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AUSTRALIAN ACADEMY OF TECHNOLOGICAL SCIENCES AND ENGINEERING (ATSE)
NOVEMBER 2014
SUBMISSION TO THE
Boosting the Commercial Returns from Research
Issues Paper
Australian Academy of Technological Sciences and Engineering
Level 1, 1 Bowen Crescent, Melbourne Vic 3004
GPO Box 4055, Melbourne, Vic 3001, Australia
T+61 3 9864 0900 F+61 3 9864 0930 W www.atse.org.au
Australian Academy of Technological Sciences and Engineering Limited – Incorporated ACT ACN 008 520 394 ABN 58 008 520 394
Contact details: Australian Academy of Technological Sciences and Engineering 03 9864 0900 [email protected] www.atse.org.au
List of attachments:
1. ATSE 2013, Rethinking Linkages: Translating research into economic benefits for Australia, Australian Academy of Technological Sciences and Engineering, Melbourne.
2. ATSE 2014, Rewarding researcher–industry engagement and collaboration: Developing an ‘Impact and Engagement for Australia’ (IEA) metric, Australian Academy of Technological Sciences and Engineering, Melbourne.
3. ATSE 2014, Submission to the Senate Standing Committee on Economics inquiry into the ‘Tax Laws Amendment (Research and Development) Bill 2013’, Australian Academy of Technological Sciences and Engineering, Melbourne.
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ATSE Submission: Boosting the commercial returns from research issues paper
The Australian Academy of Technological Sciences and Engineering (ATSE) welcomes the
opportunity to provide comment on the Australian Government’s Boosting the commercial
returns from research issues paper.
ATSE advocates for a future in which technological sciences, engineering and innovation
contribute significantly to Australia’s social, economic and environmental wellbeing. The
Academy is empowered in its mission by some 800 Fellows drawn from industry, academia,
research institutes and government, who represent the brightest and the best in
technological sciences and engineering in Australia. The Academy provides robust,
independent and trusted evidence-based advice on technological issues of national
importance. ATSE fosters national and international collaboration and encourages
technology transfer for economic, social and environmental benefit.
The effective translation of research to economic benefits will be at the core of Australia’s
future competitiveness and prosperity. Australia undertakes world-class scientific research
through universities and other publicly funded research organisations, such as CSIRO,
ANSTO, and AIMS. While improving the commercial returns from research does require
significant attention, it is important that this does not come at the expense of fundamental
scientific research.
Addressing barriers to collaboration
The Boosting the commercial returns from research issues paper correctly identifies many of
the concerning issues that are adversely affecting Australia’s ability to capitalise on our
strengths in research. One of the most important of these is the poor collaboration between
industry and publicly funded researchers. This may be attributed in part to current
disincentives for university-based researchers to engage with businesses, as an unintended
consequence of the Excellence in Research in Australia initiative (ERA).
The ERA exercise encourages university researchers to publish quality research, based on
metrics such as citation rates, and rewards this behaviour by moderating allocation of
approximately $65 million per annum based on ERA outcomes. The behaviours that ERA
drives in our university sector are even greater than might be anticipated from this scale of
funding, demonstrating that a metrics-based approach can achieve important behavioural
change. While research excellence is desirable in its own right, it is only one dimension of
the research endeavour. The current system’s weighting towards on research excellence is
often at the expense of other important activities such as university-industry collaborations,
entrepreneurial behaviour and knowledge transfer.
In August 2014, ATSE proposed an initiative – termed ‘Impact and Engagement for
Australia’ (IEA)1 – designed to encourage increased collaboration between Australia’s
publicly funded researchers and business. IEA proposed using data already reported
through ERA, including income received by universities from commercial and industry
sources, patents and licensing, to create a metric of industry engagement.
1 See attachment 1
3
A metric like IEA is intended as a counterbalancing measure to ERA to ensure that
collaboration is appropriately recognised and rewarded alongside excellence, in line with the
Government’s Industry Innovation and Competitiveness Agenda. It is likely that this will
increase the return on the public investment in research in science, technology, engineering
and maths (STEM) and humanities and social sciences (HASS). It is important to note that
an IEA-like metric is proposed to work in parallel with ERA and does not imply a loss of
value of basic, curiosity-driven research. The Group of Eight’s recently published Group of
Eight: Research Impact Benefiting society illustrates the fundamental importance of basic
research to ongoing innovation and research commercialisation2.
The concept of a metric to measure collaboration and engagement has received wide
support from government, universities and other stakeholders. Importantly, the Forum of
Australian Chief Scientists has endorsed the proposal, and the Queensland and South
Australian Governments have expressed interest in their universities participating in a trial.
ATSE is currently in discussions with the Department of Education on undertaking a project
to develop detailed inputs, appropriate definitions for the assessment bands, and the
methodology to be used to process the inputs into these bands. This work will demonstrate
the feasibility of using these metrics to capture and reward the level of collaboration and
knowledge transfer occurring in the Australian university research sector.
Commercialisation support programs
A major problem related to commercialisation support programs identified in the issues
paper is that of scale. Insufficient scale reduces the overall effectiveness of a whole range of
initiatives designed to support research, innovation and commercialisation.
However, the solution proposed of consolidating existing collaboration support programs to
increase scale may be counterproductive. Programs must be sufficiently diverse to offer a
range of appropriate niches for people seeking assistance to collaborate. Over-consolidation
may end up making collaboration more difficult as options for seeking support become
limited. Ideally there should be a full spectrum of programmes available from the
Commonwealth and state governments that range from discrete researcher-led grants to full,
multiple programme, multiple partner, user-driven research centres, such as CRCs.
To achieve sufficient scale in these programs requires that appropriate levels of funding be
made available. Overall funding levels and adequacy of scale should be assessed regularly
through careful analysis and consultation with participants – but without consistent, ongoing
and adequate funding, programs designed to support collaboration and commercialisation of
research will not reach their potential. The constantly changing landscape of these programs
is a real impediment to researchers and industry.
