High Variation in R&D Expenditure by Australian Firms

High variation in R&D expenditure by Australian firms is a study, undertaken by the Department, that examined the R&D expenditure patterns of firms who had claimed the R&D Tax Concession continuously over a ten year period.  The report was released in March 2007.

The study, based on longitudinal data of 353 R&D Tax Concession firms, found that:

  • Most firms dramatically vary the amount they spend on R&D from year to year irrespective of firm size, industry and on R&D intensity.
  • 75 percent of the firms examined have moderate to highly variable patterns of R&D expenditure over time.
  • Small and medium enterprises (SMEs) and large firms had similar levels of variation in R&D expenditure and only a quarter of each grouping had stable R&D expenditure.
  • While industry sectors showed appreciable differences, none were predominately composed of firms with stable R&D expenditure.
  • Variation was also observed in the R&D intensity of firms and in the number of R&D employees.

Factors identified as shaping the high variability in a firm's R&D expenditure included:

  • life cycle of a product/project
  • cash flow and profits
  • influence of customer needs
  • investments in plant and equipment
  • the size, number and duration of R&D projects.

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