Govt mulls R&D payback

Success for firms taking part in grant scheme may bring request for return of funding Steven Joyce is wary of discouraging firms from seeking grants. Photo / APN

The Government is considering new rules that would require research and development funding to be repaid by companies if taxpayer-supported R&D projects prove particularly successful.

Economic Development Minister Steven Joyce told the Business Herald that the measure, if introduced, would apply to the new Project Grants scheme, unveiled in last week's Budget, which provides 30 to 50 per cent public co-funding for specific R&D projects.

"But we haven't got to the stage where we're comfortable with the final rules so it's just a bit of conjecture at this stage," Joyce said.

The Project Grants, which will be overseen by Callaghan Innovation - the Government's new high-tech development body - are targeted at firms with small research budgets and those that are new to R&D.

Andy Hamilton, chief executive of Auckland business incubator The Icehouse, said that while the mooted repayment requirement may not prove popular with some businesses, it was hard to disagree with.

"Entrepreneurs don't actually mind paying back [money] if something proves successful," he said. "We all agree that there's only so much money a government can invest and if this provides the opportunity for some recycling of that money into other companies then I think that's a really good thing."

Hamilton didn't think the requirement would put firms off signing up for the Project Grants.

But Joyce said the Government needed to be careful not to discourage firms from taking funding.

"If we provide [funding] and it's got so many strings attached that people don't want it then you're back at square one again," he said.

Technology commentator Peter Griffin said there could be some difficulties around defining "success" in R&D projects.

"If you're the next Google or something, sure, you'd be happy to pay it back but what's the definition of success?"

Entrepreneur and business commentator Lance Wiggs also said the devil would be in the detail.

"An R&D project develops the technology, but an innovation project develops something that people actually want to buy so how do you define what an R&D project is and how do you measure success?" However, Wiggs supported the introduction of the repayment requirement.

"You can look at it almost like debt funding," he said. "[The Government] can say, 'Here's a hundred grand for your project, if it's a success you can pay us back and if it's a failure then you don't need to pay us back'.

"It's probably a fairer proposition to everyone concerned where they can roll that hundred grand over and give it to the next company."

When announcing a number of changes to the R&D schemes last week, Joyce also signalled that funding will be repayable if a company shifts research and development work overseas.