have pointed to investment in research and development as an important factor
driving productivity growth in the economy and in determining the
international competitiveness of firms in competitive global industries.
can take many forms. Typically it will be on the development of new products
and production processes. Firms may be seeking patents from their investment
- a way of providing protection of intellectual property rights that will
help finance the development costs incurred.
In recent years,
the UK economy has invested less in new research spending than other
According to a
recent Government report, in 1997 the UK expenditure on R&D was £14.7
billion which represents 1.80 per cent of GDP. This is just below the EU
average of 1.83 per cent and puts the UK in fifth place compared to other G7
countries. Of the G7 countries
the UK and the USA devoted the highest proportion of their total government
R&D funding to defence.
expenditure on R&D in the business sector was in pharmaceuticals, medical
chemicals and botanical products, which accounted for £2.2 billion, followed
by motor vehicles and parts at £963 million. It is often the case that firms
operating in oligopolistic markets invest more heavily in R&D because of
the importance of non-price competition in protecting and gaining market
share from rival firms.