An oft-cited example of a long-lived, well supported innovation support scheme is the Small
Business Innovation Research program in the United States. SBIR has been in place for
2 Go8, 2014, Group of Eight: Research Impact Benefiting society, Group of Eight Australia,
https://go8.edu.au/publication/go8-research-impact-benefiting-society
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over 30 years, and delivers approximately $2.5B per year in research contracts with the
potential for commercialisation and public benefit. Each year, Federal agencies with
extramural R&D budgets that exceed $100 million are required to allocate 2.8 per cent of
their R&D budget to programs that encourage domestic small businesses to engage in R&D
that has the potential for commercialisation.
Evaluations of this program have found strong economic and employment outcomes, and it
has been replicated in a number of other countries around the world. Importantly, the
program has received consistent bipartisan support in the US. Australia should consider
introducing a similar scheme, which must be supported by all political parties if it is to be
successful. These and similar issues raised by the issues paper are dealt with in detail by
the 2013 ATSE publication Rethinking Linkages: Translating research into economic benefits
for Australia.
Another key means to support research translation and commercialisation is through
technology intermediaries. Technology intermediaries identify, connect and facilitate
communication between parties at all stages of technological innovation, from research to
product. This allows a better assessment of sharing the risks and rewards, determining
where weaknesses lie and optimising the benefits of government intervention. Innovation
intermediaries, preferably operating outside government but with government support,
provide an effective means of creating networks and stimulating collaborations. Examples
include technology brokers, incubators, accelerators and clusters. Intermediaries can help
their clients to access government support, and can build links between industry and
universities.
Other countries have implemented various models of technology intermediaries very
successfully, including the UK’s Catapult Centres and Germany’s Fraunhofer Institutes.
Examples of successful Australian intermediaries include the Victorian Centre for Advanced
Materials Manufacturing (VCAMM) and the Small Technologies Cluster (STC). There is an
opportunity to apply these models around Australia.
The issues paper also raises the issue of supporting collaboration through national research
infrastructure funded under the National Collaborative Research Infrastructure Strategy
(NCRIS). This is a valuable way to promote collaboration, as this kind of investment brings
together researchers from academia and industry to work together on collaborative projects.
NCRIS funding for shared research infrastructure that no single organisation could sustain
on its own, and which can service a broad range of potential research programs, is
invaluable.
Incentives
The R&D Tax Incentive is an important tool to increase business expenditure on research
and development, including through collaboration with publicly funded research
organisations. Any changes to this scheme should be formulated through a rigorous,
evidence-based approach.
The current proposal before Parliament to limit the availability of the R&D Tax Incentive to
businesses with less than $20 billion income per year has significant potential to adversely
affect its ability to encourage collaboration between industry and researchers. In addition,
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the proposed changes would lead to the unintended consequence of large companies
potentially moving their R&D spending overseas. As most business R&D in Australia is
conducted by large companies, this would have a major multiplier effect as it is the R&D
personnel in large companies that form the receptors (or bridges) between industry and the
academic and government-funded researchers. ATSE’s position on this issue is laid out in a
submission to the Senate Standing Committee on Economics inquiry into the Tax Laws
Amendment (Research and Development) Bill 2013, attached for your information.
Other issues
Setting national research priorities is a worthy idea in principle, and the Chief Scientist has
spoken extensively on the need for a national research strategy. However, Australia has a
poor history of using research priorities effectively to improve our research translation. For
industry and other end users of research, national priorities are almost irrelevant. Their
criteria will always be dominated by their perceived need for the outcomes of research, and
their commitment to invest time and money in commercialising and adopting these
outcomes. Care should be taken when emphasising the importance of a set of national
research priorities. There are a range of issues requiring attention to improve Australia’s
research commercialisation, and much effort may be expended on developing research
priorities and the surrounding framework with little return on investment.
The Australian Council of Learned Academies’ Securing Australia’s Future program is
currently planning a project to investigate international approaches to research translation
and commercialisation. This project will address many of the issues raised in this paper and
will highlight successful approaches overseas that may be adaptable for Australia. This
project is planned to report in October 2015.
Concluding remarks
While many important points are raised in the Boosting the commercial returns from
research issues paper, ASTE recommends that it would be most effective to prioritise a few
areas on which to focus policy attention in the short term. Rapid changes to a wide range of
programs and systems may risk damaging the confidence of researchers and industry. Any
changes should be undertaken in a focussed and consultative way, with provisions to assess
the effects of these changes on the desired outcomes to inform further reform.
The issues raised here are of pivotal interest to ATSE, and the Academy has devoted
considerable time and thought to how best to address them. If ATSE can be of any further
assistance, please contact Dr Matt Wenham, Executive Manager, Policy and Projects, at
[email protected] or 03 9864 0926.
POSITION PAPEROcTObER 2013
TranslaTing research inTo economic benefiTs for
ausTralia:Rethinking linkages
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Translating research into economic benefits for Australia: Rethinking LinkagesExEcuTIvE SummARy
improving productivity and facilitating economic growth are key priorities for australia. technological innovation based
on research plays a key role in addressing these priorities. Collaboration between publicly funded research organisations
and industry is crucial to improving the translation of research into productive outcomes that increase the nation’s
output. however, there remain fundamental systemic barriers to increasing this collaboration in australia.
technology-based small and medium enterprises play a vital role in the australian economy. however, there are major
gaps in the funding mechanisms available to support high-growth potential sMes to engage in collaboration. new
approaches suited to sMes, such as voucher programs, are needed. targeted procurement schemes can be used to
support sMes. technology intermediary organisations have an important role to play in facilitating linkages.
this paper describes how these mechanisms can be used to improve productivity through the creation of successful
collaborations1. this paper draws on discussions at a recent atse-aCOla workshop.
1 This paper draws on discussions at an aTse-acola workshop Translating research into productivity: rethinking linkages, held on 9 august 2013, brisbane; it does not necessarily reflect the views of all participants. for workshop details see page 8.
2 includes government laboratories, such as csiro and ansTo, universities and medical research institutes.
