Electronic Working

Papers Series

Paper No. 43

ACADEMIC RESEARCH IN EUROPE

Keith Pavitt

SPRU
Science and Technology Policy Research
Mantell Building
University of Sussex
Falmer, Brighton
BN1 9RF, UK

Tel: +44 (0) 1273 686758

Fax: +44 (0) 1273 685865
Email: M.E.Winder@sussex.ac.uk
http://www.sussex.ac.uk/spru/
 ACADEMIC RESEARCH IN EUROPE*
by
Keith Pavitt

SPRU: Science and Technology Policy Research

Mantell Building
University of Sussex
Brighton, BN1 9RF
England
Tel: 44 (0) 1273 67 81 73; 44 (0) 1273 68 67 58
Fax: 44 (0) 1273 68 58 65
E-mail: K.Pavitt@sussex.ac.uk
K.Pavitt@gundreda.demon.co.uk

The role of publicly funded academic research in Europe’s future economic and social
development has been both misunderstood and neglected in Europe’s science and technology
policy. Experience in the USA suggests that the generous public funding of high quality
academic research is the source of major new technological opportunities, as well as an
attraction for high quality business activities in an increasingly globalised world. The EU should
consider establishing an Agency to complement and compete with national agencies in the
funding of academic research. Its success would depend on its capacity to identify and support
exciting programmes of research and related training in promising fields, rather than on its
capacity to forecast or demonstrate specific applications.

* This is the first draft of a paper to be presented at Workshop II of the EU funded

Europolis Project in Lisbon, 5-6 June, 2000.

2
 Europe’s lacklustre performance in high tech industries in the last few decades is partly
due to the failure of its universities to educate students in ways that allow them to move
quickly to the current frontiers of research in the realms of science and technology.
(Rosenberg, 1998)

EU policies for science and technology have not so far given high priority to strengthening
Europe’s academic research1. A quarter or less of the funds for Framework 2 and 3 were spent in
higher education establishments, with more than half going to business firms and about one fifth
to public research centres (Peterson and Sharp, 1998: 148). Most of the other EU initiatives for
universities have supported exchanges and networks rather than the performance of research
itself.

I shall argue the lack of EU support is attributable in part to:

• mistaken and misleading models of the contributions of high quality academic research to
economic and social progress in Europe;
• misunderstanding of the central role of academic research in the system of innovation in the
USA.
On this basis, I shall propose some guidelines for increased EU support for academic research in
future.

1. MISTAKEN AND MISLEADING MODELS

1.1 Knowledge as Information

The treatment of the output of academic research as "information" (i.e. costly to produce, but
virtually costless to transmit and re-use) is prevalent in the economics profession, and provided a
powerful justification in the USA after World War Two for the support of the production of
published academic research through public funding (Nelson, 1959; Arrow, 1962). However, in
the world since the 1970s, with numerous nations active in academic research, it has also been

1
I define academic research as research undertaken in institutions of higher education (universities, grandes ecoles,
technische-hoschulen), normally leading to publications and associated with post-graduate research training. It
therefore includes the research activities of agencies such as the CNRS in France, Max Planck Institutes in Germany,
CNR in Italy, when these include post-graduate research training with associated universities.

3
argued that countries can "free-ride" by obtaining and using the results of their neighbours’
research free of charge. This has sometimes led to proposals for national policies that either
discourage free-riding by restricting foreign access to national academic research, or that
encourage "free-riding" by reducing national expenditures on such research.

Studies over the past fifteen years have shown that such policies would be misguided. The
useful and applicable output of academic research cannot be reduced to information, thus
defined. The capacity to understand, interpret, re-produce and apply the results of research
performed in other countries requires an infrastructure of expertise, equipment and networks that
is costly. The entrance ticket to the world’s best academic research is expensive, which explains
in part why the OECD countries which spend the highest proportion of their GDP on academic
research are small countries: Netherlands, Scandinavian countries and Switzerland.
Furthermore, several studies have shown that practical applications of academic research flow
less through papers than through personal contacts and mobility. Since these are constrained by
distance and language, many of the person-embodied benefits of academic research tend to stay
within national boundaries.

1.2 The Changing Location of Knowledge Production: Mode 2 versus Mode 1

According to M. Gibbons and his colleagues (1994), the nature and locus of research activities
are changing from Mode 1 (based on academic institutions and disciplines, homogeneous and
hierarchical) to Mode 2 (undertaken in a variety of transient contexts of application,
transdisciplinary, heterogeneous, and networked), and this change should be reflected in the
public support of research activities. However, critics point out that Mode 2 research has existed
for a long time, and is a complement to publicly funded and validated research, rather than a
substitute for it (David et al., 1999; Etzkowitz and Leydesdorff, 2000). To concentrate on Mode
2 would lead to "cut-price research motels" (David et al. 1999: 334) to the neglect of
fundamental research. Furthermore, according to Godin and Gingras (2000), the share of Mode
1 (i.e. universities) in knowledge production has been increasing, rather than the contrary.

