Australasian Science: Australia's authority on science since 1938

Strengthening the Weakest Link

By John Bell

Australia needs to develop better incentives for public–private sector collaboration.

Through initiatives like the Australian Research Council (ARC) and the Cooperative Research Centres (CRC) programs, Australia has a long history of encouraging public researchers to seek links with firms and other end users of research. These “supply-side” innovation measures encourage researchers to supply their skills and experience to innovating companies.

“Demand-side” measures that encourage firms to seek innovation inputs from the public sector have received little attention in Australia, although recently there has been renewed interest in stimulating private sector interest to build on public sector innovation capabilities.

Despite our strong public sector R&D performance, we trail other OECD countries in the scale of research linkages to the private sector, so we miss out on many of the real innovation dividends from our public sector R&D investment.

There are some good examples of demand-side stimuli that Australia could emulate.

The US Small Business Innovation Research (SBIR) Program, which has been copied or adapted by a number of other countries, requires agencies with major research budgets to set aside 2.5% of their funds for contracts with small business to develop new products and services of interest to these agencies.

Current requests for proposals include one from the Department of Agriculture to develop new biofuels, and another from the National Science Foundation to enhance access to the radio frequency spectrum The Foundation proposes to make 35 proof-of-concept awards of $150,000 each. The most successful of these will be eligible for further assistance up to $1 million. Follow-on funding for one US Navy project recently exceeded $20 million.

A related incentive, the Small Business Technology Transfer (STTR) Program, is more focused on public–private sector partnerships. Both the SBIR and STTR programs provide assistance to start-up companies arising from university research.

In the United Kingdom, an SBIR look-alike – the Small Business Research Initiative (SBRI) – is funded from the procurement funds of major government agencies. Administered by the Technology Strategy Board, SBRI focuses mainly on the defence, health and constructions sectors. The Board is also responsible for another demand-side initiative – the Knowledge Transfer Partnership Program – which aims to improve the exploitation of science though public–private sector collaboration.

In Australia, the Victorian government has an SBIR look-alike – the Market Validation Program. Unlike its US counterpart, the Victorian program is centrally administered although it offers funding for research projects drawn from suggestions provided by all state government agencies. In 2009, 19 project specifications attracted 124 applicants of which 85 proposed collaborations with other firms or public sector researchers. The program has a $40 million budget over 4 years.

In Australia, funding SBIR-type programs using set-aside research funds might be resisted by the major agencies, but taking these funds from government procurement budgets (as in the UK case) would be less problematic. The Victorian government’s approach may be better suited to smaller countries like Australia.

Getting government agencies to accept the funding arrangements and take ownership of the SBIR processes is a challenge, as some countries that have copied the idea have found. In the USA, the Small Business Administration plays a key role in promoting the SBIR.

The UK’s Knowledge Transfer Partnerships achieve several goals – engaging new graduates in industrial research and innovation, identifying suitable university partners and using them to contribute to the design and management of projects.

The 2008 review of Australia’s innovation system concluded that introducing an SBIR-type scheme would fill an important niche in the Australian innovation system. It recommended that the Commonwealth government work with the states and territories to implement a program based on the US SBIR.

This recommendation was not taken up at the time, but should now be reconsidered. Demand-side incentives to encourage industry-driven innovation and greater public–private sector research collaboration offer a new approach that is worth exploring at both Commonwealth and state government levels.

Dr John Bell FTSE is a Senior Associate with the Allen Consulting Group and former Deputy Secretary and Chief Science Adviser in the (former) Commonwealth Department of Industry, Science and Technology. For more information see OECD (2011) Demand-side Innovation Policies.