The idea is the the government purchases the rights to sucessful R&D from the developing firm at value and then makes the R&D available (presumably domestically) at no cost. This way the firm is rewarded for their efforts, and the country can take advantage of the public good-ish nature of the information.

Applied to publicly produced R&D here in NZ, this would mean that successful R&D would be available to firms at no cost as the government has already paid for it to be produced.

If purchase was transitioned to firms from CRIs over time, then there could be some prize (the purchase price) that would require some judgement about the firm’s contribution, or as WH suggests some first mover advantage afforded by it being most familiar with the technology. Might be a moral hazard problem though.

I think that the prize idea in isolation duplicates existing profit incentives unless there is an element of making the information / IP publicly available.

Paying $1m for three years work by a team of seven experts is an excellent return on investment. Another benefit is that Netflix were able to attract participants with full time positions at other firms (AT&T and Yahoo for example), who wouldn’t have been able to leave their firms to work at Netflix in a full time role.

You can read more about it at http://www.slate.com/id/2229225/

I’m interested in the IRL and resene paint story – it quietly passed me by. I’ll have a look into it, thanks for pointing this out.

A quick cast around revealed that there was recently something of a nexus between them in the form of a kind of “ideas competition” run by IRL and won by Resene Paints. Basically IRL put up $1m of research time as the prize in a competition for the best idea that would use that resource (perhaps using a kind of Dragons’ Den selection).

The IRL concept looks good, but it is less radical than either of your ideas. You have inspired me to persist with this subject!

What needs to be considered is what is the best mix of incentives/funding to generate new knowledge (old knowledge and current CRI model is sunk costs so we can ignore it). Competition based science funding may provide a mechanism to generate private sector R&D (winner gets $xM ) and is normally directed to a commercial activity, spin-offs are generated by the number of teams entering examining multiple paths, each which may have there own spin-offs.

May need to consider whether the winner gets commercialisation rights as well, or just gets the prize money and first mover advantage in subsequent commercialisation.

However, the underlying public policy problem is that the PRIVATE sector will underprovide R&D as it is unable to capture the full benefit from it. The NZ approach doesn’t address this problem as the private sector is still underproviding R&D.

This matters as it is difficult to transfer knowledge (it takes three years to get a degree for example) to the private sector for them to commercialise even if the incentives ran in that direction. Which they do not because of the profit incentive that the CRIs have and their retention of the property rights.

And I question whether any organisation can manage commercialisation across the breadth of markets that a large CRI has to manage. Private sector companies that are reseach based such as Monsanto or aerospace companies tend to be very narrowly focused.

My view is that there must be a transition to purchasing R&D from the private sector. The funding into CRIs is a massive scientist magnet. The more capability that they build up, the less likely it is that private providers can compete. So over time there needs to be a transfer of capability to, and purchase from, the private sector if we are to become a more technologically based economy.