THE ROLE OF ECONOMIES OF SCALE IN AUSTRALIAN R&D

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.

Keywords:

• R&D
• economies of scale
• spillovers
• Australian industry policy