The word 'innovation' is often associated with banks of computers, not the back paddock. But Australia’s agricultural sector is actually a world leader when it comes to research and development.
Calls are growing for Australia to reverse a productivity malaise by investing more in knowledge infrastructure. It would be wise to take heed of agriculture’s century-long experiment with collaborative research.
Agricultural research and development corporations began in the early 1900s with the wool industry. By the 1930s, in recognition of the importance of the agricultural sector generally, the idea spread to other commodities and government started to provide matching funding.
There are now 15 organisations covering products from meat, eggs, wine and sugar to forestry. Some of the most significant organisations include the Grains Research & Development Corporation and the Cotton Research & Development Corporation. Similar organisations also exist in mining and dairy manufacture.
The success of these organisations is well documented. The most recent evaluation, reviewed by Treasury and the Department of Finance, found for every $1 invested, $10.51 is gained over 25 years.
The economic benefits come largely from productivity gains, improved market outcomes and improved quality management.
Unfortunately most sectors don’t have government-backed collaborative organisations to help smaller businesses innovate and commercialise research.
Narrowly-targeted or temporary programs are more common. These research schemes are often project specific -- like CRCs -- or very small. And in many cases the research isn’t industry-led.
It is a shame that, for the most part of Western history, the translation of ideas and science into use has occurred largely by accident: an unusually tenacious scientist shepherds their work to manufacture; a chance personal friendship between a researcher and business person sees a discovery taken into production; a small under-resourced tech transfer unit hits upon a patient capitalist with faith in the idea.
In fact, these are some of the common ways research is commercialised in Australia.
Whereas (lucky) innovations provide enduring returns, other opportunities are missed. It is difficult to quantify these unseen possibilities, although it is clear that Australia has many high quality upstream research bodies, but a very low rate of commercialisation.
Australia’s knowledge infrastructure would be well-served if other industries took up the example of RDCs.
All in the design
RDCs work because they are led by industry but share responsibility for funding with government. Industry players fund the organisation, usually through levies, an amount then augmented by public money.
Businesses end up with the benefits of the resulting intellectual property. However, over time, the economic benefits are spread across the community through cheaper and better goods and services.
Since the organisation is funded by businesses, there is a strong incentive to engage with the industry. While the individual businesses themselves don’t need to take the time to actively monitor research projects or interact with government policy, they can still benefit from the output.
And because the costs are shared between businesses, narrow projects that benefit only one business are avoided in favour of research that has intra-industry benefits.
For instance the RDC would not fund research that only solved a technological problem that only one member had. Project intellectual property would be owned collectively by the members, not just one company.
Inherent in the RDC model is an in-built extension program that ensures that ready-to-use ideas are transmitted to the end-user. These are very practical programs that reach out in the most appropriate way to farmers.
The livestock RDC, for instance, funds a range of practical workshops designed to help producers gain knowledge and skills to improve livestock operations.
The process from research to commercialisation is a long one. Building up the knowledge infrastructure to streamline this process, whereby industry directs research and sees it translate to its members, requires a certain amount of stability.
RDCs have worked well because they are supported in legislation, which neutralises some of the problems associated with short term government programs that disappear before the people they are meant to help are aware of them.
The agricultural experience has shown these organisations have been remarkably successful in building informal relationships and trust between people in the industries they serve.
These are, of course, important issues to consider if other industries are to begin adopting similar models as part of their drive to innovate.
Not for everyone
RDCs have been a success because they fit with specific industries. There are many other ways of creating and commercialising research, and it depends on the characteristics of each sector as to which approach is best.
Obvious industries that could benefit the most from its own RDC are those that are export-oriented or want to become more export focused. This could include the processed food, medical instruments, tourism or heath services sectors.
The rural RDCs work because they are tied to businesses with a common product market, or because they use similar technologies. This means members collaborate in solving these problems, making them unsuitable for promoting domestic competition. They best serve groups of firms that want to compete internationally.
This means that these businesses share common barriers and problems which the RDCs can focus on solving. For example, it may be to improve operational processes, make management more effective or enhance the reputation of Australian products in overseas markets.
The real limitation is that these organisations could not be used for the development of proprietary intellectual property, but to assist export oriented domestic companies that see their competitors as overseas players.
Selling the idea of major government investment into an intangible such as R&D is never easy. It is simple to see the output from tangible investments such as roads and tunnels.
However, there is a considerable body of evidence which shows the importance of R&D and innovation for the wealth of both companies and countries. Selling these notions, although more difficult, will ultimately be more rewarding.
Elizabeth Webster is professorial research fellow, Melbourne Institute of Applied Economic and Social Research and director, Intellectual Property Research Institute of Australia at University of Melbourne.
Elizabeth Webster does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.