This paper analyses the importance of basic research in the Italian manufacturing sector. Analysis is based mainly on the results of a specific survey on the subject, and the resulting data are processed to test general hypotheses on the innovative strategies of firms and to describe the present situation in Italian industry. From the theoretical point of view, test results appear consistent with the hypotheses put forward on the spontaneous behaviour of firms. From the descriptive point of view, the prospects for Italian industry are far from being reassuring as far as basic research is concerned.
Companies often consider the cost of R&D projects (especially salaries paid to R&D personnel) as part of their current expenses. Companies continue to do this practice even without exactly specifying what they mean by R&D project costs. This practice is misleading because spending on research is undeniably a form of fixed capital investment, even more so than the item that economists consider as the epitome of fixed capital investment -purchase of machinery.As Salter (1966) observed in relation to sunk costs in machinery, this amount may only be recovered by continuing with the investment over several production cycles, no matter what the effective returns are.The 'capitalist' nature of R&D is, if anything, even more apparent than that of the machinery that a company buys from its supplier of capital goods. In fact, the gradual accumulation of capital through sustained investment over time in R&D projects is, if considered in relation to a company's profit profile, similar to the gradual construction of a production plant.The depreciation of research spending begins even before the productive use of the capital good, which the spending (or funding) is actually intended to create (the original and possibly useful knowledge it produces). The same does not hold true for machinery purchased ready for use. In this case, depreciation generally begins immediately after the machinery has entered the company and begun to produce.
In our analysis we have recalled the general results of recent studies on innovation according to which innovation within the manufacturing industry is a complex phenomenon which does not lend itself to description or explanation utilising simplistic analytical models. We have then taken into account clues garnered from various descriptions of the innovative behaviour of companies utilising several indicators of how innovative they are.Our results confirm the belief that notable differences exist between the two sub-sectors into which the chemical industry is divided: pharmaceutical and basic chemicals.Regarding the policy implications of our research, the close correlation between patents and basic research expenditure suggests that the Italian Fund for Basic Research might play a useful role in promoting innovation in the chemical industry.
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