1. cOllAbORATION IS AN ImPORTANT mEchANISm TO TRANSlATE RESEARch INTO PROducTIvITy
1.1. Productivity in Australia can be enhanced through increased connectivity
collaboration between business and publicly funded
research organisations (Pfros)2 is crucial to improving the
translation of research into productivity. however, experience
has shown that effective collaboration between business
and Pfros can benefit from independent facilitation to build
trust and to establish momentum between parties.
sMes play a vital role in the australian economy
small to medium enterprises (smes) play a major role in the
australian economy. They account for more than a third of
gross domestic product (gDP) and almost half of private
sector industry employment in australia. many smes need
to develop or licence technology and helping smes do this
enables them to contribute to economic growth.
1.2. Reasons for collaboration a relationship with a Pfro can benefit a company in many
ways, for example by creating talent pipelines and developing
technology or capability roadmaps. collaboration with a Pfro
can provide business with affordable and rapid access to Pfro
skills, people, equipment, facilities and ideas and so contribute
to improved productivity. Pfros often have strong brands
and international networks that can be leveraged. Pfros can
provide a ‘problem solving’ service to business which can be a
useful way of initiating collaborations. in support of this, some
leading oecD countries have increased funding for university
research to support business.
collaboration with industry can benefit Pfro researchers by
developing innovative ‘receptors’ and improving researcher
understanding of how to pitch their capabilities. in many
leading oecD countries, excellence in research goes hand-
in-hand with impact and collaboration with business. The uK
imperial college is a good example of a university that conducts
excellent research and is strongly engaged with industry. in
the uK there are various incentives for researchers to engage
with industry. some australian universities have recognised
the benefits of building stronger linkages with industry. for
example, the university of Queensland collaboration and
industry engagement fund (cief) is an internal grant scheme
to support the development of competitive grant proposals
that provides seed funding to encourage new industry-linked
research and supports cross-disciplinary activities.
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1.3. barriers to collaboration remainWhile the relationship between collaboration and improved
research translation from Pfros is becoming increasingly
well known, fundamental systemic barriers to collaboration
between industry and Pfros remain. These include financial
barriers, cultural barriers, information ‘asymmetry’ (lack of
knowledge of who is doing what research, where), differing
timescales for conducting research (even applied research
operates over much longer timescales than business) and
a lack of absorptive capacity (research will flounder unless
it is taken up by the right, knowledgeable organisational
receptors). These barriers are discussed in more detail below.
FinanCial: shortages of capital, particularly for high-
technology smes, is a significant barrier to investing in research
collaboration. The lack of capital for investment in start-ups
and high growth smes in australia has been particularly critical
since the start of the global financial crisis. many smes have cash
reserves to last only a few months. This can lead to an overriding
short-term focus. existing government support programs
designed to facilitate collaboration and industry-Pfro linkages
present significant barriers to many smes: high application
costs and long delays in funding decisions can preclude many
smes from participating because they simply do not have the
resources or the ability to wait for lengthy grant cycles.
CultuRal: There are significant cultural differences between
industry, particularly smes, and academia which results in a
‘mismatch’ of needs, goals and priorities. This poses a range of
challenges for collaborative projects, from defining success to
the timeliness of project delivery. Pfro researchers operate
on very different timescales to the businesses sector. likewise
people in industry often lack the understanding of how
research providers operate and how to find the right group
able to handle their particular requirement. one approach
to addressing this could be to facilitate relationship-building.
aligning graduate research programs with the needs of industry
could help universities to develop productive exchanges.
DisinCentives: Disincentives for university researchers to
engage with business remain a fundamental problem in
australia. academics are under various performance pressures
and metrics which can make them reluctant to engage with
industry if the activity is considered likely to detract from formal
performance requirements. This problem has recently been
exacerbated by the introduction of the excellence in research
australia (era) with its emphasis on publications in highly
ranked journals. australian universities should be encouraged
by government to diversify their performance and promotion
criteria and reward strategic collaboration with industry.
encouraging early career researchers to engage with
businesses can be particularly challenging but can have
valuable outcomes. for example, ‘speed meeting’ sessions
designed to introduce young scientists to entrepreneurs can
struggle to fill places, but feedback from those researchers
that have participated is that it had a very positive impact.
Risk v RewaRD: large companies are generally risk averse.
smes, on the other hand, are often more accustomed to risk. The
high potential for failure of smes may fuel a risk-averse culture
in government-funded innovation support programs. There is a
need for governments and companies to shift their focus from
potential risks to the potential rewards from collaborations.
1.4. Overcoming barriers to translating research to productivity
Creating strong strategic collaborations
boeing is an example of a company that has fostered
collaboration to achieve productivity gains. it has a long
standing relationship with australian researchers. The
strength of boeing’s relationships with universities and
companies around the world and ability to collaborate
across the innovation system are key to the company’s
success. The boeing 787 Dreamliner was created by a
consortium of members from around the world to span the
innovation chain working together on a common goal in a
precompetitive environment.
some common key criteria of successful collaborations
include choosing the right partners to collaborate with, at
the right time, and recognising the importance of individuals
in making relationships work. Working in a pre-competitive
environment allows competitors to work together. good,
commercially oriented project management on both
sides of a partnership is crucial to achieving outcomes
from collaborations, as are simple agreements that can
be executed quickly. identifying a common goal or value
proposition around which to build a collaboration is crucial
to success. aligning the expectations of parties and agreeing
on a focus early is important but some flexibility is desirable
to allow outcomes beyond the original concept to emerge.
absorptive capacity is important to maximise the outcomes
of collaboration.
as an example, em solutions is a small australian sme
engaged in innovative product design and manufacture.
it has developed broadband radio equipment used in
satellite and microwave telecommunications networks. by
incorporating its own novel iP with csiro’s, em solutions
was able to embark on a large-scale product development
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and commercialisation program to develop a first-to-market
broadband radio that was co-funded by the customer.
a critical factor was that although csiro had been
identified by a large customer requiring the product, both
recognised they required a commercial partner to develop
it. financial reasons, such as access to capital, are a key
driver for collaborations. This can create alignment, but it is
important to have a clear understanding on both sides of
a collaboration of who pays. simple, one-page agreements
with smes, that can be finalised quickly, are also important.
individuals are crucial to the success of collaborations, by
providing champions for a partnership and facilitating
mutual understanding of the interests of all parties. multi-
year stable government programs that support collaboration
are important to endure beyond the individual relationships
that started them. networks, centres, clusters and precincts
can help build critical mass and engage researchers with
the private sector, taking into account the importance of
individual relationships. They can be complex to manage,
and therefore strong leadership is critical to their success.
