It's time to fix Australia's broken research-to-business pipeline

A practical proposal to align research with real business needs, using data, incentives and talent to drive global competitiveness.

Australia spends over $4 billion on the Research and Development (R&D) Tax Incentive and nearly $6 billion a year on research, yet business R&D investment remains well below OECD averages. The Strategic Examination of Research and Development (SERD) is a rare opportunity to change that. 

As Former Productivity Commission Chair Michael Brennan noted in his recent CEDA piece, the institutional structure of R&D remains too inward-looking. That’s true. So rather than endlessly redefining the problem, it’s time to focus on bold solutions. 

We have the data, the networks and the research talent. What’s missing is a demand-led approach that helps businesses find solutions to their hardest problems—collaborating with world-class researchers to gain a global competitive edge.

This piece sets out how we can turn our research, incentives and institutional assets into a platform for building globally competitive businesses.

Using the R&D Tax Incentive process more effectively

Australia’s future prosperity depends on our ability to deliver products and services the world values—at a quality, cost or capability unmatched elsewhere. That requires solving hard problems others haven’t, in areas where we hold unique advantages. It’s this combination—complexity, distinctiveness and strategic focus—that builds the economic moats needed for high-value exports and resilient growth. To do this, we must build a system that starts with business problems—not research outputs.

My proposal to the SERD review outlines a national “helper system” that uses the R&D Tax Incentive application process to help active, innovation-focused firms and nudge these businesses towards researchers with the right expertise to solve their identified problems. 

This would be supported by federated platforms across universities—bringing together “Find a Researcher”, “Find a Graduate”, and “Find an Investor”—to reduce friction and improve businesses access to research to build competitive advantage.

It requires deeper talent exchange between business and the research sector, embedding researchers in industry and bringing experienced business people into research teams. When a business is trying to solve a critical problem, the research system should respond—with urgency, relevance and ambition.

Realigning R&D investment

Fixing the pipeline from research to impact requires more than better tools—it demands sharper role clarity and institutional accountability. Universities must go beyond offering capability—they need to become active partners in creating business value. That means recognising and rewarding engagement that solves real-world problems, not just publications and grant metrics.

Government must focus its funding and policy levers on building sovereign capability and commercial outcomes, not just sustaining volume. 

Businesses, in turn, must see R&D not as compliance or cost-offset, but as a strategic asset—best unlocked when paired with deep research expertise.

We need a system that rewards usefulness, speed and outcomes—not process. This isn’t about diminishing academic freedom or commercialising everything—it’s about ensuring our public investment in knowledge translates into prosperity, resilience and national strength.

The missed opportunity

The result of this misalignment is a profound economic opportunity cost. Despite generous tax credits, over 90 per cent of R&D Tax Incentive claims are spent outside the research sector. Much of this goes to consultants, internal software systems and compliance support—not to solving meaningful problems through research collaboration. 

The effect is structural: Australian businesses continue to underinvest in innovation that builds long-term advantage. Our economic complexity has stalled, with Harvard’s Atlas ranking Australia 93rd in the world for complexity—behind Kazakhstan and Uganda. 

Meanwhile, sovereign capability sectors—like clean energy, advanced manufacturing, medical technology and agri-food—remain underdeveloped despite high global demand and substantial local knowledge. 

We are producing excellent research, but we’re not directing it where it can compound into competitive advantage. Without intervention, we will continue to subsidise routine spending while missing the chance to turn public investment into private prosperity. That’s why we need a system that engages firms when they are ready to innovate and connects them—efficiently and confidently—with the best researchers to solve their hardest problems.

Call to action

The SERD process is a rare opportunity to reimagine how Australia turns knowledge into prosperity. We have world-class researchers, ambitious businesses and one of the most generous R&D tax systems in the world. What we need now is a more deliberate bridge between them—a system that helps businesses find the right research partners when they need them most and gives researchers the tools and encouragement to respond with impact.

The foundations are already in place. By aligning our incentives, talent and institutions around shared national goals, we can unlock a new era of innovation-led growth. We can build sovereign capabilities, create globally competitive industries and ensure that public investment in research delivers real, measurable returns.

The SERD review is our chance to stop circling the problem and start building the solution. The path forward is clear—and the potential is immense.