I think we should encourage funding on social impact research as it would lead us to explore and find answers to long disputed or rather complex issues. One major area in which funding can be flown in can be reaching out of computers and Internet in mass usage in the rural and village areas (talking about developing countries like India). This may not bring about innovation, but will lead to social empowerment.
In India, I have worked with a couple of organizations such as CDAC (Center for development of Advanced computing www.cdac.in) who is entrusted with enacting and implementing policies to bring IT to the common man. The organization supports various independent and collective research project efforts in the area of Localization of Software so that people can use their native languages while interacting with PC. The efforts are focused on Linux based Open source systems which can be freely modified. Seeing the potential impact of open source systems, giants like Microsoft started playing game by granting free computers to all rural and village schools, all loaded with windows. See how far competition goes.