Innovation Expenditure on R&D

Research and development (R&D) activity is the systematic investigation or experimentation involving innovation or technical risk, the outcome of which is new knowledge, with or without a specific practical application, or new or improved products, processes, materials, devices or services.

R&D plays a crucial role in the technological development and competitiveness of a country. It is often a key step in the innovation process.

Industries that are more knowledge intensive invest more in R&D. Literature has shown that R&D related activities can explain up to 75 per cent of the total factor productivity growth, once externalities are considered (Australian Innovation System Report, 2016).

R&D expressed as a proportion of GDP is used as a measurement of an economy’s relative degree of investment in generating new knowledge. Higher education, government and business are the key sectors that invest in R&D.

Growth in developed economies is increasingly driven by investment in intangible assets. Private gross fixed capital formation measures the amount of private investment in intellectual property (IP) products.

Investment in IP and other forms of intangible capital can facilitate business growth and improve productivity.

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