4
1.3 Academic Research as Conspicuous Intellectual Consumption

Another influential view of academic research is that it is no longer a useful input into
technological progress, but has become a form of conspicuous, intellectual consumption that rich
countries support with public funds. Some observers have argued that public funding of
academic research should therefore be stopped (for example, Kealey, 1996). Others - more
numerous - have argued that academic research should be steered more consciously and firmly
towards fields of potential application. This point of view appears to pervade many EU
programmes, as well as those of its Member-governments.

However, whilst considerable resources have been devoted by governments to trying to identify
and agree on fields of potential usefulness, relatively few have been devoted to identifying what
users of academic research (particularly business users) expect from it. Those studies
undertaken show that business users do not give greatest weight to immediately useful
knowledge, but to the benefits of trained researchers familiar with the latest research techniques
and results, background expertise and membership of leading-edge international networks
(Salter and Martin, 2001). Furthermore, a recent US study by Narin and his colleagues (1997)
analysed origins of the published papers that were cited in US patents. He found that nearly
three quarters were to papers that resulted from publicly funded research, undertaken in
academically prestigious universities and related institutions, and published in academically
prestigious journals. In other words, useful academic research was mainly publicly funded and
of high academic quality. Using a different methodology, Mansfield (1995) came to similar
conclusions. He also found that business funding served mainly as an entrance ticket to the
monitoring of on-going developments in public research, rather than as a means changing its
direction.

2. ACADEMIC RESEARCH IN EUROPE AND THE USA

Three major conclusions for policy emerge from the above discussion: (1) useful academic
research is mainly publicly funded and of high academic quality; (2) absorbing and applying it is
costly; (3) its practical benefits are partly localised. These are sufficient reasons for supporting

5
policies to ensure high quality academic research in Europe. But they are not sufficient to justify
high priority in European programmes, if one believes "the European paradox", namely that
Europe performs better relative to the USA in academic research than in technological
application, and that the main European difficulties therefore result from lack of private
entrepreneurship rather than deficiencies in the public funding of academic research (Papon,
2000). I shall show below that the "European paradox" is a bit more complicated.

2.1 European Performance in Academic Research: weakness in the new fields

In global terms, the output of European academic research has been increasing compared to that
of the USA. In 1982, the output of EU-15 papers was at 80% of the US level. By 1996, it had
reached the same level, and by 1997 was slightly more (OST, 2000: 355). However, the
population of the EU-15 is about 40% higher than that of the USA, so that overall EU-15
scientific productivity is still considerably lower. And it remains lower by more than 10% even
by comparison with the EU countries with higher productivities (i.e. France, Germany, Benelux,
Scandinavia and UK).

Perhaps more revealing are the differences in the various scientific disciplines (OST, 2000: 360).
EU-15 has its strongest publication performance compared to the USA in the well-established
disciplines of chemistry and physics, whilst the strongest US performance is in the recently
established disciplines of molecular and cellular biology, biomedical engineering, and
informatics. As we shall see later, these are the very disciplines that are at the basis of the US
strengths in biotechnology and ICT, and their development has been strongly supported by large-
scale Federal funding.

2.2 European Performance in Business R & D: increasing internationalisation

The R & D performance of businesses in EU-15 has been declining since the early 1990s relative
to those in the USA, and the decline has been particularly marked in electronics (OST, 2000:
364). But trends have been uneven, with decline in the larger countries (France, Germany, Italy

6
and UK), but growth in Scandinavian countries which have also emerged as world leaders in
mobile telephony2.

The reason usually given for such a decline are inadequacies in technological entrepreneurship
in European business reflected in low investments in R & D. In certain cases - such as British
electronics and automobile companies in the 1970s and 1980s - this was certainly the case. For
other European countries, any entrepreneurial inadequacies must have emerged only in the early
1990s, since their business R & D expenditures had been growing more rapidly than those in the
USA during the previous twenty years.

