Benefits of Supporting R&D Activities by Governments

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Sleeckx, Belgium

Benefits of Supporting R&D Activities by Governments

(Regional) governments often support local companies to do R&D and innovate with subsidies, tax reduction. They are hoping that this will have a positive return for the country / region, like more employment, new investments, etc.
But more and more companies develop products in one country / region and produce them in another. So the benefits from the R&D support go to another country / region than the one that made the investments.
Q: Why should governments still invest in local R&D activities of companies, if other countries / regions get the benefits?


edward sevume

Why Should Governments Subsidize Local R&D Activities?

There are advantages of supporting such business activities, even when the production is ultimately done in another country. By doing this, the country can attract companies willing to do R&D due the availability of trained manpower who are able to research into new areas of application or new products.
Production is outsourced as it is often cheaper and this lessens the final costs of the product. Not much that can be done about that. But by encouraging R&D, countries are able to continue competing in the upper region of high value jobs which are retained in the country.
It's really quite normal that countries have different relative comparative advantages and clusters in different fields which gives one country an edge in one field while having a disadvantage in another.


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