The challenge
For too long, research and development (R&D) has been an ad hoc afterthought of governments. However, evidence shows that successful innovation depends on rules of conduct and trusting relationships in order for ideas to be translated into commercial products and services. Many businesses are unaware of the multitude of changing industry programmes, and unfortunately many of these programmes do not survive an election cycle.
The research
We have conducted a microeconometric analysis of R&D investment by Australian firms, commissioned by the Strategic Examination of R&D (SERD). Using BLADE and PLIDA datasets, we produce evidence on three critical areas:
- Productivity benefits of R&D behaviour,
- The role of worker mobility as a channel for transmitting knowledge,
- Quantifying how much additional R&D is induced by the R&D Tax Incentive scheme.
The impact
This research shows that business investment in R&D creates large benefits for the whole economy. Every dollar invested in R&D can produce the equivalent of $1.49 in social returns, which means government support can be justified. Labour mobility is shown as a measurable and significant channel for knowledge transmission, particularly between the corporate sector. Future R&D policies should be targeted towards firms who are most able to turn knowledge into wider benefits. One-size-fits-all policy design may result in own-firm returns that limit returns to the wider economy.
Our researchers
Alfons Palangkaraya, Beth Webster, Trevor Kollmann, Russell Thomson, Bob Breunig
Our partners
Australian Department of Industry, Australian Department of Social Services
Publication
R&D Spillovers, R&D Labour Mobility Effects, and the Effectiveness of R&D Subsidies