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What do countries do to ensure that R&D budget for science or technology in general coming from the government is spent effectively? Often countries give a 1+ billion stimulus package for R&D only to observe that companies are using the money for things that are not related to R&D or does not contribute to R&D innovation such as buying a large real estate office in a big city without using the money for R&D whatsoever. What are the things government do to maximize the effect of such a big capital injection?

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    Please clarify what you mean by "R&D". I'll pick one example, the James Webb Space Telescope. Was that an R&D project? The R&D had been done decades ago, yet the JWST was severely over budget. I see that as a construction project as as opposed to an R&D project. R&D is typically a tiny sliver of the budget of an organization such as NASA whose entire focus in a sense is R&D. Stimulus packages usually are not used on R&D projects. R&D is slow. ("If we knew what we were doing we wouldn't call it research".) They're used on construction or some other concept where monies can be spent quickly. Commented Dec 14, 2022 at 8:59
  • It would be helpful to point to specific agencies responsible for handing out the funds. There are many ways to get research funding and many other ways to get subsidies. Each of them will have their own monitoring system. You mention a 1+ billion stimulus package for R&D, what package was that?
    – xyldke
    Commented Dec 14, 2022 at 10:16
  • What specifically are you talking about? The procedures are different for e.g. (1) direct grants for specific (often military) projects (2) funding via universities and other funding bodies/programs like the EU's Horizon which are not directly controlled by government, (3) tax credits for R&D spending (which are typically administered by tax authorities) (4) spending by regional, state, or local development agencies, (5) specific/emergency purposes like COVID which operate outside normal procedures by special laws or emergency powers, (6) a variety of partnerships with charities, companies...
    – Stuart F
    Commented Dec 14, 2022 at 12:08
  • So three comments asking for specifics. If the OP specified a particular grant issued on a particular day by a particular agency, would you be able to answer? If there are different methods for different types of grants from different agencies, why don't you include that in your answer?
    – Boba Fit
    Commented Dec 14, 2022 at 13:36
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    @DavidHammen I've had the occasion of sitting in on a few corporate meetings trying to suck at government teats and that has soured my view. True R&D has failures, that is part of it. But a lot of what gets passed off to the govt as R&D is not truly innovative or research - the fact that it succeeds or not has nothing to with it. And when taxpayers pay for non-R&D as R&D, that pisses me off. Hence my support for this question. For rich Western countries, the numbers are not small either: data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS Commented Dec 14, 2022 at 18:54

2 Answers 2

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There are numerous tools available to governments (generally speaking) to ensure that grants of money (for whatever purpose) are being used appropriately. They will vary in-situ as various commenters have observed.

Reporting Requirements

Virtually every government grant comes with requirements that you make regular reports about how the money was spent, what the fruits of that spending were, and especially any financial benefits you were able to realize from it.

Audits

Generally speaking, governments have a standing power to demand audits from taxpayers and frequently narrowly-scoped audits are a right reserved by governments when making grants of funds. e.g. The CDC requires grantees to make regular reports and if the dollar values are high enough, to have such reports audited.

Clawbacks

If, at any point, the government concludes that the money was ill-spent (usually in an egregious manner), they can make you give it back.... even if you've already spent every penny. Just the threat of a clawback is enough to keep the vast majority of would-be bad actors in line because a late clawback is financially disruptive in the extreme.

Criminal Investiation

All else failing, the government can accuse a grant recipient of outright fraud and proceed with a standard criminal investigation. Defrauding the government is the sort of thing they're especially keen to punish.

Much of the rhetoric around waste in government spending is not founded in fact but instead in the speaker's disagreement with the particular values expressed by what research is being funded. Grant programs aren't perfect, but deliberate abuse of the system will get you in hot water sooner, rather than later.

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    I would add the grant application procedures themselves, as gatekeepers. Good ones should be set up to weed out exactly the OP's kind of concerns, as well as commit the recipients to at least some direction of action. Some accounting software is also able to track grant funding - ie cash from account X can used to buy lab equipment, not office renos. Commented Dec 14, 2022 at 17:44
  • @ItalianPhilosophers4Monica I waffled on that one. Ultimately I decided not to include it because the OP asks specifically presuming abuse has occurred, which presumes that failsafe has failed. But I agree with your point, generally. Commented Dec 14, 2022 at 17:45
  • If you go by the title, rather than the body, I think it qualifies. Fraud and abuse is one thing that comes to mind, but the Q also has a more general interpretation of "how to spend wisely". Commented Dec 14, 2022 at 17:52
  • I agree with the other comment. As the question currently stands, talking about the "grant application process" (solicitation/acceptance) as a gatekeeping method, to ensure responsible government spending, is on-topic.
    – BurnsBA
    Commented Dec 14, 2022 at 21:29
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In any decision on how to spend public R&D wisely, the notion of additionality * also needs to be taken into account.

i.e: Would the project have taken place without government $$$?

In free markets, a private computer company will... do R&D to make better computers to sell more of them to make more money. They don't necessarily need government money to do so and in fact pushing government money to established, well-connected, firms using old technology ** may hurt new innovators.

If you have $2B to hand out and $1B went to fund projects that companies would have funded internally anyway, then, from the PoV of the taxpayer, the end result is not very different from burning $1B, or having it vanish through fraud: you did not spend that $1B supporting research that really needed it.

This is a fuzzy, hard to pin down, and hard to solve concept, but, IMHO, likely more of a problem than outright fraud. Which is sexier to talk about.

* Not sure additionality is the best term, but I have often seen the issue of not funding would-have-happened-anyway projects mentioned wrt carbon offsets. I assume there's a better term in economic theory - I'll adjust based on suggestions.

** I think the analogue HDTV subsidies to major EU firms was due to spend $20B. Not sure how much was used before the project cratered.

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