Why don’t the Dutch industry and government fund more basic research?

Carel van der Poel has served at FOM, Philips, Dupont, NXP, FEI and TU Delft.

On its website, NWO enthusiastically quotes a recent Raboresearch report as proof of the relevance of financing basic research to beneficially feed the growth engine for the Dutch economy. Indeed, already at a 2013 FOM meeting, I learned from Leiden University professor Van Bokhoven that a 1-euro investment in basic research would subsequently grow the economy on average by a whopping 10 euro. At an average tax rate of 40 percent, it’s hard to understand why the authorities don’t immediately spend that euro, as it pays back at least four times the initial investment.

Appropriate deployment of the well-recognized world-class scientific quality and significant size of the Dutch public research community (universities, polytechnics, research institutes) would, without doubt, lead to substantial further enhancement of the Dutch innovation potential. But instead, already for years, the demolition continues. This demonstrates that politicians and industry are holding back when it comes to supporting basic research with anything more than words. I offer several reasons why this is the case.

First, there’s a mismatch in research areas. The domains where Dutch public research excels have only little overlap with industry. Back in 2002, for example, Philips took inventory at international R&D conferences for the eleven research areas that were at that time of interest to the company. The score turned out to be remarkably low. In the rest of the world, the ratio between the presented number of university and industry papers averaged to about 1:1, but in the Netherlands, it was 1:7. My own inventory of the papers and posters presented at the yearly FOM Physics Veldhoven days from 2012-2018 gave a similar result: excellent science but less than 1:20 of the papers had some potential for the industry. Apparently, Dutch physicists were, and still are, active in very different research areas than the industry.

Secondly, there’s a mismatch in perspective and expectations. Industry is interested in research that can be turned into practical applications in relatively short time frames, at as low as possible costs while gaining ownership of the intellectual property rights. Dutch public research, on the other hand, is being judged primarily on educational performance and scientific excellence rather than on shorter-term valorization potential. The careers of public research staff members, their status and their chances of being awarded research grants are mainly determined by scientific recognition of their departments and acceptance rates of their publications at top journals and conferences. Understandably, industrial relevance alone isn’t enough; the topic needs to be conducive to highly competitive science.

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Additionally, there are significant differences in the ‘clock rates’ of decision loops and the drive for results between industry and academics. While the market dynamics force industries to be able to change gears rapidly, Dutch public research acts at a much more thoughtful rate. Here, a project may last four years (as is typical for thesis work), has uncertain outcomes and is, by international standards, relatively expensive. A recent example showing size, cost and benefit of a well-targeted activity is ARCNL: 90 scientists costing 10 million euros per year, or 110,000 euros per year per scientist. Well-supported by authorities, while industry accounts for about 30-40 percent of the cost. For industry, this doesn’t feel like a small amount of money for a lot of influence. The quick-fix industrial alternative: simply hire a new employee, or find partnerships with other conditions abroad.

At the same time – just ask around at industrial R&D departments – there’s an abundance of somewhat longer-term research items that are well connected to the development programs, but these often get shelved because of more immediate needs. Here, extra public research involvement for such topics leading to more in-depth studies, widening of scope and added personal networks would offer significant added value to industry. But as long as Dutch public research is only interested in applied science if it’s directly paid for by industry, industry isn’t strongly motivated to sketch out its areas of research interest in further detail. And so, the remaining relevance of public research for industry is the educated talent it produces. These days, however, such talent can also easily be found internationally.

Thirdly, national authorities are on the retreat. The gap between industry needs and public research areas can’t be easily bridged by either party. Public research does its best to develop appropriate new instruments (like industrial partnership programs and PhD+ initiatives), but this remains of only marginal size. National authorities themselves should take the lead in coordinating efforts to fill the gap between industry needs and public research programs, change evaluation standards for public research and identify and support mutually fruitful research areas. Not an easy task!

If my previous experience is of any guidance, though, the omens for a more active role of government in the research arena aren’t good. It’s not only a lack of expertise but also of attitude. At the Economic Affairs innovation department, on at least one occasion I was told: “Excellent research project proposal, but we will not support this. We believe that researchers in other countries will solve this problem in the end. We can just wait and see.”

While the Raboresearch report offers a substantial 80-billion-euro economic return for a sizable 34-billion-euro R&D investment over the better part of a decade, the government is unlikely to take it to heart. Tellingly, Finland recognizes the positive correlation between the volume of basic research funding and the growth rate of its manufacturing industry and its employment opportunities and therefore recently decided to significantly raise its R&D spending budget. In the Netherlands, however, recognition of the positive correlation led to the opposite conclusion, ie that the volume of the national R&D budget wasn’t a good fit with the relatively small manufacturing industry. Therefore, the size of the budget should better be reduced!

Authorities retreating and becoming less competent to judge the value of research, combined with less motivated industries, are a guarantee for a further divergence of basic research areas, diminishing fruitful interactions between industry and academics, a further sell-off of Dutch industries and a deterioration of the business climate. Who’s going to break the trend?