2. APPROAchES TO SuPPORT cOllAbORATION fOR SmES
Some existing schemes are not well suited to SmEscomplexity, inconsistency and instability are key problems
of australian schemes designed to assist smes. stability is a
key criterion of successful support mechanisms used around
the world. for example, the us small business innovation
research (sbir) scheme has been in place for over 30 years.
australian schemes are often abandoned before they can be
fully evaluated. overlap between schemes and insufficient
demarcation between federal and state government
programs can be a challenge. This is exacerbated by
government agencies stretching funds across a large
portfolio of programs, which diminishes available support in
each and results in some lacking critical mass.
some existing mechanisms to encourage industry-Pfro
links are applicable to large companies but are not well
suited to the needs of smes. for example, the cooperative
research centre (crc) Program involves high entry costs,
such as complex legal and contract negotiations, up-front
financing and time commitment requirements, and long
funding turnarounds. smes face a similar challenge with
the time commitment and matching fund requirements of
australian research council (arc) linkage grants, which put
the control and the incentives with academics, not industry.
alternative approaches are needed that put smes in control
and also take advantage of strategic supply chain alliances.
many existing schemes are designed to be researcher-
driven rather than led by industry. however, Industrial
Transformation Research Hubs is an example of a successful
program (operated by the arc) to bring researchers and
industry together to work in a few priority areas. it is a
researcher-driven program that may produce outcomes
that the industry partners have an option to adopt. on the
other hand, industry innovation Precincts funded through
ausindustry are business-driven and are useful to more
established businesses seeking to increase sales, export and
to collaborate to grow. enterprise connect has one program,
Researchers in Business, which provides grants to allow Pfro
researchers to undertake placements in business to develop
new ideas or solve problems.
voucher schemes are effective for SmEsVoucher schemes provide an appropriate mechanism for
an sme to collaborate with a university, placing control of
the collaboration with the sme. Voucher schemes span
the funding gap, spread risk and generally do not require
matching funds. These schemes operate in a number of
oecD countries. The Victorian government’s Technology
Voucher Program is an example of a successful australian
voucher scheme. over 500 vouchers have been issued over
a three year period to companies to allow them to work
with Pfro’s. much of the appeal of the scheme to company
and researcher alike is that the decision on the voucher is
taken rapidly (within five weeks), and that the parties agree
to a simple one page agreement. lengthy, complex legal
negotiations are often cited as a key barrier for companies
and Pfro’s getting together to carry out an initial pilot piece
of collaborative research.
Targeted procurement schemesThe us small business innovation research (sbir) Program
is a demand-side measure that has now been copied or
adapted by a number of other countries. The us sbir has
existed for nearly three decades, but changes following
reviews and a strong promotional effort by the us small
business administration have given it a considerable boost
in the past 10 years. The us congress established the sbir
Program by requiring major research funding agencies to
set aside a small percentage of their budget. This ‘set-aside’
is used to fund contracts with small business to develop
new products and services of interest to these agencies. a
key benefit to small business is that the sbir program does
not require matching funds. There is a short lead time for
applications, and review processes are rapid. a number of
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oecD countries have adopted modified forms of the us sbir
scheme. The Victorian government operates such a scheme.
The commonwealth government has planned a pilot sbir-
type scheme in its enterprise solutions Program but it is
constrained by insufficient funding.
3. TEchNOlOgy INTERmEdIARIES Technology intermediaries (also known as accelerators or
incubators) are an important mechanism to address the
barriers to collaboration between industry, particularly smes,
and Pfros. These organisations play a vital facilitation role to
catalyse collaborations between smes and Pfros and help to
ensure they run smoothly, particularly for smes. They also play
an important role in reducing the risk of new collaborations.
There are a number of examples of intermediaries helping
firms take up new technology in other oecD countries e.g. the
uK catapult centres.
Technology intermediaries identify, connect and facilitate
communication between parties at all stages of technological
innovation, from research to product, whilst being able to
differentiate between them. This allows a better assessment of
sharing the risks and rewards, determining where weaknesses
lie and optimising the benefits of government intervention.
access to information, and assistance with problem
identification and solutions are key challenges for smes.
Technology intermediaries provide people with the right
background and experience to assist an sme and help to
find the right sources of support. This may include assistance
with developing a business plan, addressing a technology
problem or access to research.
Technology intermediaries can make use of a voucher
scheme to help an sme access support from Pfros.
The diagram on page 6 shows how the technology
intermediary model can be fostered to help achieve the
goal of improving collaborative outcomes from australia’s
research potential. Value chains provide a powerful set
of interrelationships and opportunities. The link between
research provider, technology developer (e.g. a sme), and
technology user (e.g. a customer) is a stylised form of value
chain. such value chains will not naturally assemble unless
all components in the chain understand the financial end-
game, and the associated risks, incentives, and rewards. The
benefit of involving an intermediary in assembling such a
chain is that core skills can be retained to help all parties
build trust, and to overcome the challenges associated with
information asymmetry, absorptive capacity, and project
management that were identified earlier.
collaborative arrangements succeed only if barriers
are recognised and de-risked early in the collaboration.
The presence of other complementary assets in the
collaboration, and experienced mentors in the form of a
technology intermediary, can help create the conditions for
successful collaboration. for example, the explicit presence
of a technology user can not only help provide financial
incentives to align the collaboration, it can help inform the
research and create the “virtuous circle” on which ongoing
innovation depends.