There is another possible explanation of the changing trends since then, namely that European
firms are performing an increasing share of their R & D outside their home country, and more
specifically in the USA. A recent analysis by Cantwell and Piscitello (2000) show that this is
indeed the case. The major companies in most of the EU-15 countries have been increasing the
foreign share in their R & D activities, and at a faster rate in the 1990s. At least a third of
European-based large firms’ R & D is now performed outside their home country, of which
about 20% in the USA and 14% in other European countries. It is not possible at this stage to
assess the degree to which this shift in the location of corporate R & D can explain the stronger
performance of business R & D in the USA, since US-based businesses have also been
increasing the foreign share in their own R & D. But there is increasing evidence that foreign
corporate R & D no longer is a simple support function for foreign production, but a deliberate
search to learn about foreign skills and knowledge (Niosi, 1999).

2.3 Foreign Corporate Learning in the USA

Recent studies by Dalton et al. (1999) and Florida (1997) show that this is particularly true of
foreign corporate R & D in the USA, which increased from about 9% of the US total in 1987 to
nearly 15% in 1997. In the pharmaceuticals and biotechnology sector, the foreign share was as
high as 49%, in communications it was 20%, and in computers and office equipment only 2%.

2
EU countries in general have been relatively stronger in telecommunications than in other fields of ICT. See Tijssen
and van Wijk, 1999.

7
At least two-thirds of the foreign R & D was performed by European firms3, who have a very
powerful position in the pharmaceutical sector. Although part of this foreign R & D serves the
traditional function of modifying products and practices to the requirements of the US market
and regulatory regimes, its major purpose is to gain access to high-quality technical staff and
developing links with the technical community. This is particularly true of firms involved in
biotechnology, but also holds for those in electronics.

As a consequence, foreign corporate R & D is located mainly in regions where such talent is
concentrated, sometimes in business R & D laboratories (e.g. Detroit for automobiles, New
Jersey for chemicals and pharmaceuticals), and sometimes in universities. Co-operative research
with US universities is the rule rather than the exception, and they are also a common source of
recruited technical staff. The main fields for such co-operation are biotechnology and ICT, and
the main regions California (Berkeley and Stanford), Massachusetts (MIT) and the Research
Triangle Park in North Carolina4.

These data tend to confirm that the strength of US academic research is one of the factors
causing European firms to increase the share of their research performed in the USA,
particularly in pharmaceuticals and related biotechnology, and also in ICT. We shall now argue
that large-scale US government funding has helped to create this state of affairs, before turning
to the implications for EU policies for funding R & D.

2.4 US Government Funding of Academic Research: Biotechnology and ICT

In a recent thought-provoking paper, Rosenberg (1998) argued that US universities have always
been highly responsive to the changing patterns of economic needs and opportunities. In the
past, the academic disciplines of electrical, chemical and aeronautical engineering were
pioneered in the USA. More recently, we have seen the development there of research and
related post-graduate teaching in biotechnology and ICT-related engineering subjects.

3
About half, when Swiss firms are excluded
4
Other universities identified include Princeton and the Universities of Colorado and Washington.

8
This more recent development reflects both the new opportunities opened up by fundamental
discoveries in molecular biology, and the large resources available from the US Congress for the
National Institutes of Health (NIH). They also reflect the policies and practices of the mission
oriented agencies (NIH, NASA, DOD) in supporting the long term development of fundamental
knowledge in new fields with potential applications. As Stokes (1997) has pointed out, research
can be supported both for the search for fundamental understanding, and considerations of use;
such research accounts for most of the Federal funding of academic research in the USA.

It has been estimated that the resources devoted to academic research in the life sciences in the
USA are 50% bigger than in Europe (Business Decisions, 1997). These have been spread
amongst a plurality of funding sources, including the National Institutes of Health, the National
Science Foundation (NSF) and the various private medical foundations. As we have seen, this
has resulted in a strong US lead in biomedical research. New biotechnology firms have
consequently been formed with strong associations with academic, high publishing "stars"
(Zucker and Darby, 1996), and act as attractors to the world’s large pharmaceutical firms.

A similar pattern of funding of high quality and long-term fundamental research, from a plurality
of Federal sources, emerges from a recent study of earlier developments in US computing and
software engineering (Langlois and Mowery, 1996; Computer Science and Telecommunications
Board, 1999). Funding by the NSF has been strongly augmented by funding from NASA and
various defence -related agencies - particularly the Defence Advanced Research Projects Agency
(DARPA). The modest support of academic research in software by the NSF was augmented
considerably in the 1960s through support by DARPA, which included the development of post
graduate research, theoretical developments and more targeted programmes. In addition to the
well-known example of the Internet, these programmes laid strong foundations for later
developments in such fields as computer time-sharing, computer graphics, artificial intelligence,
packet switching and speech recognition. Many of the technical personnel prominent in the
eventual commercial development of these technologies in the private sector received their
training as part of these publicly supported academic programmes.

