Current research and problems in science and technology policy are reviewed. Trends in innovative activity in the G-7 economies during the past two decades are summarized and the economic rationale for policy in this area given. Policy tools currently in use in many countries include tax credits...

Evidence on the 'funding gap' for R&D is surveyed. The focus is on financial-market reasons for under-investment in R&D that persist even in the absence of externality induced under-investment. The conclusions are that (i) small and new innovative firms experience high costs of capital that are...