4. ThE ROlE Of gOvERNmENT INduSTRy ANd INNOvATION POlIcy IN SuPPORTINg cOllAbORATIONS
Policy consistency and continuity of assistance measures governments have an important role in providing continuity
of support measures and incentivising collaboration
between Pfros and industry. a holistic ‘systems thinking’
approach to innovation policy is needed. Policy consistency
is vital, the assistance provided needs to address sme needs,
with minimal compliance requirements.
incentivising collaboration requires recognition and reward
of efforts by Pfro researchers to increase engagement and
victorian centre for Advanced materials manufacturing victorian Centre for advanced Materials Manufacturing (vCaMM) provides an example of an advanced technology
incubator that operates from initiation to market realisation, working with sMes to prepare them to collaborate and
then catalysing collaboration with universities and government. vCaMM provides industry with a way to access
research, provides sMes with support solutions, and assists sMes with planning, to identify appropriate resources
and technologies, and to find partners. vCaMM operates differently in the various stages in the innovation process,
covering such things as project management, protection of iP and acting as a portal for sMes to access CRCs and other
government programs.
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foster ‘cultural exchange’. The era, while encouraging more
attention to quality in university research, is discouraging
external collaboration because of perceptions that this may
result in fewer articles in leading scientific journals (even
though the uK experience shows that, with appropriate
incentives, industry collaboration and research excellence
can still coexist).
complementarity between state and federal government programs for facilitating industry-PfRO collaborations it is important to have strategic cooperation between all
levels of government to avoid duplication and ensure
complementarity. state governments generally have
a better understanding and knowledge of the micro
and small businesses in their jurisdictions and are well
placed to interact directly with smes and facilitate their
links with Pfros (e.g. through local assistance, offices).
The commonwealth government is better placed to
manage national measures to encourage businesses
to seek Pfro and other business collaborators. The
commonwealth government also needs to balance the
era with a complementary measure that rewards industry
collaboration.
Involving larger companies with requirements for new technology in SmE technology developmentfunding is the major impediment confronted by smes in
bringing their new technology to market and neither the
financial markets nor governments are prepared or able to
address this need. in a period when government resources
are constrained, other solutions have to be found. large
profitable companies are a potential source of support
for australia’s smes. When a large company needs new
technology it would be logical for them to consider investing
in a potential supplier of the required technology. early
identification of a lead customer prepared to co-invest in
commercialisation is another option.
Tax measures or a grant program could encourage large
companies to support smes to develop the technologies
they need. extending the r&D tax concession to large
companies that do this would be a simple cost-effective
Figure 1 Technology intermediaries and their relationship networks.
Technology userseg. Business, government, others
Researchproviders
eg. PFROs
Researchdevelopers
eg. SMEs
TECHNOLOGYINTERMEDIARIES
Note: Government policies, programs and actions can a�ect each of the network nodes shown. Frequently a combination of di�erent measures might be needed aimed at di�erent nodes in the network. Examples of government in�uences include:• For research providers government provides research grants and other incentives and sets priorities. • For technology developers government provides grants, procurement programs and measures such as a R&D tax concession.• The National Collaborative Research Infrastructure Strategy (NCRIS) is a good example of an infrastructure support scheme that brings together users from public and private sectors.• For technology users government provides procurement programs and measures such as a R&D tax concession.• For technology intermediaries government measures include ARC linkage, voucher programs, matching levies and programs such as the CRC program.
New products, services, problem
solving
Angel & Venture Capital Investment
guidance commercialisation
Research outputs, ideas, facilities
Funding, opportunities,
de�ning problems
Finance, sales, test sites
Ideas, skills, research outputs
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TRANSlATINg RESEARch INTO EcONOmIc bENEfITS fOR AuSTRAlIA: REThINkINg lINkAgES
measure. even where large companies are disinclined to
provide investment funds for technology development in
smes, they could provide a commitment to purchase the
technology in the event that it is successful. This could in
turn provide smes with access to other sources of funding
such as venture capital.
Evaluating and measuring success of current schemes australia has a number of examples of industry-public
sector research collaborations (such as the crc program,
csiro, rural r&D corporations) however there has been
very little work done across these different approaches to
understand what has worked in successful cases and what
did not work in others. undertaking such a study could help
to draw lessons that improve the design of those models and
increase collaboration.
5. cONcluSIONS & REcOmmENdATIONS
1Productivity and economic growth in australia can be
enhanced through increased collaboration between
business and Pfro researchers. however, in australia there
are fundamental systemic barriers to securing this innovation
dividend. We also lack best practice incentives to encourage
collaboration between Pfro researchers and industry,
particularly smes.
the Commonwealth government should put in place
measures to overcome the barriers and disincentives to
collaboration between PFRO researchers and business
and establish new measures to encourage collaboration,
particularly for the benefits of sMes. specific funding
should be allocated on the basis of the impact of
university research.
PFROs should implement measures to overcome the barriers
and disincentives to collaboration between their researchers
and business, and should encourage collaboration
particularly with sMes.
2Technology intermediaries are a proven mechanism for
achieving productivity gains and economic growth through
collaborations. These intermediaries are particularly important
for growing our smes. There are some good examples in Victoria
and in other oecD countries. There is an opportunity to apply
these models in other states.
state and territory governments should establish
technology intermediaries to help sMes in their
jurisdictions grow.
3 Voucher schemes offer an effective mechanism to enable
smes to collaborate with Pfro researchers. There is scope
for more widespread adoption of this model to address the gap
in the funding mechanisms available to support high growth
potential smes.
state and territory governments should adopt voucher
schemes to help sMes collaborate with other firms and
access the resources of PFROs.
4 sbir-type schemes use procurement to link researchers
with potential customers. They are successful in other
oecD countries and in Victoria. unless customers exist to pay
for innovation, its pursuit can be pointless. With a customer
at the head of a value chain, funding of development is more
assured, requirements are better informed, risk is reduced, and
stakeholders will line up.
Other state and territory governments should follow
victoria’s lead in adopting sBiR-type schemes. the
Commonwealth government’s pilot enterprise solutions
Program scheme should be allocated additional funding
so that it can achieve critical mass.
5 incentives for large profitable companies who are potential
customers for new technology to invest in smes who can
supply the technology would open up a new source of funding
for commercialising good ideas.
the R&D tax incentive should be reintroduced for those
large companies that commission the development of
technology based products from australian sMes.
