8.2 Foreign ownership characteristics of businesses undertaking research and experimental development activity in Australia
The other study examined the foreign ownership characteristics of businesses undertaking research and experimental development (R&D) activity in 1999-2000, with the results showing a significant contribution by majority foreign-owned businesses. Majority USA-owned businesses made the largest contribution to R&D activity of all foreign-owned businesses to the extent that they contributed more expenditure and human resources devoted to R&D than all other foreign-owned businesses combined. Majority foreign-owned businesses dominated R&D activity by wholesale and retail businesses, both in terms of R&D expenditure and human resources devoted to R&D. However the overall level of R&D in these industries was relatively low.
The manufacturing industry contributed more than any other to total R&D activity, and this contribution was shared evenly between majority foreign-owned and majority Australian-owned businesses.
This study used data collected by the ABS as part of the Survey of Research and Experimental Development in respect of the year ended June 2000 and published in Research and Experimental Development, Businesses (ABS Cat. no. 8104.0). This survey sought data from all businesses identified by the ABS as likely to be undertaking R&D. Businesses responding to the R&D survey were linked to their foreign ownership characteristics from the ABS Survey of International Investment for those businesses included in both surveys. For other businesses, a number of sources were used, with most ownership data compiled from extensive Internet searches. For those businesses where the ABS was not able to determine ownership characteristics, data were imputed based on the ownership characteristics of similar businesses.
Scope of the Study
The ABS compiles a range of R&D statistics for government and private non-profit organisations, higher education organisations and businesses. This study looked at R&D expenditure by businesses only.
In 1999-2000, foreign-owned businesses made a significant contribution to Australia’s R&D activity spending $1,690m (42% of total R&D expenditure) and investing 10,747 person years (41% of total human resources devoted to R&D). Both Australian and foreign-owned businesses invested approximately 10% of their total R&D expenditure on capital items. However, foreign-owned businesses spent a slightly higher proportion of their total expenditure on labour costs than Australian-owned businesses (47% and 43% respectively) and a slightly lower proportion on other current expenses (44% and 47% respectively).
For the mining industry, foreign-owned businesses had significantly less R&D expenditure than Australian-owned businesses ($97m and $176m respectively) and devoted fewer human resources to R&D (331 person years and 419 person years respectively). However, foreign-owned businesses reported higher capital expenditure on R&D than Australian-owned businesses ($18m and $10m respectively), which differs from the expenditure patterns for all other major industries.
On an industry basis, R&D activity was dominated by businesses in the manufacturing industry. Foreign-owned manufacturing businesses contributed strongly to R&D, accounting for 45% of total manufacturing R&D expenditure and 44% of human resources.
For the wholesale and retail industries, foreign-owned businesses dominated R&D expenditure and human resources, spending $265m (75% of the industry total) and investing 1,681 person years (68% of the industry total).
For the property and business services industry, R&D indicators for businesses involved in scientific research have been compiled separately to assist analysis. For businesses involved in the property and business services industry (but not scientific research), the proportion of total R&D expenditure by foreign-owned businesses was similar to the all industries total (45% and 42% respectively). In contrast, for businesses mainly involved in scientific research, the proportion of total R&D expenditure by foreign-owned businesses was relatively low (8%).
Businesses with majority ownership from the USA had total R&D expenditure of $893m (22% of total expenditure). This was slightly more than the combined total for all other foreign-owned businesses.
Large foreign-owned businesses (those with employment of 200 or more) had the same share of R&D expenditure and human resources, both approximately 30%. This close correspondence between R&D expenditure and human resources for foreign-owned businesses continued in the medium and small business size ranges. Conversely, while large Australian-owned businesses, with 30% of R&D expenditure, used only 22% of human resources, smaller Australian-owned businesses had a proportionately smaller share of R&D expenditure than human resources.
For more information on this study, please refer to Australian Economic Indicators (Cat. no. 1350.0), August 2002.