Ronald Bailey från Reason:

It is a truism among academic researchers and many economists that Federal funding is necessary for basic research and that such funding is perpetually inadequate. However, a 2001 study by Organization for Economic Co-operation and Development researchers found that in fact that higher spending by industry on R&D correlates nicely with higher economic growth rates. In contrast to the academic truisms about the need for Federal funding, the study found that “business-performed R&D … drives the positive association between total R&D intensity and output growth.”

The OECD researchers noted that publicly funded defense research actually crowded out private research, “while civilian public research is neutral with respect to business-performed R&D.” In other words, government funded civilian research didn’t hurt private sector but there wasn’t much evidence that it helped, at least in the short term. The report concluded, “Research and development (R&D) activities undertaken by the business sector seem to have high social returns, while no clear-cut relationship could be established between non-business-oriented R&D activities and growth.” In other words, economic growth was associated almost entirely with private sector research funding. The OECD report did allow that perhaps publicly funded research might eventually result in long-term technology spillovers, but that contention was hard to evaluate.