The poor translation contrasts with the general quality and quantity of academic research. Australia ranks an impressive seventh when it comes to our universities, and ninth in terms of highly cited research publications.

But while R&D investment by universities is up by more than 90 per cent in the past 14 years, business R&D spending has flatlined, consistent with general underinvestment across the same period. Business investment as a share total R&D fell from 61 per cent to 51 per cent over the decade to 2019.

This declining investment is evident on the ground, with business researchers representing just 42 per cent of all researchers. This compares with 82 per cent in Korea, 74 per cent in Japan and 72 per cent in the US

Academia, business fail to collaborate

More problematic is the lack of collaboration between academia and business. According to the Australian Innovation System Monitor, Australia ranks stone dead last in the OECD for collaboration between business and universities.

A well-crafted action plan was released by the previous government late in its tenure and focused on prioritising research around the modern manufacturing priorities, six domains where research funding is being preferred.

These are renewables, space, defence and medical research, and the two staples of mining and food. For a nation dominated by services, the lack of focus on this sector is remarkable.

Australia’s venture capital market has come a long way since the bad old days when researchers had to go offshore to get commercial support for their research. Observers note that the tipping point was about 2015, when the market began to take serious interest in start-ups.

To date, this has been broadly focused on software and, to a lesser extent, the biomedical space – meaning there remains a significant “valley of death” for researchers seeking to get beyond proof of concept.

A new accelerator fund and a $243.5 million trailblazer program to support selected universities working with industry partners, as well as a program of industry-supported PhDs, are focused on improving Australia’s woeful translation record.

Money talks when its comes to academic research and time will tell how much these programs will move the dial.

But the elephant in the room is the poor research and innovation performance of Australia’s pervasive small and medium enterprise sector.

About 97 per cent of Australian businesses have fewer than 20 employees. Research shows SMEs lack confidence in the ability of universities to understand their day-to-day problems and how to solve them. Collaboration remains cost prohibitive, particularly when SMEs are expected to fund initiatives.

The result is a paltry level of investment in research and innovation: businesses with fewer than 200 employees (over 99 per cent of firms) spend less than $25,000 a year on innovation. That is about the cost of a new, multifunction photocopier.

Recent research by CSIRO and Melbourne’s RMIT came up with 23 technical improvements that should begin to make a difference, but there remains a fundamental policy issue about the effectiveness of the federal government’s $3 billion R&D tax incentive.

A major review by venture capital pioneer Bill Ferris in 2016 resulted in significant change to the program, which drawfs the government’s $2 billion direct funding for university research.

Ensuring the R&D tax incentive goes to real product innovation – rather than simply funding the deployment of the next iteration of business software or making market assessments – would go a long way to ensuring precious tax dollars are used effectively.

Sydney University research vice-chancellor for research Emma Johnston notes that Australia is highly unusual in the way it funds research indirectly. With all the data showing the nation is lagging big-time on product innovation, there remains significant questions whether the fiscal support via the R&D tax incentive could be better used.