Funding for Research and Development is not encouraging Innovation

October 16 2014

Australian governments (Federal and State) spend around $9B per annum on research and development and this is above the average of the G20 countries. Therefore, the trouble is not necessarily that more money needs to be spent; it is that most of this money is tied up in (untouchable) tax concessions for business and (largely immutable) funding for the ARC, NHMRC, universities, CSIRO, Ansto, AIMS, CRCs, et alia. As a result, there is almost no flexibility in the system and any new program that a government has the courage to put up only has the capability to make changes at the margins. As respondents in this forum have pointed out, this means that there is little chance of making any sort of real impact. 
Part of the problem, it seems to me, is that we have (i) a culture of reliance on the government to fund corporate welfare, (ii) an unwillingness by companies and investors to take the necessary risks to achieve real step changes in innovation, (iii) a democratic system in which any proposal for change is consistently and vehemently opposed by those seeking to bring down the government of the day, and (iv) a fourth estate that is obsessed with reporting primarily on the negatives. It's therefore little wonder that we keep circling the same old challenges, hoping that something different (i.e., a miracle) will happen this time around. 
If anything really different is to emerge, we have a choice of two options, or a mixture of both. Firstly, rather than continuing to fund the same old entities and programs because we always have, we could extricate ourselves from the restrictions of the current entrenched funding system and reallocate the money based on a brave new, contemporary, reassessment of priorities. Alternatively, or in addition, we could move away from the current zero sum game by raising additional funding to put into the pool. In respect of the latter, this is being attempted with the GP co-payment model, designed to provide funding for a massive new medical research initiative, but that doesn't look like it's going anywhere soon.

Yet another wicked problem in the system is that the research and education institutions are all encouraged to partly fund their operations by recouping a share of the commercial revenue from the uptake of their inventions/patents by industry (think external revenue targets). The trouble with this is that the institutions end up playing a hard bargain on IP in a desperate attempt to protect these putative returns, thereby discouraging businesses from working with them due to the strong likelihood of drawn-out and complex contract negotiations. Furthermore, by insisting on a share of the profits of the commercialisation, the research institutions end up competing with the very businesses that they are supposed to be helping translate the IP, thereby diminishing the chances of a successful commercialisation. The different forces in the system are clearly not working in support of each other.

22 October 2014

Some additional comments, not necessarily in order of importance: 

1. It is easy to suggest a simple, one-line answer to the issue of business-research institution engagement but, as we all know, the devil is in the detail. We should not underestimate the fact that the answers to complex challenges are likely to be complex and require very careful analysis and implementation to ensure that there are no unintended consequences; 
2. It is accepted that IP Offices in research institutions are cost centres for the most part, but it is the allure of the allusive blockbuster that drives cautious behaviour and overestimation of value and impact, not the prospective income from BAU; 
3. Two things that are often ignored in studies of research institution-business interactions are that (i) it is often the company, rather than the research institution, that insists on rock-solid protection of the IP and water-tight research agreements before it will become involved, and (ii) the vast majority of 'commercialisation' revenue received by research institutions (and this can be very substantial indeed) comes from collaboration on research projects, mostly generating incremental innovation, not patents; income from 'classic' commercialisation (i.e., royalties, equity sales and license fees) is generally very small; 
4. Reward structures at universities (contra CSIRO) do not rate external engagement and revenue anywhere near equally with academic excellence (i.e., quality publications and teaching), so there is very little incentive for researchers to pursue relationships with business. This is especially true since engagement of this sort usually involves the anathema of 'loss of academic freedom' through the company exerting control over the direction of the research. Some universities allow a higher proportion of any early commercial revenue to go to the academic, but the majority of the spoils usually end up with the university at the end of the day; 

What makes successful innovation?

Creativity and Research are vital components of innovation, but there’s no impact without delivery of a commercial product that is taken up by the target market.

RJ Hill Innovation has put together some articles and papers to help you make the right choices in commercializing your product. Please contact us should you have any questions regarding the contents of this page.


Obstacles to Industry Engagement


Thinking about the Market and the Customer Differently


Open  Innovation (from Chesbrough 2004)


Recognising the False Dichotomy of Excellence and Engagement




The South East  Melbourne Innovation Precinct with its research heart

centred around the Monash University campus at Clayton

Composite image developed by Monash University 2012



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