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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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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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

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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 policyresearch@atse.org.au

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.