Australia underperforms in business university research collaboration. At times, the blame has been attributed to the lack of business expenditure in R&D or the inability of universities to engage with business. This piece from 2013 highlights that much of the blame can be attributed to the differing nature of research expenditure by business and universities.

First published in Australian Financial Review.
Access on QUT eprints.

Despite a significant improvement in business investment in R&D, Australia still underperforms in business university research collaboration. Much of the blame has been attributed to the differing nature of research expenditure by business and universities.

In 2010, businesses spent 52 per cent of their R&D outlay on engineering, while universities spent only 9 per cent. Businesses spent 28 per cent on ICT, while universities spent just 4 per cent. On the other hand, while universities spent 38 per cent of their research expenditure on medical, health and biological sciences, businesses spent just 6 per cent.

This is not to say that universities and businesses have to be totally aligned in their research investment — but the disparity in the Australian context is serious. It almost appears as if the research capacity in universities has evolved independently from the innovation needs of the economy. What has led to this?

The research expenditure of an Australian university consists of its external research income and its own investment in research from internal funds, including research block grants. Because research income seldom covers the full cost of research, much of the internal investment in research ends up subsidising activity that is determined by external research income. So, the discipline mix and the scale of research—and consequently of the research workforce—in Australia's universities is, to a large extent, determined by the nature of research income.

A large part—some 45 per cent—of this research income is from competitive peer-reviewed grants. A strong peer-review funding program is an essential component of any innovation system. It allows a nation to build enabling capacity that is internationally benchmarked, and a globally mobile research workforce ensures emerging research trends are reflected in the national research profile.

If anything, a strong case can be made for an increase in the competitive grant funding base for a resource-rich nation looking to transition to a more knowledge-intensive economy. This is even more the case for the Australian Research Council (ARC), as it covers a vast majority of the discipline mix in our universities.

While a healthy peer-review funding program is important, there can be unintended consequences if such funding also comprises of a large proportion of the overall research income of universities. Because a peer-review system is driven by researchers, the funding distribution is influenced by the volume of quality proposals across disciplines. This, in turn, is driven by the size of the research workforce in these disciplines. Increased research activity in a discipline leads to an increased production of PhDs, which results in more candidates for academic positions, as well as greater representation in the peer review.