Money
Issue No. 26 - December/January 2005/06
Research, development and innovation the keys to success and profitability
by John Rawson
Research & Development (R&D) and innovation are a key element for the success and profitability of businesses. The good news is that South Australian business R&D expenditure is the highest R&D expenditure in Australia as a percentage of Gross State Product at 1.08%.
The bad news is illustrated in the table below as extracted from a presentation by Deloitte partner Damon Cantwell at the recent Manufacturing Prosperity Conference held in Adelaide. The table shows the ratio of Business Expenditure on R&D to Gross Domestic Product for a number of OECD nations:
As can be seen from the table above, Australia's R&D ratio is around half or less than half of that of many OECD nations including Japan, Germany and the US.
While the R&D tax concession and other R&D programmes such as Commercial Ready have proven successful in encouraging R&D in Australia, more needs to be done at all levels to encourage innovation through a wide range of schemes and awareness programmes. I am not suggesting that more direct cash subsidies or grants are needed but rather that the Federal and State and Territory governments should adopt an active role in encouraging innovation.
In addition, the focus of any programme initiated must be basic innovative research. Basic research is generally performed by the biotechnology and pharmaceutical industries. This type of research is higher risk but when it is successful it can significantly increase the fortunes of the business.
At the other end of the scale is experimental research. This type of research is generally performed by manufacturers and car makers with a focus on incremental product improvement rather than breakthrough innovations.
As can be seen from the table below which is from Damon Cantwell's presentation, the focus is currently in experimental research or incremental product improvements rather than basic innovative research, which is the key to long term survival and profitability. ...
