The economic literature shows a multiplicity of influences on the firm's R&D decision. While Schumpeter's monopoly theory is not the most appropriate explanation of inventive behaviour, I R&D expenditure and performance is found to be influenced by firm size to a point other factors intervene including market structure, "technological opportunity", the appropriability of R&D output, and behavioural factors. However large firms a priori are expected to be amongst the most innovative.
The present survey shows that the large firms in Australia active in R&D, occupy a position of authority in their respective markets, and possess a level of technical competence that is strong by international standards. Yet in many respects their R&D does not conform to conventional images of the activity. There is a substantial component directed to information-gatekeeping and adaptation of technologies: by several criteria innovativeness appears lower than that of business enterprises in general: the R&D is concentrated very heavily in existing businesses; and where innovations are achieved they tend not to be in generically new products but implicitly the area of cost control and product performance.
The R&D organisations have very strong links with Production but significantly weaker ones with Marketing, and this reflects the backgrounds of virtually all the research managers. There is very little R&D involvement in corporate diversification, and by inference diversification occurs via acquisition of technologies or even whole firms. Australian public sector research is not a significant factor in the development or diversification of large firms since it fulfils only a minor role in the supply of science and technology to them.
In fact the Australian I R&D management genre contains many factors that would be barriers to innovation in another environment e.g market awareness. In the large firm the manager is technocrat rather than entrepreneur, who has generally pursued a specialised route to his present post. Certainly these are not criticisms solely of the individual, for institutional constraints demand behaviour appropriate to the circumstances. But it is not the model of versatility implicit in innovative search.
It is therefore important to realise what is being encouraged when R&D in these firms is stimulated by policy, and even more important that which is not being encouraged. If it is invention and entrepreneurialism that require promotion then this must happen elsewhere. It is unlikely that large firms' R&D structures can be easily changed, and in any event what these firms do is their business and they have undoubtedly long ago adapted to their own optimum level and composition of R&D. As invention policy needs to be focussed elsewhere, small firms rather than more government R&D seems the appropriate solution.