Is big business gobbling up public funds?

The sum was staggering by any measure: €80 billion over seven years. With that money, the European Union’s Horizon 2020 programme was tasked with channelling investment towards technologies deemed essential to the continent’s competitiveness, with a view to promoting scientific excellence. At its halfway mark, what does the programme have to show for itself? Over the past three years, more than a quarter of its outlays have wound up in the pockets of businesses. But are companies in the best position to convert research and innovation into concrete solutions, or should the allocation of European funds be re-assessed?

For Jan van den Biesen, formerly of Philips and current director of Dutch consulting firm Europolaris, the EU should not only continue funding major corporations, but double down on its commitments. He believes large companies are essential for translating progress in research into progress in the real world. “From 2014 to 2016, businesses received slightly more than a quarter of European funding,” he says. “If we look only at major corporations, that figure drops to just below 12%. Meanwhile, the private sector accounted for about a half of European R&D from 2014 to 2015.” According to Van den Biesen, the EU simply cannot ignore the key role that major corporations play: “They are central actors in emerging innovation ecosystems, and they bring many smaller companies along for the ride.” It follows, argues Van de Biesen, that big business is the only stakeholder equipped with the expertise and critical mass necessary to ensure new goods and services are monetised, standardised and adopted.

But doesn’t conferring such handsome sums on major corporations put European research at a disadvantage, by potentially prioritising private interests over the public good? Not if you ask Philips Lighting, global leader in its sector. The company is involved in a number of research projects jointly funded by various European entities. “European funds contribute significantly to our investments in R&D. Some of our programmes would never have seen the light of day had it not been for this European cooperation,” says Paul Merkus, portfolio manager of Research at Philips Lighting. Still, it is worth noting that big businesses themselves shoulder part of the projects’ costs. “Some projects might be 70%–100% funded by Horizon 2020, but those funds cover only direct costs,” says Merkus. “The other indirect costs, like housing or general equipment, are paid by the industry partners themselves.”

Virtuous circle

In addition, this collaborative effort has built-in accountability measures. “The grant agreement includes a document, approved by the project’s European leadership, that meticulously lays out expected deliverables,” Merkus adds. Beyond that, technical and financial reports facilitate the periodic evaluation of European funds’ appropriation. “Once a year, evaluation results are presented to the relevant EU authority, which is joined by two independent experts. Finally, Philips Lighting circulates its research results at conferences and publishes them in trade journals in order to chart a path for the lighting industry and keep it informed.” This helps Europe stay relevant in the global economy. “Without the EU acting as a driving force, Europe and its industries would have a significant setback against Asia and the US, both of which enjoy larger domestic markets and better coordination,” says Merkus.

For Denmark’s Novo Nordisk Foundation, however, the equation is reversed. The foundation partially or fully owns more than 80 private companies, including the pharmaceutical lab Novo Nordisk A/S. It is the largest Danish private contributor to research, having funnelled €546 million last year into universities and public hospitals. This funding went primarily to medical and biotech research, i.e. treatment of diabetes, cancer and infectious diseases. Return on investment does not even figure in the company’s calculus, because results of the research it funds remain the property of the researchers and their institutions. Should the foundation not reinvest in its companies instead? “We conduct regular analyses to evaluate the overall societal impact of our grants,” says foundation spokesperson Christian Mostrup Scheel. “In 2016, one of these analyses led us to conclude that, at the societal level, investing in public research has a positive socio-economic impact and creates jobs.”

Staying in the race

The Technical University of Denmark (DTU) advocates a complementary approach. According to DTU Vice President Katrine Krogh Andersen, “European funds account for 12%–13% of our external research funding. These funds allow us to encourage our researchers’ mobility, beyond just covering the cost of the work itself.” DTU and others believe that European support is essential; it facilitates, among other things, post-doctoral exchange programmes, international training networks, and individual grants/scholarships for nto cutting European funding for the private sector, as one might expect. On the contrary. “The importance of public-private cooperation is enhanced when you consider that European industry is trailing its main competitors in terms of R&D investment,” says Andersen. “It is probably wise, though, to distinguish between major, well-established corporations and SMEs.”

Van den Biesen remains unconvinced; for him, big business is in no danger of cannibalising European funds. “Today about 11% of proposals for European funding are approved. The major corporations receive under 12% of total allocations, so even if you were to completely wipe out their funding, it would only nudge that average approval rate up by not even 2%. That potential gain is negligible, and even more so in view of its possible collateral damage. Businesses might be less inclined to cooperate on projects launched under the future framework programme; this would come at the expense of its economic and societal impact.”

For many researchers these questions are secondary considerations, according to Matthias Reiter-Pásmándy, an expert at the Austrian Ministry of Research. In a recent study with Austrian institute Era Portal, he voices recurring concerns in the human and social sciences. Many in these fields consider European research to be very industry-oriented as it is, and they fear that the coming FP9 could relegate social, economic, geopolitical or cultural research projects to the back burner.

“The EU should focus on new ideas”

An academic leader calls for a more bottom-up approach to financial support

Should the public sector fund corporate research? Yes, says Thomas Hofmann, senior vice president of the Technical University of Munich, but with one caveat: European funds must go towards the most innovative ideas.

TECHNOLOGIST: How do you assess the Horizon 2020 program?

Thomas Hofmann : You have to consider that the European Framework Program is unique in the world. No one else has developed an equivalent system to support research. But, in my opinion, the structure of the future funding program should be simplified and the evaluation system improved. A research program can only be as good as its evaluation procedure. I also think we need to make sure Europe’s excellent research leads to excellent innovation and concentrate on fundamentally new ideas. This can be achieved only if the overall research and innovation budget in Europe is secured at least at its present level.

T. What is your position on the collaboration between universities and private companies?

T. H. TUM has a close, symbiotic relationship with its industry partners. We also see ourselves as an entrepreneurial university. This means that we encourage our researchers to start their own businesses based on research that the EU funds in the long term. That way, we leverage European funding to maximise its impact, making it sustainable over time. For Horizon 2020 and its successor programme (FP9) to be as effective as possible, the EU should focus on funding entirely new ideas, rather than tweaks to existing technology. That would go a long way to bringing small businesses and start-ups into the fold.

T. What do you hope to see from FP9?

T. H. The European Commission’s foresight report charts two possible courses for the EU – one optimistic and one less so. The optimistic path leads to a peaceful, sustainable and economically stable future. Research and innovation are paramount to achieving that vision; we can get there, but only if we let researchers lead the way and allow more room for risk-taking.

T. How can this be successful?

T. H. The current programme already offers a bottom-up approach, mainly in the ERC and Marie-Skłodowska Curie funding schemes. These are by far the most popular instruments for researchers because they respond to their most essential needs: the freedom to develop excellent scientific ideas to tackle the most pressing problems of the early 21st century. This should go hand-in-hand with a more mission-driven approach, advocating unlimited access of scientific solutions to current problems.