, the economic cycle, marketing efforts, and so on). There may also be long lag-times before the fruits of any R&D expenditure are obvious. R&D effectiveness cannot be measured by only one or a few indicators. The most appropriate approach is to use both qualitative measures (such as case studies and tracking the careers of scientists) and quantitative measures, and even this will only produce an indicative rather than exact measure. MoRST use a large array of indicators when measuring effectiveness. Some quantitative indicators Unsurprisingly, the few quantitative indicators that are publicly available give an incomplete and mixed picture. Some of these partial measures show limited R&D success compared with other countries, in keeping with the low level of expenditure on R&D in New Zealand. New Zealand s technology exports (such as industrial R&D services, patents, and franchises) were equivalent to only 0.03% of GDP in This is well under the OECD average of 0.32% and ranks New Zealand second lowest. 15 Industries classified by the OECD as being of high or medium-high technology made up only 16% of New Zealand s exports in This is below the OECD average of 63% and ranks New Zealand third lowest. However, these exports grew 18.2% between 1990 and 1996 in New Zealand, compared with a 7.0% growth of the OECD average. 16 Other partial indicators are more optimistic. The number of resident patent applications per 10,000 population was 4.2 in New Zealand in This compares with an OECD average of 5.3 and ranks New Zealand seventh highest. This figure grew 50% between 1991 and 1997 in New Zealand, compared with a fall of 4% for the OECD average OECD, 2000, p OECD, 2000, p OECD, 1999, OECD Science, Technology and Industry Scoreboard 1999, Paris, p OECD, 1999, OECD Science, Technology and Industry Scoreboard 1999, Paris, p. 172 & OECD, 1999:2. p

13 The number of scientific publications per 100,000 population was 80 in New Zealand in This is higher than the OECD average of 52 and ranks New Zealand tenth highest. The number grew 2.3% between 1990 and 1995 in New Zealand, compared with 4.1% growth of the OECD average. 18 Selected references Department of Industry, Science and Resources (Australia), 1999, Measuring the knowledge-based economy: how does Australia compare?, Canberra. Ministry of Research, Science and Technology (New Zealand), 1999, New Zealand research and development statistics 1997/98, Wellington. Ministry of Research, Science and Technology (New Zealand) website: OECD, 1999, Basic science and technology indicators, OECD, Paris. OECD, 1999:2, Main science and technology indicators, OECD, Paris. OECD, 2000, Science, technology and industry outlook 2000, OECD, Paris (especially chapter 3 Innovation and economic performance ). Statistics New Zealand, 2000, Ch.15 Science and Technology, New Zealand Official Yearbook 2000, Wellington. Andrew Morrison, Economist Research & Analysis Group Parliamentary Library For further information, contact Andrew (ext.9202) Copyright NZ Parliamentary Library. Except for educational purposes permitted under the Copyright Act 1994, no part of this document may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, other than by Members of Parliament in the course of their official duties, without the consent of the Parliamentary Librarian, Parliament Buildings, Wellington, New Zealand. 18 OECD, 1999, OECD Science, Technology and Industry Scoreboard 1999, Paris, p

14 APPENDIX: Vote Research, Science and Technology appropriations for 2000/01 Output Class Appropriation ($000) Percent of Vote Purchase Agent Description Innovation Goal: Accelerate knowledge creation and the development of human capital, social capital, learning systems and networks in order to enhance New Zealand s capacity to innovate. Non-Specific Output Funding (O2) 27, FRST Funds the Crown Research Institutes as specified in the relevant Ministerial instruction. Marsden Fund (O1) 25, RSNZ Research outputs which broaden and deepen the research skill base and support excellent research in NZ, regardless of whether the research contributes to the Government's socio-economic priorities. Research Contract Management (O5) 11, HRCNZ FRST RSNZ Supporting Promising Individuals (O3) 10, FRST HRCNZ MoRST RSNZ Supports the capability of the Crown's purchase agents to negotiate, manage and monitor research contracts, and provide advice to the Minister. Supports the development of human resources in research, science and technology through awards and fellowships. The recipients include post-doctoral researchers, teachers and Maori researchers and technologists. RS&T Policy Advice (D1) 5, Provides policy advice on research, science and technology. This includes investment strategies, the performance and integration of the innovation system, scientific technical advice and ministerial services. Promotion of Innovation Culture (O4) 3, CO MoRST RSNZ Promotes values and attitudes supportive of an innovation culture in NZ. International links will be developed to access the best international research and researchers, and to promote NZ research overseas. RS&T System Contract Management (D2) Negotiates, manages and monitors the Crown's funding of science and technology purchase agents and negotiates and monitors contracts with specific science and technology service providers. Science & Innovation Advisory Council (D3) Supports the SIAC, which consults with interested groups in the community on science and innovation issues, and provides advice on policies for science and innovation to the government. Economic Goal: Increase the contribution of knowledge to enhancing the competitiveness of New Zealand enterprises. Research for Industry (O7) 171, FRST Public good science and technology that improves the competitiveness of the industrial sector. New Economy Research Fund Industry (O6) 50, FRST Investigator-initiated research that stimulates the emergence and growth of new knowledge-intensive enterprises. Technology NZ (O8) 24, FRST Enhances the technological capability of businesses to grow through the development and adoption of new technologies. Grants for Private Sector R&D (O9) 11, FRST Outputs will be co-funded to stimulate private sector investment in R&D in NZ, particularly within small to medium-sized firms. National Measurement Standards (O10) 4, Provides specified standards to satisfy the needs for traceable physical measurement in NZ. 14

15 Environmental Goal: Increase knowledge of the environment and of the biological, physical, social, economic and cultural factors that affect it in order to establish and maintain a healthy environment that sustains nature and people. Environmental Research (O14) 84, FRST Public good science and technology that enhances the understanding and management of our environment. Social Goal: Increase knowledge of the social, biological, environmental, cultural, economic and physical determinants of well-being in order to build a society in which all New Zealanders enjoy health and independence and have a sense of belonging, identity and partnership. Health Research (O12) 33, HRCNZ FRST Public good science and technology that improves the health status of New Zealanders. Social Research (O13) 4, FRST Public good science and technology that improves societal well being. Maori Knowledge and Development Research (O11) 3, HRCNZ Public good science and technology that enhances Maori knowledge and capability and contributes to the FRST positive future development of Maori. Convention Du Metre Payment of New Zealand's assessed subscription to the Convention du Metre in accordance with Cabinet directives. TOTAL 473, Vote Research, Science and Technology has separate but complementary objectives of Maori advancement and Maori knowledge and development. Maori knowledge and development is about ensuring the positive development of Maori people and has a special place in the social goal. Maori advancement addresses the significant disadvantage of Maori compared to non-maori in many areas and is concerned with all four science goals. Legend: FRST: Foundation for Research Science and Technology RSNZ: Royal Society of New Zealand HRCNZ: Health Research Council of New Zealand CO: Carter Observatory Source: The Estimates of Appropriations for the Government of New Zealand for the year ending 30 June