Before research and innovation (R&I) policies can be identified as instruments for economic growth, and therefore of smart government spending, several questions must be answered. First: does R&I contribute to growth? At present, it is widely acknowledged that innovation is an important force behind long-run economic growth. In particular, models that use an endogenous growth framework make a strong case for the growth power from R&I and innovation (eg Aghion, 2006). But this does not yet make the case for R&I policies. Will R&I policies lead to sufficient innovation and growth to cover the opportunity costs of using public funds for R&I?

To address these questions, we have reviewed the evidence on the impact of R&I policies. We first looked at the evidence of the impact of public intervention on private R&I and innovation, which is mostly from micro-analysis. To assess the impact from public R&I on growth, we needed to complement micro-results with a macro-perspective. To this end, we looked at how R&I and R&I policies perform in affecting GDP growth and jobs in the applied macro-models most commonly used in European Union policy analysis. We start with a brief description of the critical features and enablers of the R&I process needed to appropriately account for its role1 in economic growth, as well as the main policies aimed at promoting R&I to boost growth. A proper understanding of the features of R&I, and its enablers and policies, is important to be better able to use the appropriate models and data to evaluate the impact of R&I policies. We conclude with some recommendations for improving R&I policy assessment for growth.