THE ROLE OF ECONOMIES OF SCALE IN AUSTRALIAN R&amp;D

Mitchell, Shannon K.; Stonecash, Robin E

doi:10.1080/08109029608629215

ScienceOpen: research and publishing network

For Publishers

For Researchers

Blog
About

Search
Advanced search

119

views

recommends

If you have found this article useful and you think it is important that researchers across the world have access, please consider donating, to ensure that this valuable collection remains Open Access.

Prometheus is published by Pluto Journals, an Open Access publisher. This means that everyone has free and unlimited access to the full-text of all articles from our international collection of social science journals. Furthermore Pluto Journals authors don’t pay article processing charges (APCs).

scite_

Prometheus

Volume 14, Issue 2

Record: found
Abstract: found
Article: found

Is Open Access

THE ROLE OF ECONOMIES OF SCALE IN AUSTRALIAN R&D

Published

research-article

Author(s): Shannon K. Mitchell , Robin E. Stonecash

Publication date (Print): December 1996

Journal: Prometheus

Publisher: Pluto Journals

Keywords: R&D, economies of scale, spillovers, Australian industry policy

Bookmark

Abstract

Australia does relatively little R&D. One possible explanation is that as a small country, Australia cannot take advantage of scale economies. A schema is provided for the role of economies of scale in R&D. Case studies from the automotive, mining, and pharmaceuticals industries show examples of successful R&D in Australia. These case studies illustrate that if Australian firms are internationally competitive, then economies of scale in production need not hamper R&D. Even when at a comparative disadvantage in producing a product, Australia may still be competitive in basic research or the initial development of ideas.

Content

Author and article information

Journal

Journal ID (publisher-id): cpro20

Journal ID (archive): CPRO

Title: Prometheus

Subtitle: Critical Studies in Innovation

Publisher: Pluto Journals

ISSN (Print): 0810-9028

ISSN (Electronic): 1470-1030

Publication date (Print): December 1996

Volume: 14

Issue: 2

Pages: 152-167

Affiliations

Article

Publisher ID: 8629215 Coden ID: Prometheus, Vol. 14, No. 2, 1996: pp. 152–167

DOI: 10.1080/08109029608629215

SO-VID: d3a65e83-baec-4b0f-bd42-8336e01a275b

License:

All content is freely available without charge to users or their institutions. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission of the publisher or the author. Articles published in the journal are distributed under a http://creativecommons.org/licenses/by/4.0/.

History

Page count

Figures: 0, Tables: 0, References: 22, Pages: 16

Notes and References

Among other issues, the Jessop Report suggested that firms could recapture their R&D expenditures through export or licensing. (See pp. 106-107.) They provide examples of Australian technologies that were developed into products overseas. (See p. 228.) Senate Standing Committee on Science and the Environment, Industrial Research and Development in Australia, Australian Government Publishing Service, Canberra, 1979.
Robert Gregory. . 1993. . “The Australian Innovation System. ”. In National Innovation Systems: A Comparative Analysis . , Edited by: Nelson R. R.. New York : : Oxford University Press. .
The fact that governments think these spillovers exist and are significant is evidenced by the attempt to establish the Multifunction Polis near Adelaide. The basic idea was that the State and Federal governments would contribute to funding to build a “technology city” which would include various research organisations as well as manufacturing facilities. It was thought that this would give Australia a leading edge in innovation and production in the high technology area.
Gene Grossman and Elhanan Helpman, Innovation and Growth in the Global Economy, MIT Press, Cambridge, Massachusetts and London, England, 1991.
Bureau of Industry Economics, Beyond the Innovator: Spillovers from Australian Industrial R&D, Australian Government Publishing Service, Canberra, 1994.
Kenneth Gannicott, ‘The determinants of industrial R&D in Australia’, Economic Record, 60(170), 1984, pp. 231-35.
Francis Castles, An ABC of R&D: Is Australia's record as black as it has been painted?’, Australian Quarterly, Autumn, 1989.
Donald Lewis and John Mangan.. 1987. . Research and development in Australia: The role of multinational corporations. . Prometheus . , Vol. 5((2)): 368––85. .
Ralph Lattimore. . 1991. . “Research and Development: Hidden investment in Australian industry. ”. In The Economic Dynamics of Australian Industry . , Edited by: Hamilton C.. Sydney : : Allen & Unwin. .
By “average cost” we mean the opportunity cost of undertaking R&D, that is, the alternative uses for the resources that must be expended on R&D.
More formally, fi can be thought of as a vector of the relevant factor prices.
In mathematical terms, ∂ ri/∂ Bi < 0, 0≤ Bi < Ƀ i and ∂ ri/∂ Bi = 0, Ƀi ≤ Bi
This is not crucial to the analysis that follows. As will be clear later, the cost premium for operating at a low scale could be interpreted as coming from a low scale of firm or industry output.
So ∂ ci/∂qi < 0,0 ≤ qi < [qbar]i, and ∂ ci/∂ qi = 0, [qbar]i ≤ qi
Australian Financial Review, ‘Patience Wears Thin for Investors’, September 14, 1995, p. 27.
Industry Commission, The Automotive Industry, Report No. 5, Australian Government Publication Service, Canberra, December 1990.
S.W.F. Omta et al. state that from the 1960s to the 1990s, the period between finding the lead compound (a chemical compound with assumed therapeutic effectiveness) to the introduction of the product onto the market lengthened from 5 years on average to more than ten. S.W.F. Omta, ‘Managing industrial pharmaceutical R&D: A comparative study of management control and innovation effective in European and Anglo-American companies’, R&D Management Journal, 24(4), 1994, pp. 303-315.
Estimates of expenditure required to bring a new product from discovery of a new compound through to marketing is in the range of US\(150–300 million in 1990, compared with US\) 10–24 million in the early 1960s. Bureau of Industry Economics, The Pharmaceutical Industry: Impediments and Opportunities, Australian Government Publication Service, Canberra, 1991.
The Federal Government has recognised the importance of encouraging cooperative research efforts. There are specific provisions in the Competitive Grants for Research and Development scheme aimed at encouraging joint work.
The Australian, 17 June, 1995, p. 39.
Sydney Morning Herald, 26 July, 1995, p. 15.
Adam Smith, An Inquiry Into the Nature and Causes of The Wealth of Nations, Clarendon Press, Oxford, 1776, [edition published 1847], pp. 424–426.