Small Technologies cluster the small technologies Cluster (stC) demonstrates the role of a technology intermediary serving as an incubator
accelerator for new emerging and enabling technologies. the stC operates the victorian government’s successful
technology voucher program and sponsors collaboration between sMes, and between sMes and universities. Placing
students in companies during vacation periods has been one of the novel approaches adopted by the stC. the stC
has 30 companies ‘in residence’, just under half of which are from universities.
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www.atse.org.au
TRANSlATINg RESEARch INTO EcONOmIc bENEfITS fOR AuSTRAlIA: REThINkINg lINkAgES
translating research into economic benefits for australia: Rethinking linkages © australian academy of Technological sciences and engineering
the australian academy of technological sciences and engineering (atse)
ATSE Officelevel 1, 1 bowen crescent, melbourne VicToria 3004, ausTralia
mail addressgPo box 4055, melbourne VicToria 3001, ausTralia
Phone +61 3 9864 0900 fax +61 3 9864 0930
Websiteswww.atse.org.auwww.stelr.org.auwww.crawfordfund.org
WORkShOP dETAIlSa recent workshop held on 9 august 2013, Customs house,
Brisbane explored how australia can maximise the translation
of research into improved productivity, with a focus on how
industry-research linkages can raise productivity at the firm
level. the workshop involved more than fifty key thought
leaders from industry, government and research from
australia and overseas.
Details of the workshop program, issues paper, presentations,
participants and other atse publications can be accessed at
the atse website.
the workshop was co-sponsored by atse and the australian
Council of learned academies (aCOla) and discussed
issues which are part of the remit of an expert working
group convened under aCOla’s securing australia’s Future
program.
AckNOWlEdgEmENTSaTse gratefully acknowledges the contributions of the
workshop speakers and participants, and the assistance
and guidance of the steering committee: Dr John bell fTse
(co-chair), Professor Peter gray fTse (co-chair), Dr rowan
gilmore fTse, mr Peter laver am fTse, ms leonie Walsh fTse.
cONTAcTfor further information please contact
harriet harden-Davies, manager, Policy & Projects, aTse.
email [email protected]
or telephone (03) 9864 0900.
AbOuT ATSEThe academy of Technological sciences and engineering
(aTse) is an independent not-for-profit organisation. its
fellowship, composed of more than 800 outstanding
scientists, technologists and engineers, drives its mission – to
foster excellence in technological sciences and engineering
to enhance australia’s competitiveness, economic and social
wellbeing and environmental sustainability. The academy
provides robust, independent, evidence-based policy advice
on science and technology issues to government, industry
and the community. more information on the academy can
be found at www.atse.org.au.
Australian Academy of Technological Sciences and Engineering
Page | 1 www.atse.org.au
PROPOSAL
Rewarding researcher–industry engagement and collaboration:
Developing an ‘Impact and Engagement for Australia’ (IEA) metric
OECD data shows that Australian researchers are less engaged in collaboration with industry than their counterparts in other countries. This is of particular concern for Australia given the large proportion of our researchers in the public sector. Calls to address this problem have increasingly been heard from government and industry. ATSE proposes an initiative that will lead to increased collaboration between Australia’s public sector researchers and business. It should also increase the impact of public sector researchers in both the science, technology, engineering and maths (STEM) and humanities and social sciences (HASS) fields on the Australian economy, the environment and society. The Excellence in Research Australia (ERA) initiative encourages university researchers to publish quality research in highly cited journals and rewards this behaviour by allocating approximately $65 million per annum based on ERA outcomes. While research excellence is desirable in its own right, the ERA is having the unintended effect of discouraging university researcher engagement with business. A counterbalancing measure is needed to ensure that collaboration is appropriately recognised and rewarded. While public sector researcher ‘impact’, ‘engagement’ and ‘collaboration’ are not synonymous, these terms have some common features and all three pose similar measurement challenges.1 In this proposal, the phrase ‘impact and engagement’ includes ‘collaboration’. Encouraging engagement To encourage more engagement between universities and industry, ATSE proposes the following:
That an ‘Impact and Engagement for Australia’ (IEA) metric be determined in parallel with the current ERA 2015 exercise. The data needed for the IEA is already being collected for ERA 2015, thus there are no additional costs involved in determining the IEA.
The non-philanthropic dollar amounts collected in the ERA 2015 exercise in the ‘Industry and other Research Income’ and ‘Research Commercialisation’ categories will be summed as a proxy for Impact and Engagement and used to determine the rank obtained by an institution for IEA.
The IEA metric would be determined in 2015 in parallel to the ERA on a trial basis, and institutions would be ranked on a grading from A (top 25% nationally) to D (bottom 25% nationally) – no subsequent funding to institutions would be associated with the IEA rankings obtained in the trial.
Institutions would then receive results for both ERA and IEA
Because the rank of IEA will be determined by comparison with the national average, both STEM and HASS fields of research will be compared to the institutional national average applying to that field, i.e. research fields with relatively lower dollar income will not be disadvantaged against fields with higher dollar income.
The determination of IEA will in no way alter funding linked to the ERA 2015 exercise.
1 Grant J, P-B Brutscher, SE Kirk, L Butler and S Wooding 2010, Capturing Research Impacts – a review of
international practice, a RAND Corporation report prepared for the Higher Education Funding Council for England.
National Challenges Kit 1.9
Australian Academy of Technological Sciences and Engineering
Page | 2 www.atse.org.au
Method for determining the IEA ATSE proposes that the method for determining the IEA would be as follows:
1) The submission guidelines for ERA 2015 have already been released.2 Eligible institutions (41 universities) are required to provide data by way of a series of staged submissions, which start on 19 January 2015 and end on 20 April 2015.
The data that eligible institutions are required to submit includes the following:
5.5.3.5 & 6 Industry and Other Research Income
The data that institutions are required to submit under this category is the Higher Education Research Data Collection (HERDC) Category 3 income for the ‘research income reference period’, which for ERA 2015 is the three year period from 1 January 2011 to 31 December 2013 inclusive. Institutions are required to apportion the income against the relevant four digit ‘field of research’ (FoR) code and record income according to its source (i.e. Australian or international). It should be possible to separate out and sum the industrial income from Australian and international sources. Commercial income from other sources such as research contracts and consultancies is also included in the returns for this Section.
