Submission to Australian Government consultation on
Boosting the commercial returns from research
November 2014
Front Cover:
TOP: CSU Rhyzolysineter Laboratory, Wagga Wagga; CSU Biomedical Science Building, Orange
BOTTOM: CSU Vineyard, Orange; CSU National Life Sciences Glass Houses, Wagga Wagga
Submission to Australian Government on ‘Boosting the commercial returns from research’
Page 2
As a leader in strategic, applied research focusing on significant challenges facing
regional industries and communities, Charles Sturt University welcomes the release of
the Government’s discussion paper, and focus on the important translation of research
into commercial outcomes.
CSU believes it is important to have a broad view of innovation, one recognising the
creation of new technologies and ways of doing these things, as well as recognising the
importance of applying this research for practical outcomes. Without the application of
innovations into the practices of firms and industries, the benefits of research are not fully
captured.
CSU has extensive experience working with industry to increase profitability and deliver
broader benefits to Australian and international consumers. This is particularly the case
in agriculture.
Delivering commercial returns for industry – the Graham Centre for Agricultural
Innovation
The Graham Centre for Agricultural Innovation is a collaborative alliance between CSU
and NSW Department of Primary Industries which undertakes research for mixed farming
systems. Drawing on its proximity to the grain and livestock industries, the Graham
Centre has developed strong partnerships between growers, industry groups, and
researchers. To ensure that research is tailored to the needs of growers and exporters,
the Centre’s research priorities are overseen by an Industry Advisory Committee
comprising independent industry representatives.
The Graham Centre plays a role throughout the research, development, extension and
training continuum. By doing so it enhances on-farm profitability and enriches rural
communities in Australia and across the developing world.
The Graham Centre’s weed management research is leading to new non-chemical
control tactics that will help growers combat widespread herbicide resistance in weeds in
crops and pastures. Graham Centre researchers are also developing new annual hard
seeded legumes as break crops that improve soil nitrogen and provide an animal
feedbase, which will improve resource use efficiency, reduce costs of nitrogen inputs and
increase animal production.
However, while supportive of this focus, CSU wishes to highlight the challenges in
measuring and incentivising research application.
Commercial returns from research
One way research application can be measured is by examining the associated
commercial returns via patents, plant breeder’s rights and commercialisation income.
Where these direct returns are visible it is clear that the research is being applied to
valuable uses in Australia and or abroad.
However the absence of direct commercial returns from research does not necessarily
indicate that the research is not delivering economic returns to the people of Australia.
Submission to Australian Government on ‘Boosting the commercial returns from research’
Page 3
Instances where value cannot be captured or quantified
In many cases research can add significant value to the economy but in a way which
cannot be directly captured by the researcher or institution conducting the research. For
example, applied research that leads to advances in practice (such as the new
approaches to teaching children mathematics developed by Professor Bob Perry and
other staff at CSU’s Research Institute for Professional Practice, Learning and
Education) may result in widespread economic returns to the community, however it is
almost impossible to charge the beneficiaries of this research and yield a commercial
return. In economics, this is known as non-excludability. While there are ways to secure
commercial rights to this knowledge through patents and copyright, this can be difficult
where the research is a way of doing things rather than a specific scientific technology.
Where commercial value is difficult to capture, it is often difficult to measure the broader
value to society of this research. For instance, an improvement in a practice of speech
pathology (such as those developed by CSU’s Professor Sharynne McLeod), could
improve the quality of life of many Australians and those internationally, but how do you
value that increase in quality of life? Such values could be implied from willingness to
pay techniques and surveying but these are costly and there are considerable
methodological issues. In cases such as these it is difficult to derive more than a
qualitative view of the value of the research. However this does not at all suggest that
there is no value in the research and its application.
There is also research that is focused on public goods such as the environment. For
instance, research undertaken by CSU’s Institute for Land, Water and Society, on the
relationship between water delivery and downstream water quality and ecology is
informing government decisions on the management of water flows. This has led to
critical interventions with environmental water, contributing to the successful breeding of
the threatened southern bell frog in the Murrumbidgee catchment, and preventing
hypoxic blackwater and associated fish deaths in the Edward-Wakool system. It is clear