9
3. EU POLICIES FOR ACADEMIC RESEARCH

3.1 Economic Justification for Stronger EU Academic Research

The experience of the USA shows that government support of high quality academic research
has positive economic benefits, in both creating technological and economic opportunities, and
providing the skills and knowledge to attract high-tech businesses. High quality academic
research in itself is a necessary but not sufficient basis for technological dynamism (Florida,
1999). But there is evidence that the direct practical usefulness of the results of academic
research is extending beyond molecular biology and biotechnology (Mowery et al., 2000). In a
range of fields, massive computing power now enables academic-based researchers to develop
and test technical concepts through virtual prototyping, and thereby become an increasingly
importance source of technology-based firms5.

This experience, and the above comparisons with Europe, strongly suggests that similar policies
in Europe will help redress the balance of technological performance in its favour in future.
However, this will require major changes in the priorities and practices in the science and
technology policies of the EU.

3.2 Direct EU Funding of Academic Research

The first major change is that the strengthening of high quality academic research should
become one of the principle objectives of EU policies. EU funding of academic research should
complement and compete with national sources of funding, and not replace them, for the
following reasons.

• The spread of the economic benefits of publicly funded research in Europe is extending
increasingly across national boundaries in Europe, reflecting the long term increase in
Europe-wide collaboration and the growth in the establishment of corporate R & D
laboratories of European companies in a number of European countries. A greater share of

5
See, for example, Mahdi and Pavitt, 1997; Koumpis and Pavitt, 2000.

10
 EU-wide funding of academic research would increase the alignment between the sources of
funding and those benefiting from their results.

• The case for continuing EU funding of "near market" corporate R & D is weakening.
Evaluations of past experience show that EU programmes are most effective in establishing
networks, and accumulating science and engineering competencies (Peterson and Sharp)6.
Making high quality European academic research an increasingly important component of
such networks and competencies will help establish a stronger basis for EU-based innovative
activities.

• The US experience shows that pluralism in funding sources increases variety, and the
likelihood that promising research will be supported. It also increases competition amongst
both the funder and the funded, thereby both increasing quality. J-P. Connerade (2000) has
recently pointed out that one of the major supposed benefits of the EU - competition on a
Europe-wide basis - is denied in public research, since both funding and execution are
mainly nationally based and protected. EU funding would create at least one element of such
competition

3.3 Changing Funding Methods and Competencies

The US success in developing and exploiting radical and major technological opportunities in
the economy did not have the following characteristics.

• Active or accurate "foresight", in matching long-term technological opportunities with

economic and social needs; on the contrary, success was the unintended consequence of
active health and defence policies based on the fear of both cancer and communism.

6
As the experience in mobile phones shows, establishing EU-wide standards is also widely appreciated by business
practitioners.

11
• The obligation to demonstrate practical usefulness and user involvement at the project level:
on the contrary, potential practical usefulness was defined in broad terms for broad fields,
which allowed the development of both long-term, speculative and fundamental research
programmes, together with post-graduate research training.

• A "democratic" spread of funding to many regions and institutions; on the contrary, funding
tended to be concentrated in relatively few elite institutions, with the diffusion of knowledge
elsewhere taking place through the movement of trained post-graduate researchers.

Based on these considerations, the main elements of a European Agency for funding academic
research should be the following.

1. The strict separation of the Agency’s funding and autonomy and decisions from national
agencies funding academic research.
2. The participation in the choice of research fields and the management of research
programmes of high quality scientists, acting independently in their professional capacities,
and for fixed periods.
3. A strong focus on high quality, original and exciting research programmes, many of which
will cut across established disciplines.
4. Flexibility and variety in the means of financial support, from support for post-graduate
students to ambitious and relatively lengthy programmes of research.

Such an Agency would certainly run up against two legitimate concerns of the EU member
countries: accountability and equity. Its programme would need to leave much to the judgement
of high-quality professionals, and would probably concentrate its research and training in
relatively few institutions. The US experience shows that generous programmes of visiting
studentships and visiting fellowships would ensure that the benefits of such programmes were
diffused more widely. Given recent experiences within the EU, the problems of proper
accountability are more challenging. National experience suggests that an EU agency for the
support of academic research would benefit from an arms-length relationship with established
EU institutions, in order to protect it from political pressures. Maintaining a balance between

12
the proper expenditure of public funds, on the one hand, and leaving space for professional
discretion, on the other, would be the most difficult objective to achieve.

