R&D and growth: it’s complicated

In July, the Belgian-Dutch biotech firm Galapagos made headlines. Securing a big long-term support agreement with a US pharma giant, it succeeded in guaranteeing its long-term survival as an independent company. In an environment where large companies are aflush with money and innovate (or stifle competition) by acquiring successful start-ups, this is no mean feat. As Het Financieele Dagblad wrote in an editorial, value is usually created by scientists and then turned into money by entrepreneurs. Galapagos wants to do both, which takes a lot of guts. After successful innovation (research), it wants to drive this innovation to market (development) on its own as a big independent company.

The link between R&D and growth is an interesting and important one. The European Union has recognized a causal relation between R&D and societal advance in its Lisbon Strategy in 2000, which it renewed in 2010. It stated that in order to develop the European economy to become a competitive, social and environmental market economy, member states among others need to invest 3 percent of their GDP in R&D. As an indication, in 2013 this was 1.9 percent for the EU and 2.8 percent for the US. Probably this hasn’t changed much over the years.

Whether said causal relation has been rigorously proven and whether the key performance indicator here is only the GDP or whether it should or does include a happiness or inequality index, I don’t know. But having been on both sides of R&D for all of my professional life, it shouldn’t come as a surprise that I’m a strong believer in societal progress being driven forward by R&D.