Commercialising university research: a good but costly move

| August 26, 2014

The federal government is seeking to restructure the way university research funding is allocated to foster more applied outcomes. Tim Mazzarol explains why strengthening the relationship between universities and industry makes sense.

Industry Minister Ian Macfarlane this month suggested that the funding of research grants to universities should be decided on the basis of the number of patents generated rather than the number of academic papers published. He said this was something other countries were already doing, and he was more interested in producing jobs than producing papers.

His comments were quickly condemned by many within the university sector who argued that trying to tie research funding to the production of patents was risking harm to fundamental and theoretical research. While this could certainly be the case, more could be done to engage universities in the early stages of the commercialisation process. That would create a more beneficial and closer relationship between the academy and industry in Australia.

The missions of universities and industry

A problem with commercial engagement between universities and industry is the different missions these two groups have. Universities are tasked to educate and undertake research for the public good. Industry seeks to use R&D to generate commercially valuable products and services through invention and commercialisation. The two do not always find engagement easy, as I have previously noted in The Conversation.

There is no science minister in the current federal cabinet, but the role has been assumed by Ian Macfarlane through the Department of Industry. Responsibility for research infrastructure comes under the ministerial control of Christopher Pyne through the Department of Education.

This administrative division between two ministers and their respective departments is something of a metaphor for the divide that exists between university research activity and industry. It is also clear from Macfarlane’s comments that a more applied focus may be demanded of our universities under the present government.

These issues are not confined to Australia. The need to strengthen university-industry ties has recently been debated in the United Kingdom. The UK Government commissioned an independent review by Sir Andrew Witty, CEO of GlaxoSmithKline, to examine how Britain’s universities can drive economic growth in their local areas.

Published last year, the Witty report, Encouraging a British Invention Revolution, highlights the important role universities play within the national economy. It acknowledges their engagement in education and research, but also calls for the university sector to adopt a “third mission”. This mission is to make the facilitation of economic growth a core strategic goal.

Witty also recommends that universities be required to report their “third mission” activity to government on an annual basis, and to identify any impediments to this activity along with recommendations for ways to overcome such obstacles. In return the government is asked to publish its response to these reports and make recommendations for change.

The key to enhancing engagement between the universities and industry, according to Witty, is to identify and undertake “arrow projects”. These are long-term strategic projects targeted specifically at local industries where an existing potential for international growth exists. Such projects are designed to engage innovative small to medium enterprises (SMEs).

Other interesting recommendations are the need for universities to make it easier for SMEs to access their services through the creation of “single points of entry”. This would “triage” each SME to determine their specific needs and then direct them to the most appropriate part of the university. The aim would be to increase engagement between the universities and SME sector. Witty also suggested:

University business schools should be incentivised to prioritise working directly with local businesses on workable solutions to practical problems.

A key element in this strategy is for UK universities to work on their arrow projects via the network of Local Enterprise Partnerships (LEP), which were established by the Department for Business, Innovation and Skills in 2011. The LEP are voluntary partnerships between local authorities and businesses. Around 39 LEP were operating in the UK in 2013.

Would it work in Australia?

The Global Competitiveness Report for 2013-2014 suggests that Australia ranks well in terms of the quality of its scientific research institutions (eighth out of 148 countries). We also score a respectable 15th place for university-industry collaboration. However, investment in R&D by Australian companies only scores a 30th place and our capacity for innovation is ranked 23rd.

This compares to the UK, which ranks third for the quality of its scientific research institutions and fifth for university-industry collaboration in R&D. UK company spending on R&D ranks a respectable 12th and the overall capacity for innovation ranks eighth.

This suggests that while Australia and the UK are both considered “innovation-driven economies”, with relatively good innovation performances, the latter is keen to avoid complacency. Australia should also avoid becoming complacent; the future growth of the economy will depend on more not less innovation and commercialisation.

We seem to have the essential foundations in place but there is a need for Australian industry to invest more in R&D, and to help our 1.96 million SMEs improve their innovation and global competitiveness. Strengthening the relationship between universities and industry via the adoption of a third mission makes sense. This should not result in the deterioration of the quality of university education and research, but it will require a change in how university performance metrics are calibrated.

It is important to note that the Witty report recommended that the UK government invest at least £1 billion (A$1.8 billion) over the life of the next parliament to fund arrow projects. This is a significant sum in times when national budgets are tightening. However, there is a need to invest in R&D if future returns to commercialisation are to be realised.

If Minister Macfarlane and the government are seeking to restructure the way university research funding is allocated to foster more applied outcomes, they would do well to note Witty’s recommendations and the price tag associated with this strategy.

This article appeared first in The Conversation and is republished with the permission of the author.