5.6.2.7 Research Commercialisation Income.
Institutions are required to report research commercialisation income at the four digit FoR level, including income resulting from licences, options and assignments (LOAs); running royalties; cashed in equity; and other types of specified income. The above income includes patent royalties and so gives a good measure of the value of patents to an external licensor. This allows for a better representation of the value of patents generated rather than simply the number of patents.
5.5.3.7 Cooperative Research Centre (CRC) Research Income:
It may be appropriate to include the non-Commonwealth CRC funding attracted by the institution under this category.
The sum of each institution’s income from commercialisation and industrial sources by four digit FoR is then a good estimate of the Industrial and Engagement Income (IEI) earned by the institution over the reference period.
2) The IEI for each institution by four digit FoR code is then compared, on a per FTE basis,
with the national average. Organisations will then be ranked for their Impact and Engagement for Australia metric as per the following:
2 http://www.arc.gov.au/era/era_2015/2015_keydocs.htm
National Challenges Kit 1.9
Australian Academy of Technological Sciences and Engineering
Page | 3 www.atse.org.au
IEA = A For institutions in the top 25% IEI per FTE IEA = B For institutions ranking 50-75% IEI per FTE IEA = C For institutions ranking 25-50% IEI per FTE IEA = D For institutions in the bottom 25% IEI per FTE Each institution would then receive an ERA and an IEA for each four-digit FoR for which they returned data, composed of the numerical score (on a scale of 1-5) for the quality of their research in the research field, followed by a letter for the impact and engagement of their research (as a letter A through D). For example, a university whose research in ‘1003 - Industrial Biotechnology’ was judged (by the ERA) to be above world standard and the impact of research was assessed (on the basis of IEI) to be in the top 25%, would have a result of: 1003 – Industrial Biotechnology: the ERA-IEA 2015 result is 5-A.
ATSE recommends that the above exercise could be trialled for the ERA 2015 returns, on the understanding that there would be no funding attached to the results in the IEA category. However, if the exercise is judged to be informative, useful and – most importantly – influences behaviour, then this exercise could be repeated in subsequent ERA iterations and have institutional funding linked to the impact rankings. This proposal was developed by Fellows of the Academy in consultation with experts and stakeholders in the field. Members of the ATSE Research Impact Advisory Group were: Professor Peter Gray FTSE (chair) Dr John Bell FTSE Dr Alan Finkel AO FTSE Professor Paul Greenfield AO FTSE Mr Peter Laver AM FTSE Professor Tanya Monro FAA FTSE
National Challenges Kit 1.9
Australian Academy of Technological Sciences and Engineering
Level 1, 1 Bowen Crescent, Melbourne Vic 3004
GPO Box 4055, Melbourne, Vic 3001, Australia
T+61 3 9864 0900 F+61 3 9864 0930 W www.atse.org.au
Australian Academy of Technological Sciences and Engineering Limited – Incorporated ACT ACN 008 520 394 ABN 58 008 520 394
21 January 2014
The Secretary
Senate Standing Committee on Economics
Parliament House
Canberra ACT 2600
Dear Sir
Tax Laws Amendment (Research and Development) Bill 2013
In the view of the Academy of Technological Sciences and Engineering (ATSE)1, this
legislation is flawed and should not be passed. ATSE is concerned that passing this Bill
would have severe impacts on Australia’s productivity. ATSE finds it difficult to understand
the arguments presented to justify this Bill.
Technological innovation, underpinned by research and development (R&D), is a key driver
of productivity and international competitiveness for Australia. Large companies play an
important role in driving innovation through investment in R&D. Given the priority to lift
productivity in Australia, ATSE has strong concerns regarding the adverse impact that this
Bill is likely to have on large companies and their investment in R&D in Australia.
ATSE urges the Committee to consider the following key suggestions:
1. Ensure that a rigorous evidence-based approach is taken in analysing this Bill, and
that this approach is reflected in the Committee’s report to the Senate
2. Recognise and take steps to avoid unintended consequences of driving R&D
investment offshore (including loss of employment and related spill-overs as well as
negative impacts on some large Australian companies).
Further comments on these suggestions follow.
1 ATSE advocates for a future in which technological sciences, engineering and innovation contribute significantly
to Australia’s social, economic and environmental wellbeing. The Academy is empowered in its mission by some
800 Fellows drawn from industry, academia, research institutes and government, who represent the brightest and
the best in technological sciences and engineering in Australia. The Academy provides robust, independent and
trusted evidence-based advice on technological issues of national importance. ATSE fosters national and
international collaboration and encourages technology transfer for economic, social and environmental benefit.
www.atse.org.au
2
1. Ensure that a rigorous evidence-based approach is taken in analysing this Bill,
and that this approach is reflected in the Committee’s report to the Senate
ATSE advocates a rigorous, evidence-based approach. It notes that the explanatory
memorandum states under ‘compliance cost impact’ that the Office of Best Practice
Regulation has determined that a regulatory impact statement is not necessary. While ATSE
understands that these sorts of Bills are not normally subject to regulatory impact statement
requirements, it feels that the Committee should be provided with detailed information that
would be normally be found in such statements.
Given the likely impact of the BiIl on industry R&D expenditure in Australia, and that the R&D
tax incentive program has only been running for a short period of time, it is important that the
Committee has access to detailed information regarding the cost, benefits and impacts of the
Bill including whether there could be adverse impacts on the profitability and productivity of
businesses that perform R&D in Australia.
2. Recognise and take steps to avoid unintended consequences of driving R&D
investment offshore
Loss of business investment in R&D in Australia
The Second Reading Speech contains a statement that the measure “targets access to the
research and development (R&D) tax incentive to the small and medium sized entities”.
However, the Bill does not change the ability of, or the extent to which, small and medium
sized enterprises (SMEs) access the incentive. Furthermore, a proposal in relation to the
quarterly tax credits, which ATSE notes has been deferred for further consultation, would
have a very significant impact on the efficacy on the growth and stability of SMEs.