Comments

Comment on this article

[1] Among other issues, the Jessop Report suggested that firms could recapture their R&D expenditures through export or licensing. (See pp. 106-107.) They provide examples of Australian technologies that were developed into products overseas. (See p. 228.) Senate Standing Committee on Science and the Environment, Industrial Research and Development in Australia, Australian Government Publishing Service, Canberra, 1979.

[2] Robert Gregory. . 1993. . “The Australian Innovation System. ”. In National Innovation Systems: A Comparative Analysis . , Edited by: Nelson R. R.. New York : : Oxford University Press. .

[3] The fact that governments think these spillovers exist and are significant is evidenced by the attempt to establish the Multifunction Polis near Adelaide. The basic idea was that the State and Federal governments would contribute to funding to build a “technology city” which would include various research organisations as well as manufacturing facilities. It was thought that this would give Australia a leading edge in innovation and production in the high technology area.

[4] Gene Grossman and Elhanan Helpman, Innovation and Growth in the Global Economy, MIT Press, Cambridge, Massachusetts and London, England, 1991.

[5] Bureau of Industry Economics, Beyond the Innovator: Spillovers from Australian Industrial R&D, Australian Government Publishing Service, Canberra, 1994.

[6] Kenneth Gannicott, ‘The determinants of industrial R&D in Australia’, Economic Record, 60(170), 1984, pp. 231-35.

[7] Francis Castles, An ABC of R&D: Is Australia's record as black as it has been painted?’, Australian Quarterly, Autumn, 1989.

[8] Donald Lewis and John Mangan.. 1987. . Research and development in Australia: The role of multinational corporations. . Prometheus . , Vol. 5((2)): 368––85. .

[9] Ralph Lattimore. . 1991. . “Research and Development: Hidden investment in Australian industry. ”. In The Economic Dynamics of Australian Industry . , Edited by: Hamilton C.. Sydney : : Allen & Unwin. .

[10] By “average cost” we mean the opportunity cost of undertaking R&D, that is, the alternative uses for the resources that must be expended on R&D.

[11] More formally, fi can be thought of as a vector of the relevant factor prices.

[12] In mathematical terms, ∂ ri/∂ Bi < 0, 0≤ Bi < Ƀ i and ∂ ri/∂ Bi = 0, Ƀi ≤ Bi

[13] This is not crucial to the analysis that follows. As will be clear later, the cost premium for operating at a low scale could be interpreted as coming from a low scale of firm or industry output.

[14] So ∂ ci/∂qi < 0,0 ≤ qi < [qbar]i, and ∂ ci/∂ qi = 0, [qbar]i ≤ qi

[15] Australian Financial Review, ‘Patience Wears Thin for Investors’, September 14, 1995, p. 27.

[16] Industry Commission, The Automotive Industry, Report No. 5, Australian Government Publication Service, Canberra, December 1990.

[17] S.W.F. Omta et al. state that from the 1960s to the 1990s, the period between finding the lead compound (a chemical compound with assumed therapeutic effectiveness) to the introduction of the product onto the market lengthened from 5 years on average to more than ten. S.W.F. Omta, ‘Managing industrial pharmaceutical R&D: A comparative study of management control and innovation effective in European and Anglo-American companies’, R&D Management Journal, 24(4), 1994, pp. 303-315.

[18] Estimates of expenditure required to bring a new product from discovery of a new compound through to marketing is in the range of US\(150–300 million in 1990, compared with US\) 10–24 million in the early 1960s. Bureau of Industry Economics, The Pharmaceutical Industry: Impediments and Opportunities, Australian Government Publication Service, Canberra, 1991.

[19] The Federal Government has recognised the importance of encouraging cooperative research efforts. There are specific provisions in the Competitive Grants for Research and Development scheme aimed at encouraging joint work.

[20] The Australian, 17 June, 1995, p. 39.

[21] Sydney Morning Herald, 26 July, 1995, p. 15.

[22] Adam Smith, An Inquiry Into the Nature and Causes of The Wealth of Nations, Clarendon Press, Oxford, 1776, [edition published 1847], pp. 424–426.