that the public places a high value on the environment but the free-rider problem
associated with public goods means that researchers cannot charge the beneficiaries of
this research. As a result of this market failure, there is a clear role for government in
funding this type of research to ensure the protection of the environment.
Undertaking the types of research outlined above is critical to the university’s mission, as
encapsulated by the motto taken from the writings of Charles Sturt, “for the public good”.
The importance of funding research which delivers commercial returns to industry which
cannot be directly captured is underscored by the current industry structure in Australia.
Australia’s manufacturing sector has significantly declined as a share of the economy
and employment for decades and constitutes a much smaller share of GDP than the
OECD average. At the same time, the Australian economy is dominated by the services
sector with more than 75 per cent of people employed in the sector and it accounting for
a similar share of gross value added.1
1 Lowe, P., The Changing Structure of the Australian Economy and Monetary Policy, Address to the
Australian Industry Group 12th Annual Economic Forum, 2012 http://www.rba.gov.au/speeches/2012/sp-dg-070312.html and ABS cat. no. 5206.0.
Submission to Australian Government on ‘Boosting the commercial returns from research’
Page 4
If we are to play to our economic strengths and to ensure that the research sector is
supporting the services sector we must fund research that delivers returns to the services
sector. However, the type of research that supports the services sector is not necessarily
the traditional patentable research where you can directly draw commercial returns but it
involves improvements in practice.
An example of this is the research being undertaken by CSU Lecturer (and PhD student)
Alexander MacQuarrie, a Critical Care Flight Paramedic who is working with NSW
Ambulance to examine the fitness and health of paramedics, their stress tolerance and
how this affects their clinical decision making.
It is suggested that the research sector and Government work together to construct ways
of measuring the value of these types of research to the economy. Quantitative and
qualitative metrics could be developed to measure practice change (and to a lesser
extent policy change) and the impact that this has.
Proposal 1
It is critical that the Government continues to fund research that delivers commercial and
economic returns to the community, but that cannot be directly captured or measured by
research institutions.
CSU suggests that the Government work with the research sector to develop metrics that
quantify the commercial returns from research that cannot be directly captured or
measured using current metrics.
Incentivising research collaborations that deliver value to industry
CSU is strongly supportive of efforts to encourage closer links between researchers and
industry that delivers value to the private sector. As noted earlier, there are complexities
involved with measuring the value of research to industries, but in the absence of better
metrics one simple way to measure this value is to look at research income derived from
industry. If industry is willing to pay for such research it is obviously of considerable value
to industry.
Another way the Government could try to encourage valuable collaborations between
research and industry is to reward patenting, patent income and commercialisation
income. However, this could create perverse incentives by placing an overemphasis on
the enforcement of property rights for research which excludes the rest of Australia from
the benefits of research which has been publicly funded.2
For example, in agriculture such incentives could encourage research institutions to
focus on developing and patenting new varieties of crops and then using the monopoly
power that a patent provides to charge maximum price for the use of this variety which
would in turn hinder the broad scale application of the research.
2 Blakeley, N. Lewis, G., Mills, D., “The Economics of Knowledge: What Makes Ideas Special for
Economic Growth”, New Zealand Treasury, 2005. See section on ‘Non-excludability’ for an excellent
summary of the tradeoffs between intellectual property protection and the spillover benefits of research.
Submission to Australian Government on ‘Boosting the commercial returns from research’
Page 5
Proposal 2
CSU recommends that the Australian Government consider a research block grant that
rewards institutions for delivering valuable research to industry, allocating funding based
on the share of research income from the following categories:

Australian Funding Contracts

Australian Funding Grants

Rural Research & Development Corporation Income
CSU also recommends that the Government simplify the design of the Sustainable
Research Excellence Threshold 2 block grant. The current funding methodology, while
technically elegant, is extremely complex and does not provide clear incentives for
universities.
Conclusion
Charles Sturt University appreciates the opportunity to provide a submission as part of
the Government consultation process.
If anyone should wish to discuss any of the points or proposals raised above, please do
not hesitate to contact my office, and we would be happy to provide any additional
information.
Professor Sue Thomas,
Deputy Vice-Chancellor (Research)
Charles Sturt University
Submission to Australian Government on ‘Boosting the commercial returns from research’
Page 6