Department of Economics. University of Melbourne. Parkville Victoria 3052 Australia
ABSTRACT
This paper examines the determinants of R&D expenditure for very large Australian-owned manufacturing firms. A non-linear relationship was found between R & D intensity and the level of appropriability, which was proxied by market share. Initially, R & D intensity increased with appropriability but further increases in market share were associated with decreasing intensity. The result therefore provides little support for Schumpeter's hypothesis but does have considerable implications for competition and mergers policy.
Technological opportunity was an influential positive factor whilst
diversification was found to have a negative effect upon R&D intensity.
It was also found that R&D spending in the previous year had a large
influence upon current expenditure. This was not surprising. More surprising
was the result that the demand faced by a firm had a negative relationship
with innovation. The level of internal funds, the degree of industry protection
and the amount of manufacturing sector R&D expenditure were all found
to be insignificant factors in the determination of R&D expenditure.
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