R&D tax bonus not the only reason to work with unis

In corporate Australia's ongoing debate about the diversity and experience required of its directors, one perspective has gone unremarked: their connection with universities, or lack of it.

When most industries are facing fundamental technological or policy disruptions, from emerging fields like artificial intelligence or quantum computing, accessing the local academic talent helping shape these fields should be a board-level priority.

However, in recent years the debate about how we foster deeper university-industry collaborations has been almost entirely one-sided.

Universities have made an effort, prompted by bipartisan political reform and facilitated by networks such as Universities Australia and the Group of Eight, which is yielding results.

Cadence economic modelling recently showed that 16,000 companies formally collaborate with universities – generating an estimated A$10.6 billion a year in revenue directly for those firms, and creating an estimated 30,000 jobs nationwide. It also adds A$19.6 billion annually to Australia's GDP.

But beyond university outreach or forward-looking CEOs, what is needed is a proactive approach embedded into strategic planning and corporate governance.

The problem was recognised in the federal government's recent budget changes to the research and development (R&D) tax incentive. The government has decided to introduce an "intensity" threshold to recognise companies that invest significant amounts of R&D expenditure as a percentage of total expenditure.

This will have a negative effect for large companies with low R&D intensity (less than 2 per cent of total expenditure) R&D, while making the tax offset more attractive for companies that have high R&D intensities (5 per cent of more).

The government has signalled it wants R&D activities in Australia that are deep and meaningful – something that a corporate culture of working with research and university partners can offer.

Traditionally, there have been negative perceptions of university bureaucracy and control of intellectual property issues, but the sector has changed. At the University of Sydney, for example, our tech transfer office takes a pragmatic business approach to IP, which has allowed companies like Elastagen to flourish (the spin-off was bought by Allergan recently for tens of millions of dollars).

Moreover, we now have business development managers embedded within the University's schools and faculties to triage strategic problem as they arise. This is contributing to strong growth in contract volumes and R&D revenue for the university.

So how can boards and CEOs begin to engage with the university sector?

Recruiting board members with familiarity of the university sector, or including them on advisory boards or risk committees, is a good place to start.

From there, defining the problem and taking it to research teams directly (if you already know them), or to a senior leader within the institution who can refer to the right team internally is a good next step.

At the University of Sydney we recently ran a process for a financial service company, where we asked them to complete a problem statement brief and pursue their own contacts alongside our own process.

We found them three possible research teams to work with, one of which they ultimately progressed with because it was quicker than their own networks.

Government are also making this process easier. The federal government is working through industry growth centres in areas of national importance, such as in food and agribusiness and advanced manufacturing, amongst others.

State governments are also playing their role in areas of excellence. For example, NSW has world-class sensor research, which is a key input into the emerging field of artificial intelligence. Under the leadership of Professor Benjamin Eggleton who now also heads Sydney Nano and Professor Justin Gooding from the University of NSW, the NSW Smart Sensors Network (NSSN) is working on use cases across the environment, agriculture, defence, and biomedical sectors, amongst others. This is just the beginning of this kind of activity, with defence, cybersecurity and the Sydney Quantum Academy all following suit.

The time is ripe for industry-led groupings – like the Australian Institute of Company Directors, and the Business Council of Australia – to actively work with their members to generate university-research collaborations. This is not just about getting a better result under the R&D tax incentive scheme, but also strengthening strategy and risk oversight so that technological and policy risks are appraised and managed.

Associate Professor Eric Knight is Pro-Vice-Chancellor (Research-Enterprise & Engagement) at University of Sydney, and on the board of two companies. 

This opinion piece first appeared in the Australian Financial Review.