13
 REFERENCES

Arrow, K. (1962), "Economic Welfare and the Allocation of Resources for Invention", in R.
Nelson (ed), The Rate and Direction of Inventive Activity, Princeton UP.
Ballantine, B. and S. Thomas (1997) Benchmarking the Competitiveness of Biotechnology in
Europe, Business Decisions Ltd.
Cantwell,J. and L. Piscitello (2000) Corporate Diversification, Internationalisation and
Location of Technological Activities: Differences between EU and non-EU Firms in the
European Regions, (memo), Academic of Reading.
Computer Science and Telecommunications Board (1999) Funding a Revolution: Government
support for Computing Research, National Research Council, Washington, D.C.
Connerade, J-P. (2000) "European Science Policy: just where is it going?", Euroscience News,
No. 10, January: 1.
Dalton, D., M. Serapio and P. Yoshida (1999) Globalizing Industrial Research and
Development, U.S Department of Commerce, Washington.
David, P., D. Foray and W. Steinmueller (1999) "The Research Network and the new economics
of science: from metaphors to organisational behaviours", in A. Gambardella and F.
Malerba (eds.) The Organization of Economic Innovation in Europe, Cambridge
Academic Press, Cambridge.
Etzkowitz, H. and L. Leydesdorff (2000) "The dynamics of innovation: form National Systems
and "Mode 2" to a Triple Helix of academic-industry-government relations", Research
Policy, 29: 109-123.
Florida, R. (1997) "The globalization of R & D: results of a survey of foreign affiliated R & D
laboratories in the USA", Research Policy, 26: 85-103.
Florida, R. (1999) "The Role of the Universities: Leveraging Talent not Technology", Issues in
Science and Technology Online, www.nap.edu/issues/15.4/florida.htm
Gibbons, M., C. Limoges, H. Novotny, S. Schwartzman, P. Scott and M. Trow (1994) The new
production of knowledge: the dynamics of science and research in contemporary
societies. Sage, London.
Godin, B. and Y. Gingras (2000) "The place of universities in the system of knowledge
production" Research Policy, 29: 273-278.
Kealey, T. (1996) The Economic Laws of Scientific Research, Macmillan.
Koumpis, K. and K. Pavitt (2000) "Corporate Activities n Speech Recognition and Natural
Language: another “New-Science”-based Technology", International Journal 0f
Innovation Management (forthcoming).
Langlois, R. and D. Mowery (1996) "The Federal Government Role in the Development of the
U.S. Software Industry", D. Mowery (ed.), The International Computer Software
Industry: a Comparative study of Industry Evolution and Structure, Oxford Academic
Press, New York.
Mansfield, E. (1995) 'Academic Research underlying Industrial Innovations: Sources,
Characteristics and Financing", Review of Economics and Statistics, 77:55-65.
Mahdi, S. and K. Pavitt (1997) "Key National Factors in the Emergence of
Computational Chemistry Firms", International Journal of Innovation
Management, 1: 355-386.
Mowery, D., R. Nelson, B. Sampat and A Ziedonis (2000) "The effects of the Bayh-Dole
Act on US Academic research and technology transfer", Research Policy,
(forthcoming)

14
Narin, F., K. Hamilton and D. Olivastro (1997) "The increasing linkage between U.S.
technology and public science" Research Policy, 26:317-330.
Nelson, R. (1959) ’The simple economics of basic scientific research’, Journal of Political
Economy 67(3), pp. 297-306
Niosi, J. (1999) "Introduction: the internationalisation of industrial R & D: from technology
transfer to the learning organisation", Research Policy, 28: 107-117.
OST (L’Observatoire des Sciences et des Techniques) (2000) Science et Technologie
Indicateurs, 2000, Economica, Paris.
Papon, P. (2000) "Preface" in OST, Op. Cit.
Peterson, J. and M. Sharp (1998) Technology Policy in the European Union, Macmillan,
Basingstoke
Rosenberg, N. (1998) "Knowledge and innovation for economic development: should
universities be economic institutions?", paper presented at the Second International
Conference on technology Policy and Innovation, Lisbon, August 3. To be published in
Schumpeter and the Endogeniety of Technology: Some American Perspectives,
Routledge. (forthcoming)
Salter, A. and B. Martin (2001), "The economic benefits of publicly funded basic
research: a critical review", Research Policy (forthcoming).
Stokes, D. (1997), Pasteur’s Quadrant: Basic Science and Technological Innovation, Brookings
Institution Press, Washington, D.C.
Tjissen, R and E. van Wijk (1999) "In search of the European Paradox: an international
comparison of Europe’s scientific performance and knowledge flows in information and
communications technologies research" Research Policy, 28: 519-543.
Zucker, L. and M. Darby (1996) "Virtuous circles of productivity: star bioscientists and
the institutional transformation of industry" Proceedings of the National Academy
of Sciences, Issue 23, November 12, Washington DC.

15