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Government Policy: Science, Funding and Regulation


Innovation plays an important role when it comes to development. Without innovation in the field of science and technology a society stagnates. Imagine a world without cars, airplanes, Internet and mobile phones. Innovations are crucial especially when it comes to agriculture, medicine, and the efficient delivery of goods and services. Innovations enhance the quality of life and help prolong it. It is therefore the responsibility of the government to encourage research that would lead to innovation. In this regard a report from the Productivity Commission of Canberra, Australia will be analysed. The specific target is Chapter 3: Rationales for Public Support.

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There are three primary purposes for this chapter. The first one is to determine the impact of public support for science and innovation in Australia. The secondary goal is to determine the impediments to the operation of the innovation system as well as the frameworks that would help assess how public funding has been allocated for the purpose of science and innovation. Finally, the last objective is to determine the importance of having a rationale to support any activity related to science and innovation.


The discussion begins with the attempt to understand the rationale for government intervention. The underlying reason for doing so is based on the fact that public support takes the form of funds or tax concessions. Therefore the rationale for public support must be linked to net national benefits. The importance of a rationale is to help policymakers decide if public support can be channelled to a particular project or not.

Nevertheless, the identification and assessment of rationales does not contribute anything of significance to the overall goal of the government when it comes to science and innovation. The overall goal is to use public support to create meaningful results, specifically the development of innovations that improve the welfare of the people.

Thus, assessing rationales is tantamount to a well-written report that can prompt action but does not guarantee results. In this report the proponent of the study asserted that one major issue that the study of rationales cannot address is in how to quantify the level of public support needed to affect positive change. For example a rationale cannot determine if public support must be packaged as a $2 billion or $10 billion endeavour.

The proponent of the study therefore suggested that aside from identifying and assessing rationales for public support it is also imperative to improve program design before public support is made available to a particular group or sector. But before going any further it is important to discuss some of the well-known rationales presented to policy makers.

One of the most frequently cited rationale for government intervention is called “spillovers” (Lattimore 56). A “spillover” must be viewed in the context of scientific research. According to those who use this rationale for public support, a “spillover” enables the government to benefit extensively from their investment. In other words, using the “spillover” rationale helps to convince policy makers that there is a foolproof way to use public support to make it appear that the government is doing something for the sake of science and innovation. This is an irresistible offer because if the main project or research endeavour failed to produce tangible results, government officials can point to the justification that a “spillover” effect can be expected and therefore the investment can be recouped in an indirect manner.

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The only problem with this view is that a “spillover” does not always occur. There are many factors why the expected outcome is not always realised. One of which is poor management of resources or the inability to access needed resources on time. There are cases wherein a research proposal has shown tremendous promise but the intervention of the government was non-existent. For instance, a project can be underfunded or lacking the necessary complementary inputs such as access to Information Technology and appropriate field work.

Another major reason why a “spillover” is not realised is the absence of efficient diffusion mechanisms. In basic research usually conducted in universities the diffusion mechanisms comes in the form of publication, conferences, and other means of exchanging research ideas. However, there is no guarantee that an efficient diffusion of ideas can be expected each and every time a scientific discovery has been made. From a business standpoint this is an example of a weakness in the system that has to be rectified.

Another major reason why a “spillover” is not a normal occurrence in the scientific community is that for it to happen, the primary requirement is research of good quality. It is therefore important to make sure that before funds are committed to a particular research project, there is a way to determine if the investment can lead to quality results. The proponents of this study discovered that low quality research can be prohibitively costly for the government “the economic loss could be around $1.20 to $1.30 – the original dollar of funding, plus around 20 to 30 cents, associated with the economic costs from raising public finance” (Lattimore 63). Thus, it is imperative to develop a verification process before funds are diverted to a particular research project.

The apparent weakness of basic research prompted many to look into commercially-oriented research as a more reliable means of generating much needed innovation. At first glance it seems like a fool-proof method because the ability to access research funds to enhance their research activities can only be viewed as an advantage. The only problem is that the government does not have one hundred percent assurance that a “spillover” will occur. In other words the government has only one measure for success and it is the “spillover” effect mentioned in the beginning of the report.

Although there are those who can assure the government that firms are unable to contain research information and eventually it will leak-out to the public sector, there are no mechanisms that can measure exactly how and what type of information or innovation can leak out into the public sphere. The competitive nature of firms prevents disclosure of information in order for them to create a competitive advantage. The government must therefore develop mechanisms that encourage firms to diffuse their intellectual property.

According to this report, the “spillover” phenomenon identified by researchers can easily become a drawback to innovation. Interestingly, the government would like research groups from the public and private sector to increase their efficiency when it comes to research that would lead to the leak-out of innovative ideas. However, the promise of scientific breakthroughs may not be enough motivation for firms to invest in R&D. Corporations view such exercise self-defeating because they invested on something that their competitors can use.

