Once the issues of funding and delivery of research have been separated, questions concerning research capacity naturally arise. In particular, who (public and/or private sector) should develop such capacity and to what extent?
The research capacity of developing countries is substantially less than that of developed countries. As a consequence, it generally seems to be taken as self-evident that it is in the interests of developing countries to invest in research capacity. World Bank et al. (1992) gave a high priority in fisheries research to the strengthening of national research capacity in developing countries and the Asian Fisheries Society Special Publication Number 7 (Davy, 1993) deals extensively with this issue.
However, a first question is whether a particular country should undertake its own research at all in a given area. If a publicly-funded priority research area were identified for which no local expertise existed, then there would be the following options:
The important point, however, is that, if it is accepted that research expertise is like any other good or service, a country could recognise that it did not have a comparative advantage in this area and simply import its requirements. Given the large amount of such expertise available in developed countries and increasingly in developing countries, it should be possible to import at reasonable cost. This approach may make much more economic sense than attempting to develop capacity, especially in situations where governments do not have the funds to provide the infrastructure to support research skills once they have been developed. If governments do decide to develop national research expertise then there is a need for them to be committed to the activity in the long run if the investments made are to pay off.
There are a number of reasons why a government may prefer to develop its own research expertise rather than rely on that which is available through the world market. One reason may be strategic: that the potential research results are of sufficient national importance that it would not be sensible to allow foreign interests to derive them.
There may also be an argument in favour of government intervention in the development of local research skills in terms of domestic market failure (e.g. public or merit good arguments). Research may be important both as a source of skilled people for the economy as a whole and as a source of employment for skilled people preventing a leakage of such skills from the economy. Clearly if this is to work the package available locally must compete with that available internationally, otherwise a "brain drain" is likely to occur and the country will have spent some of its scarce resources to train labour for developed economies. One practical difficulty is that many developing countries are unable to justify the high salaries necessary locally to retain staff and hence the best researchers often drift abroad or into other sectors of the economy. Where it is the latter, there is at least a gain to the economy as a whole.
There may also be infant industry arguments in that the developing countries could have a dynamic comparative advantage in research (or at least some dimensions of it) yet be uncompetitive simply because they have a time lag compared to developed countries. As a result developing country governments could justify favouring their institutes in the allocation of research contracts. However, this argument would not be sufficient to justify public institutes since private research institutes could be equally favoured.
There may be important non-economic arguments. Research may be seen as an index of economic and social development and the view may be taken that it is right that countries should undertake this activity for themselves rather than relying on others to do it for them. Whether this argument makes sense in particular contexts will have to be decided by individual governments, although it is clear that no country is going to be able to fund all the research that it requires domestically. Rather, research takes place in an international context. Perhaps the view from the developing countries is simply that they should be participants in this context rather than customers of it.
In developing a rational policy response, it is well to keep in mind the fundamental rule that policy measures should aim directly, or as closely as.possible, at the source of the problem. This would tend to mean that research priorities should be set and executed as efficiently as possible and that developing research capacity should be treated as a second independent problem.
If a decision is taken to develop public sector research institutes then the government will also have to take a series of decisions about investments that it is to make in such institutes. Such decisions will include size (do they have a critical mass?), funding (do they have sufficient funding to operate effectively?), employment conditions (do researchers have security and incentives to function effectively?) and discipline coverage (will the necessary expertise be available in the future?). A research system based on companies and universities tendering for work would obviate the government from the need to make such decisions.
In conclusion, in the discussion of research in developing countries, emphasis has often been put on the development of local capacity. The economic arguments in favour of such an approach are not clear. There does not appear to be any real link between public funding of research and the development of research capacity. Where such a link arises, it seems to do so because an implicit assumption is made that local research capacity must be used. It is argued here that this assumption is specious and that research should be funded according to priority and ability to undertake the work. If developing country institutes have a comparative advantage they can be expected to emerge over time. If a decision has been taken to develop such institutes this can be implemented independently of research priorities (except, perhaps, where there are budgetary conflicts).
