Political Institutions and Public R&D Expenditures in Democratic Countries

Abstract

While research and development (R&D) expenditure is crucial in a nation's competitive advantage, factors determining levels of public investment in R&D have yet to be examined. This article seeks to fill this void, focusing on different democratic institutions such as presidential versus parliamentary systems, majoritarian versus proportional electoral systems, federal versus unitary systems, bicameral versus unicameral legislatures, and the effective number of parties. Building upon theories of political institutions and government size and utilizing public R&D appropriations data from 18 Organization for Economic Cooperation and Development (OECD) countries between 1981 and 2007, this article reports that democratic institutions do matter in the levels of public R&D spending. However, the effect is more complicated across the different types and performers of research than expected. Additionally, the effect of one institutional dimension is found to be moderated by the existence of the other dimensions, which makes it clearly more challenging to sort out different degrees and directions of the relationships between R&D expenditures and political institutions.

Keywords:

• political institutions
• R&D expenditures
• OECD countries

Notes

¹This means that this article will limit this focus to different dimensions of institutions, while not dealing directly with the broadly defined national innovation system (Lundvall, 1992; Nelson, 1993).

²While controversial, the public budget of “about-right” size is defined as “the level that maximizes the utility of the representative citizen under full information” (Katsimi, 1999, p. 442).

³As stated above, in examining cross-country variations in public R&D expenditures, this article focuses only on political institutions. In doing so, rather than developing a new theory, it builds upon the extant literature on the relationship between political institutions and their implications on the scope and size of the government. Understandably, there are many other factors that may be involved in the determination of the level of public intervention in a country's R&D activities such as military expenditures, the division of labor between public and private R&D activities, and national science and technology strategies, even with no particular budgetary implications, which are captured by the concept of national innovation system (Nelson 1993). As one anonymous reviewer of this article has pointed out, all of these significant drivers shall be incorporated to build a theory of public R&D expenditures. However, with the limited dataset and for the purpose of a narrower focus, it is only to examine different institutions' effect on the public R&D expenditures across different performers and research types. As such, the empirical models are specified on this focus at the expense of a comprehensive theorizing of all relevant drivers of R&D policies.