Economies of Scope and Scale in Biomedical and Health Research

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Publicly funded biomedical and health research is expected to achieve the best return possible for taxpayers and for society generally.

The absence of predominant findings for or against the existence of economies of scale or scope implies a continuing need for case by case decisions when distributing research funding, rather than a general policy either to concentrate funding in a few centres or to disperse it across many.

Background

There is continued pressure to achieve the best return from public sector investments in medical research, alongside additional pressure to spread that investment to benefit a range of areas and institutions. To make an informed decision on how to spread investment, it is necessary to know whether medical research shows economies (or diseconomies) of scope or scale and, if so, at what levels of aggregation.

Economies of scope are said to exist when undertaking two different activities in the same place leads to greater output per investment than undertaking the same two activities separately, e.g. teaching medicine in the same place as researching it. Economies of scale exist when the average cost per unit of a single output falls the greater the quantity produced in one place, e.g. the cost per MRI scan falls as the proportion of time a scanner is in use increases.

Goals

RAND Europe was awarded a grant by the Medical Research Council to investigate the extent to which there are economies or diseconomies of scope and scale in medical research and what might mediate them. The project team sought to answer the following questions:

  1. Do economies of scope and scale exist in medical research: is it better to support research in a few places rather than spread support across many places?
  2. What is the source of any economies of scope and scale: use of costly and specific physical or human assets, or interactions affected by location?
  3. Where and if benefits exist as a result of colocation, how do these differ between different researchers, research stages and how have they changed over time?

The project's goals were to make three contributions:

  • Compile the existing evidence into a form that can be understood and used by policy makers, and disseminate that to them.
  • Develop new qualitative insights into the ways in which (dis-)economies of scope and scale function within biomedical research.
  • Explore the feasibility of carrying out an econometric examination of the magnitude of the issue in the UK biomedical research context.

Methodology

The team conducted a systematic review of the existing literature on economies of scope and scale in research, as well as qualitative work exploring viewpoints and experiences of researchers around team size and economies of scope and scale through case studies and interviews. Based on this evidence, the team developed an econometric model which could be used and developed for further research on this issue.

Findings

  • Concerning economies of scale in research, studies often pointed to positive economies of scale rather than to diseconomies of scale or constant returns to scale at the level of universities or research institutes. At the level of individual research units, laboratories or projects, the numbers of studies are smaller and evidence is mixed.
  • Concerning economies of scope in research, the literature suggested positive economies of scope rather than diseconomies, but the picture is also mixed.