Small business can eat uni R&D lunch

The science establishment argues it needs ever more money for productivity-improving research.  The Reserve Bank has another idea.

In a speech last week, RBA Assistant Governor Brad Jones addressed innovation in a way that should alarm university and discipline research lobbies, not least because it ignored them.

Dr Jones argued that small and medium enterprises, especially professional, scientific and technical services are taking the “innovation baton” from large firms, including early-stage R&D and research IP. And he made the point that innovation is about more than entirely new products and processes, it is also about “adaptation and diffusion of other cutting-edge ideas and processes across the economy.”

It is a point the Productivity Commission made in a report last year, “In Australia, innovation policy has tended to give pre-eminence to interventions that foster the creation of novel productivity-enhancing ideas and technologies in selective parts of the business sector, including by leveraging the frontier research expertise in universities.”

“Where innovation policy focuses mainly on cutting-edge scientific or technological breakthroughs, it tends to miss the way firms in much of the economy are innovating on the ground.”

Which rather detracts from the R&D funding pitch presented by university and science specific research lobbies who want more government money for them and less for businesses that do not partner with the public sector.  Calls for the government to ensure 3 per cent of GDP is spent on R&D are perennial. Science and Technology Australia, for example, campaigns for a commitment of 2.4 per cent of GDP going to research and development by 2030 and 3 per cent by 2035. At 1.68 per cent now, Australian outlays are a full percentage point behind the OECD average.

And the research community also wants the Commonwealth to change what it funds. Critics complain that the Research and Development Tax Incentive accounts for $3.4bn of the Commonwealth’s $9.2bn budget for direct research support this financial year argue funding would be better used by public research, or at least by businesses cooperating with universities.

But Dr Jones points out that the R&D Tax Incentive is, “arguably the most valued and direct source of cash flow support for innovating SMEs” and that given small and medium enterprises make up the overwhelming majority of firms in Australia, “it would only take a small increase in the share of these businesses to successfully innovate to have a material impact on the Australian economy.”



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