Public R&D Policy: The Right Turns of the Wrong Screw? The Case of the German Biotechnology Industry [chapter]

Andreas Fier, Oliver Heneric
2009 Sustaining Entrepreneurship and Economic Growth  
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more » ... bedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar. The biotechnology industry still has considerable expectations concerning its growth rates in employment, new products, patents and profits. The technology is most relevant for policy makers to foster the national competitiveness, employment and social wealth. It is of particular importance for pharmaceutical companies to develop new products and its future profit margin is promising for private investors. Biotechnology start-ups have received special attention in most OECD countries. At present, industrialized countries invest a high amount of tax payers' money in laboratories, incubators, R&D projects etc. to support biotechnology entrepreneurs and to ensure future competitiveness and independence. However, it is largely recognized that Germany, one of the largest European economies, missed the accession of this upcoming key technology in the eighties, while it evolved in other countries led by the USA. Today, German R&D policy invests about Euro 600 Mio. each year by matching grants and just in private business projects to catch up with leading countries like the UK, the US or Asian competitors in this field. In this paper we analyze if R&D policy in private business, respective public funding in biotechnology lost its origins, its mission and in the end its power. We assume that too many technologies and their increasing complexity overtax policy makers as much as their staff to follow their own strategies. It is assumed that authorities and public funding agencies neglect 'risk' as most important triggers for public R&D funding: it becomes arbitrary. We assume that public R&D funding degenerates in a public policy without discriminating between firms which suffer from financial risk, technical risk or market risk. Today, and especially in biotechnology, every firm which likes to be funded will be funded, because the R&D policy does not care for different risks any longer. Bureaucrats and experts decide by their own which projects and firms will be funded and become totally screwed on the target population. This study combines data of all German biotech companies and all publicly funded R&D biotech projects on the firm level from 2000 to 2003. The survey contains data of 1,529 firms from the largest German credit rating agency called "Creditreform" as much as missionorientated R&D project data of 326 firms from the Federal Ministry for Research and Education (BMBF). The BMBF funding data on R&D projects in the field of Biotechnology remains the most important and extensive instrument to foster R&D in Germany. We carry out Probit and Tobit estimations to determine public funded R&D. In the estimated models we control e.g. for industries, age, credit history, turnover, legal form, patents as well as for particular business fields which might have influence on the probability to receive public R&D subsidies. Abstract The German biotechnology industry missed the accession of this key technology in the 1980s. Policy makers make different efforts to overcome shortcomings and recent gaps. Public funding schemes have been implemented to establish a flourish biotech industry in Germany. We assume that R&D policy was driven blind by the idea to catch up with world's biotech leaders and analyse if Germany's R&D policy lost its origins. We do examine, if Germany sacrifice economic funding principles, in particular not discriminating different kinds of 'risk' in the field of biotechnology. The study combines survey data of German biotech companies and public R&D funding data on the firm level. The results shed light on the factors which determine public R&D funding and firm's probability of being funded.
doi:10.1007/978-0-387-78695-7_10 fatcat:xitfr5d5urc6vf5wiwkfxvtyni