---
title: "Funding of science"
chunk: 2/5
source: "https://en.wikipedia.org/wiki/Funding_of_science"
category: "reference"
tags: "science, encyclopedia"
date_saved: "2026-05-05T03:24:31.702550+00:00"
instance: "kb-cron"
---

== Methodology to measure science funding ==
The guidelines for R&D data collections are laid down in the Frascati Manual published by the OECD. In the publication, R&D denotes three types of activities: basic research, applied research, and experimental development. This definition does not cover innovation, but it may feed into the innovative process. Additionally, the business sector innovation has a dedicated OECD manual.
The most frequently used measurement for R&D is gross domestic expenditure on research and development (GERD). GERD is often represented in GERD-to-GDP ratios, as it allows for easier comparisons between countries. The data collection for GERD is based on reporting by performers. GERD differentiates according to the funding sector (business, enterprise, government, higher education, private non-profit, rest of the world) and the sector of performance (all funding sectors with the exception of rest of the world, as GERD only measures activity within the territory of a country). The two may coincide, for example, when the government funds government-performed R&D.
Government funded science may also be measured by the Government budget appropriations and outlays for R&D (GBAORD/ GBARD). GBARD is a funder-based method, it denotes what governments committed to R&D (even if final payment might be different). GERD-source of funding-government and GBARD are not directly comparable. On data collection, GERD is performer based, GBARD is funder. The level of government considered also differs: GERD may include spending by all levels of the government (federal – state – local), whereas GBARD excludes the local level and often lacks state level data. On geographic coverage, GERD takes into account performance within the territory of a country whereas GBARD also payments to the Rest of the world. 
Furthermore, several comparisons on the effectiveness of both the different sources of funding and sectors of performance as well as their interplay have been made. The analysis often boils down to whether public and private finance show crowding-in or crowding-out patterns.

== Funding types: public and private ==

=== Public/State Funding ===

Public funding refers to activities financed by tax-payers money. This is primarily the case when the source of funds is channeled through government agencies. Higher education institutions are usually not completely publicly financed as they charge tuition fees and may receive funds from non-public sources.

==== Rationale for funding ====
R&D is a costly, and long-term investment to which disruptions are harmful.
The public sector has multiple reasons to fund science. The private sector is said to focus on the closer to the market stage of R&D policy, where appropriability hence private returns are high. Basic research is weak on appropriability and so remains risky and under-financed. Consequently, although governmental sponsorship of research may provide support across the R&D value chain, it is often characterized as a market failure induced intervention.   Market incentives to invest in early-stage research are low. The theory of public goods seconds this argument. Publicly funded research often supports research fields where social rate of return may be higher than private rate of return.  Appropriability potential is the potential for an entity to capture the value of an innovation or research outcome. The general free rider problem of public goods is a threat especially in case of global public goods such as climate change research, which may lower incentives to invest by both the private sector but also other governments.  
In endogenous growth theories, R&D contributes to growth. Some have depicted this relationship in the inverse, claiming that growth drives innovation. As of 2013, science workers applying their (tacit) knowledge may be considered an economic driver. When this knowledge and/or human capital emigrates, countries face the so-called brain–drain. Science policy can assist to avoid this as large shares of governmental R&D is spent on researchers and supporting staff personnel salaries. In this sense, science funding is not only discretionary spending but also has elements of entitlement spending.
R&D funded and especially performed by the State may allow greater influence over its direction. This is particularly important in the case of R&D contributing to public goods. However, the ability of governments have been criticized over whether they are best positioned to pick winners and losers. In the EU, dedicated safeguards have been enacted under a dedicated form of competition law called State Aid. State Aid safeguards business activities from governmental interventions. This invention was largely driven by the German ordoliberal school as to eliminate state subsidies advocated by the French dirigiste. Threats to global public goods has refueled the debate on the role of governments beyond a mere market failure fixer, the so-called mission-driven policies.

==== Funding modalities ====
Governments may fund science through different instruments such as: direct subsidies, tax credits, loans, financial instruments, regulatory measures, public procurement etc. While direct subsidies have been the prominent instrument to fund business R&D, since the 2008 financial crisis a shift has taken place in OECD countries in the direction of tax breaks. The explanation seems to lay in the theoretical argument that firms know better, and in the practical benefit of lower administrative burden of such schemes. Depending on the funding type, different modalities to distribute the research funds may be used. For regulatory measures, often the competition/antitrust authorities will rule on exemptions. In case of block funding the funds may be directly allocated to given institutions such as higher education institutions with relative autonomy over their use. For competitive grants, governments are often assisted by research councils to distribute the funds. Research councils are (usually public) bodies that provide research funding in the form of research grants or scholarships. These include arts councils and research councils for the funding of science.

==== List of research councils ====
An incomplete list of national and international pan-disciplinary public research councils: