FinancialGuy Writes!

Several weeks ago, one of my writing projects raised an interesting question in my mind about the extent to which governments ought to be prepared to support, or pay for, corporate R&D.

Since I do not plan to lose this client or embarrass anyone involved, I will not name the sector, companies or organisations involved. I will say, however, that the sector is one that pretty much every household in Europe is exposed to, is of a ‘high tech’ nature and if I were to mention the industry it is likely that you could name some of the companies I am thinking of. These are multi-billion euro per year household names.

Back to the plot…

These firms have been involved in research towards the coming technological advances in their industry. Their size means that they almost certainly will all want to be involved in these developments to have their say and help to shape the industry’s future.

However, the companies are spread across Europe. From what I can tell, all have applied for government R&D funding for the project and some received money and others did not. The difference in national spending priorities and availability of funds influenced these decisions.

In total, the entire project spent some tens of millions of euros over the course of several years on R&D.

The firms involved that did not receive funding still took part and paid their way. Why? If they had not, they would have put themselves at a significant strategic disadvantage for the coming decade.

Hence my questions:

If the companies involved all needed to spend this money to be able to compete in the coming years, should they receive government funding? How many smaller ventures might have been able to use that funding but instead found that it had been spent with a multi-national giant?

At what point do corporations get so large that they really ought not to need government funding?

Obviously, this funding helped to secure jobs for several more years, and in this particular case, it helped to cement the European companies as the leaders in this field for a number of years. But still, in times of reduced government spending, should multi-nationals be getting the cash? Is there not a case to be made for existing shareholders to pay for the research from current profits?

Bearing in mind that at the start of Barroso II there was a plan being mooted for 3% of GDP to be spent on innovation and R&D, it seems lucky that nothing happened. Otherwise, European tax payers might just be subsidising their largest corporations to do things that they were planning to do anyway!

If you happen to work in the innovation environment, I would be interested to hear your thoughts…

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