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International Management - Rodchenko VV

3.3. Financing of scientific and technical activities

The international strategy identifies five sources of R & D financing . The main of them include two: state funds (public funding) and funds of industrial firms (private financing).

An important factor determining the level and dynamics of R & D spending in all countries of Western Europe is their clear division into two interrelated directions - proper research and development and provision of their commercial use.

One of the first impulses that pushed state funding for R & D in Western Europe was international competition in the electronics industry, in particular the massive seizure of world markets by American electronic firms that relied on state support. Without state financial assistance, European electronic firms could not hold themselves even in their own markets. State financing was used to form the structure of the electronic industry by encouraging the priority directions of its development. The financial participation of the governments of Europe has also manifested itself in the fact that in new firms manufacturing computers and electronic equipment, states have the most shares.

In France in the coming decades, the state funding of basic and applied research conducted by state scientific organizations and higher educational institutions has constantly increased, often to the detriment of financing the processes of introducing innovations and training scientific and technical personnel.

In higher education institutions of all countries, spending on basic research is dominant. Thus, in Germany, their share in the total expenditure on R & D is about 55%, in France and the UK - 90-95%.

In general, the state's share in financing civilian R & D in France is 42%, in the FRG - 36.5%, in the UK - 26%.

Although the importance and correlation of funding sources for R & D are constantly changing depending on changes in the goals and main priorities of the national science and technology policy, in all countries without exception, the tendency of outstripping growth in private companies' expenditures is quite clearly compared with state appropriations.

Capital investments of private companies in R & D and innovations are considered by them as "risk-investment", i.e., investments in those enterprises and programs where there is a greater risk of short-term profit compared to the usual average level. The volume of risk investment in Western Europe is much lower than in the US. According to the European Riccocapital Association, in the European Community, the ratio of risk capital to gross national product (GNP) averages 0.19%, and in the United States 0.41%. However, risk-investing in different countries is developing unevenly - for example, in the UK, this ratio is 0.69%.

In the countries of Western Europe, there were three main trends in the development of tax policies aimed at stimulating investment in risky projects. The countries of the first group (Great Britain) prefer to keep tax rates of corporations at a low level and not to develop special systems of tax incentives. The second group (Germany, Italy, Spain) has low tax rates on corporations and in parallel conducts active tax support for the firms of this business. The third group includes countries that have the highest tax rates for corporations and parallel the system of various special incentives for risky entrepreneurship (France).

Particular attention deserves the system of incentives for individual investors, established in the UK. Introduced in 1983, the Business Expansion System (BES) provides tax rebates to investors investing in official unlisted shares of young innovative firms.

The leader in terms of volume and rate of growth of venture capital investments is the United Kingdom. Since the beginning of the 1980s, a number of legislative acts have been adopted there that provide tax incentives to venture capital investors. More than 40 new funds have been created to support medium and small innovative firms.

In France, an important role in the process of state support of risk capital is played by nationalized banks, the Society for the Financing of Innovations, and the specialized ("second") exchange.