Government Spending vis-à-vis Business Enterprise Investments on Research and Development

Abstract

This paper investigated the association of government spending and business enterprise investment to research and development. Exploratory data analysis was done on R&D expenditures on gross expenditures on Research and Development (GERD). Ratios of business enterprise investment over government spending revealed that Agriculture, Humanities and Social Sciences are usually governmentally funded; Engineering and Technology, and Medicine and Health Sciences are business-enterprise driven, and Natural Sciences is financed by both. It was also found out that business enterprises tend to support R&D sectors in high and middle-income countries, while government expenditure is more evident in low-income countries. Among the sectors, only E&T, NS and SS have highly significant and positive association on public and private spending. Therefore, public spending on R &D is focused on fields concerning citizen welfare and human development while business enterprises focus on advancements in technology and medical research. Research prioritization as measured through government expenditure spurs investment in the private sector in fields as they are deemed to have high social value, and positive impact on a country’s development. Policy decisions on R & D budget allocations should consider the dynamics of current spending in relation to private sector investments to maximize productivity and growth.