The Second Reading Speech also states that SMEs are more responsive (than big
companies) to increasing their R&D spending as a result of incentives. ATSE knows of no
evidence to support this claim. The ability of SMEs to undertake R&D changes as their
fortunes change. Larger companies are much more stable and make larger, longer-term
investments in R&D. Unlike SMEs, large companies have the capacity to take up and use
their research outcomes rather than having to raise money for the expensive
commercialisation stage. Therefore research performed by large companies is likely to have
a greater return on investment than smaller company research favoured by the legislation.
The $20 billion threshold creates problems, because companies that are achieving results
approaching this figure will not know until well after the end of the financial year whether or
not they will benefit from the incentive. For such companies, there is effectively no incentive.
The Explanatory Memorandum implies that the Bill will have no impact on business
expenditure on R&D in Australia. However, ATSE notes that a significant proportion of
business expenditure on R&D in Australia is performed by large companies (more than 68
per cent according to the 2013 Innovation Systems Report). The majority of these large
companies are multinational and are capable of shifting their R&D to whichever country
provides the greatest incentives. By removing access to the incentive, some large
companies that currently invest in R&D in Australia may move some or all of this investment
overseas.
3
This would have a major multiplier effect as it is the R&D personnel in large companies that
form the receptors (or bridges) between industry and the academic and government-funded
researchers. There is likely to be a double impact, not just the research shifting off-shore,
but a loss of those capable and experienced in collaborating with our universities and our
research institutions, such as CSIRO. Australia's relatively poor position in terms of
collaboration would only get worse as a result.
ATSE is most concerned that there will be significant and adverse impacts from this Bill on
investment in R&D in Australia.
Loss of employment and related spill-over benefits
Large companies undertaking R&D in Australia employ Australian graduates including PhDs.
When these employees move jobs, they take with them R&D skills and knowledge, often to
the benefit of other companies operating in Australia. The employment of researchers by
large companies generates secondary employment in the community. For every researcher
employed, additional jobs are created in the Australian economy, ranging from technicians
servicing research equipment to the services sector (e.g. banking, retail and food). Australia
could lose some of these benefits if this legislation drives large companies to invest in R&D
elsewhere.
Large companies also collaborate and contract with Australian firms, resulting in transfers of
technology and expertise. Over the past two decades large companies in Australia have
progressively reduced their in-house research effort in favour of contracting research to
public sector research organisations and universities. This has seen these companies
investing heavily in special research centres, endowing professorial chairs and providing
scholarships. Universities have benefitted by acquiring world-class facilities and people, and
industry has benefitted through the availability of trained people who have an understanding
of its needs and an orientation towards practical rather than purely academic outcomes.
Only large companies have the capacity to make this type of investment, so removing much
of their incentive to do this will see a reduction in their interest in providing such strategic
support for new technology development and application.
The secondary employment and related spill-over benefits of the sort noted above will be
lost if large companies, no longer eligible for the incentive, move their research offshore. In
some cases, it could even lead large companies to decide to relocate their entire operations
offshore. According to media reports, several countries are already approaching companies
likely to be affected by this legislation.
Instability impedes effectiveness
The Explanatory Memorandum reflects a lack of understanding of the decision-making
processes and long-term nature of R&D expenditure in large companies. R&D is mobile
prior to any decision about where it is conducted. After that decision is made the R&D will
be completed in the most cost effective place and the funds are no longer mobile. If there is
any uncertainty regarding the ultimate cost of conducting R&D because of the threshold
being capped this will have a negative impact on the decision-making processes about
where the R&D is conducted. Competitor countries compete for such activities, rather than
providing disincentives.
4
The Second Reading Speech states that the Bill “reduces waste by ensuring that
government incentives for R&D are applied in a more effective way”. Again, ATSE knows of
no evidence to support this claim. A key rationale for providing incentives for R&D is that, in
the absence of government support, firms would under-invest. This applies equally to all
sizes of firm.
With any government incentive, stability is essential to effectiveness. Australian
governments, over the years, have sought to encourage foreign firms to invest in Australia
and to undertake R&D here. Large foreign firms have been the target of marketing
campaigns by Invest Australia and Austrade. This Bill could be counter-productive to these
efforts, by implying that foreign firms cannot rely on stable R&D incentives in Australia.
ATSE believes that collaboration between publicly funded researchers, cutting-edge
technology SMEs and large businesses (who can both assist in the development of new
technology and act as customers for it), supported by technology intermediaries, such as
Cooperative Research Centres (CRCs), provides a powerful model for innovation in
Australia. This model would be placed at risk by this legislation as large companies would
have less incentive to pursue longer term strategic research and would instead confine their
research to tactical, short term problem solving projects. New CRC proposals already
confront considerable problems in raising the required matching funding from
industry. Some SMEs only participate because they have the comfort of a large company
co-investing, so passing this legislation would run the risk of further reducing the already
diminished number of CRC applications that are not just for public benefit.
Unrealistic cost savings
The Explanatory Memorandum states that the Bill is estimated to provide savings of $1.1
billion. This estimation presumably assumes that all the large companies will continue to
invest in R&D in Australia and deliver benefits to the economy. However, it would be most
surprising if this turned out to be the case. Although existing arrangements would be likely to
stay in place until work was completed or contracts honoured, there is little question that
large companies driven by targets to support their share price and by cost reduction
programs to remain internationally competitive, would rearrange their affairs to minimise the
impact of the tax changes on their businesses.
Given that the last round of amendments to the incentive occurred only recently, past claims
are not likely to provide a reliable basis for estimating possible savings from the adoption of
this Bill. Even if these savings to the budget are realised, the Australian economy as a whole
can be expected to be worse off as business R&D expenditure declines.
Finally, ATSE is dismayed at the prospect that large Australian companies will be particularly
disadvantaged because all their income (whether earned in Australia or overseas) is likely to
be assessable while, for foreign companies undertaking R&D here, only income derived in
Australia will be assessable. It is difficult to understand how the Parliament could agree to
such a discriminatory approach.
I trust these brief comments are useful. The contact here at ATSE is Harriet Harden-Davies
on (03) 9864 0926 or at [email protected].
Yours sincerely
5
Dr Alan Finkel AM FTSE
President