This reaction is easy to understand considering the amount of resources invested in a firm’s R&D only to find out that competitors are able to use the same information to enhance their products. Thus, the government has to find ways to encourage private participation in R&D even if the possibility of the intended outflow of trade secrets is inevitable.

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The report highlighted the fact that private firms may hesitate to invest in a research project that offers little tangible impact and at the same time a high-probability of unintended leak-out of information to competitors. Nevertheless, this must be considered as a major rationale for the government to intervene. Public support must therefore be focused on businesses that are engaged in novel research and development activities (Lattimore 73). The key to success is identified as: a) spillover is achieved with minimal cost; b) it triggers cycles of innovation by rivals; and c) the creation of generic technologies (Lattimore 73). At this point the report has shown how the rationale for public support takes shape.

By focusing on the problem of diffusion, the proponent of this study were able to discover that aside from funding research initiatives that would lead to innovation, the second most important thing to consider is the mechanism for the diffusion of knowledge that would lead to a chain-reaction of events that hopefully results in more innovation. Therefore, public support must not only focus on providing funds for research but also in enhancing infrastructures that would facilitate the movement of ideas.

In the Digital Age there is no other place to channel public funds other than in investment activities that would result to the diffusion of knowledge. In this regard policymakers must also consider investing in distribution networks such as the Internet, broadcasting, and telecommunication. The end goal of government must be to reduce the cost of information dissemination close to zero. The importance of this type of initiative will be appreciated by those involved in basic research. Investments in knowledge diffusion mechanisms also enhances the effectiveness of basic research because scientists are now able to share, transmit and absorb information much more easily as compared in the past.

It has to be made clear that government intervention when it comes to R&D is a deliberate action with an intended purpose. The reason for doing so is not only to initiate the process that would lead to scientific breakthroughs and innovation; there is another intended goal. The government is looking for specific innovations especially those related to defence technology; alleviation of social and public health problems; efficient and effective social services; higher quality education; better economic policies; foreign defence; and solutions to environmental problems (Lattimore 74). Although the goals are explicit defined, the means of accomplishing them are oftentimes vague.


The government should increase public support to R&D but it must be made clear where the funds are going. The first step in the decision-making process should not focus on the rationale to channel funds to R&D because it is easy to justify the importance of R&D. Any person with the right credentials can convince a government appointed agency to release the funds to this particular group because they are on the verge of discovering something important. Instead of assessing the rationale of public support in relation to a particular research project, the government should instead look at the group’s capacity to diffuse knowledge gleaned from their research.

Using this framework the obvious choice would be universities because these are institutions that focus on basic research. This is the type of research that can be used as some form of building blocks for future innovations. However, there is no assurance that universities and other government-funded research laboratories can efficiently translate investment funds into tangible results. In other words a government sponsored project can go on for years without delivering anything useful for the public sector.

One of the problematic issues that have to be addressed is the tendency to channel funds into low-quality research. There is no need to elaborate the negative consequences of low-quality research. Government funds easily goes down the drain without any proof that policymakers acted as good stewards of the money taken from public coffers. Thus, it is imperative to put in place review mechanisms that would ensure that funds are only allocated on high-quality research projects.

Commercially-oriented research is seen as a better alternative because firms already have a mechanism in place to focus their R&D budget on research endeavours that will produce useful data. A profit-oriented organisation has a keen sense on how to efficiently manage their resources. But the only problem is that they hesitate to invest knowing that patents are no longer enough to safeguard their discoveries. In fact, a patent is a weakness that can be exploited by their competitors. This is therefore the time when the government is justified to intervene and use public support for commercially-oriented research.

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Nevertheless, the government must not use public funds to support research aimed towards the innovation of a company’s products. The partnership must be clearly defined as a government intervention to support novel research ideas. This move will enable the government to assure various stakeholders that the invested money goes to high-quality research. Secondly, the research findings can benefit not only the target firm but others. Finally, the type of research findings can trigger a chain reaction of events that would lead to more innovation.

The government has identified two fertile areas of investment. The first one would be universities and government funded research facilities that engage in high-quality research. The second one is commercially-oriented research through a partnership with corporations working on novel research ideas. However, the government must improve the design mechanism of public support by focusing on research related to defence technology; alleviation of social and public health problems; efficient and effective social services; higher quality education; better economic policies; foreign defence; and solutions to environmental problems (Lattimore 74). There must be a way to correctly assess research goals to harmonise it with those of the government. The end result should be cost-efficiency.


The government must move beyond identifying the rationale for public support and must focus on the identification of fertile ground for research opportunities. It has been identified that the universities and government funded research facilities must receive support from the government only if there is a way to prove the quality of the research project. The government must also support commercially-oriented research only if these firms are going to use government funds to study novel research ideas.


Lattimore, Ralph. Public Support for Science and Innovation. Canberra: Productivity Commission, 2007.

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