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Keynote address conference on the role of managemnt in commercialising research and technology

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Thank you for inviting me to speak to you this morning.

Your conference is both important and timely, as the commercialisation of research and development is increasingly becoming the central science and technology policy issue.

You will all be aware that I released the Report of the Block Task Force on Commercialisation of Research for public comnent last week. You will be hearing from a number of those on the Task Force during this Conference, so I will leave it to them to go into the detail of the Report.

Without indicating any commitment to specific recommendations, I believe that the Report strikes a good balance between the desirable and the achievable. It contains many useful recommendations, all of which the Government is

actively considering.

Some of these are to be examined as part of the process leading to the Government's White Paper on Science and Technology, due for release in May next year. Others will be addressed more immediately.

As an example, I would like to take the opportunity presented by this Conference to announce that the Government will be amending the research and development provisions of the tax law so that the

clawback provisions not apply in relation to contributions made by eligible companies to Cooperative Research Centres.

This was one of the major recommendations of the Block Report.


The Treasurer has agreed to amend the tax laws to ensure that this problem does not impede the development of the CRCs.

The Australian Tax Office is currently examining the most effective means of implementing this decision and I expect an announcement by the Treasurer to provide relevant details shortly.

Over the last few months I have spoken on several occasions of the need for a significant lift in the level of industry involvement in the CRC program. At the same time, I recognised that there have been

certain factors which, from industry's perspective, have discouraged such involvement. One of these, an important one, has been uncertainty over the tax

treatment of investment in CRCs.

This decision provides the clearest possible signal from the Government to industry that the Government is prepared to respond positively to their legitimate criticisms of the CRC Program. I expect industry in its turn to respond accordingly.

Having spoken on the specific, I would now like to make some general comments about science and technology policy and the Government's attitude to commercialisation.

Science and technology have always been strongly supported by the Government. Commonwealth support for science and innovation has increased by 29 per cent in real terms since 1982-83. In this year's Budget, Commonwealth support for major science and

innovation programs rose from $2.4 billion to $2.6 billion, a real increase of 4.3 per cent.


Since then a further $30 million has been ccnmitted, including a $10 million increase in capital infrastructure funding for Government science agencies, and $20 million research funding directed toward the establishment of a magnesium metal industry in Australia.

This strong support for science and technology is based on the recognition that they are essential to our economic and social development.

However even the best and most exciting research cannot contribute to this development if it is not utilised by those with the capacity and resources necessary to benefit from it.

It is here, at the conmercialisation stage, that our greatest weakness lies. The focus of the Government's attention is therefore now very clearly on the commercial end of the national

research effort.

Given Australia's current economic difficulties it is not surprising that more attention is being paid to the ways in which science and technology can make a greater contribution to national prosperity.

Nor is it surprising that the Government should ask, on behalf of the taxpayer, what return we are receiving from the $2.6 billion we invest in research and development every year.

Let me be very clear on this point. The Government's approach to science and technology is not a passing fancy. It flows from an understanding of the complex processes involved in producing benefits from research activity. The Government is looking beyond the unsophisticated

and parochial debate of a number of years ago.


Science, whether it be industrial, environmental or basic, must be carried out to solve real problems - to meet clearly articulated goals.

Not long ago it was assumed that the benefits of research wauld flow naturally from the research activity itself. There was a view that, if researchers were funded and provided with the opportunities to do the research they considered to be important, new products, processes and equipment would inevitably be produced and the world would

automatically become a better place in which to live.

If any thought was given to how the research would lead to a better world, or how the research results would be translated into the improved performance and increased competitiveness of Australian firms,

it would be explained that a linear process of innovation was operating.

Under the linear model, basic researchers develop ideas and concepts that are taken over (in seme undefined way) by strategic researchers (perhaps in CSIRO). The outputs of strategic research are then passed to people in industry, who carry out

experimental development. Next canes a complex and sonewhat hazy process of product development, involving design, prototyping and production engineering, followed by production, marketing,

sales and distribution.

Of course the fallacy of this approach is that it assumes funds pumped into research will inevitably result in economic benefits.

Most of us have moved a long way iron this relatively simple model of the innovation process.


If research is intended to produce economic benefits it is essential that the research outputs are directed towards an existing or latent market need. There has to be a user, or customer, for the research.

This is as true for research carried out for the public good as it is for research directed towards the development of new manufacturing processes or products. Moreover, if the research is to be

successful, it has to take into account not just the needs of the user, but the user's financial and technical capabilities.

Put simply, research is most likely to be successful when it is a response to a clearly identified and articulated market need and where the end-user of the research is involved in the management of the research from its earliest


Most of you will know that the Government is in the process of preparing a White Paper on science and technology, which will be tabled in May of next year. The form of that paper is still to be

determined, but four themes have already emerged.

Commercialisation is the first, and in many ways the most important of these themes, certainly if ccxiznercialisation is interpreted as including the more effective application of all research outputs.


I emphasise that its importance, in a policy sense, is not because the Government sees commercialisation as the only goal of research - there is much valuable work being done which will never reach the market. Ccmnercialisation is

important because it is the area where the most difficulties currently lie.

Three other key themes emerging from the White Paper process - science and technology awareness, skills for science and technology, and science and technology infrastructure - will all be influenced by the need to ensure that maximum use can be made of Australia's considerable, and high quality, research and development effort.

Ccmnercialisation is not a simple process and cannot be taken as an isolated activity, as an end in itself. Successful ccmnercialisation is a process that has to be integrated into the

innovation and business development strategy of a firm, a strategy that is about developing a successful business, not about developing a successful product or process.

This depends on a wide range of factors, many of them external to the science and technology system. They include the economic environment within which the firm is operating, the regulatory

and legal environments, the availability of various forms of finance, and the skills, experience and attitudes of people working within the firm.

Clearly if these factors are not right, there will be little interest in investment in science and technology activities, and therefore little point in increasing the level of support for research and

development in Australia.


However the Government does not see its responsibilities as ending here.

Successful conmercialisation depends on good management and we must strive to develop excellent management skills and world class managers. Government programs such as those of the National

Industry Extension Scheme (NIES) are playing a vital role in this regard. .

The Government's tax concession for research and development plays a key role in supporting science and innovation. It encourages business to fund and manage research, whether the research is carried out by business itself or within the public


The Cooperative Research Centres Program aims to link research users, particularly industry, into the pre-competitive end of the research system.

The 30% external funding target for key Government science agencies - CSIRO, ANSTO and AIMS - is making our strong public sector research capacity better able to serve industrial goals.

The success of the Government's approach is shown by the fact that we have one of the strongest rates of growth in business sector research and development of any OECD country, albeit from a low base.

Moreover, the business research and development growth rates are complemented by the rate of increase in foreign patent applications taken out by Australian residents - which is considerably

higher than that found in any other OECD country.


Clearly the national research effort is being harnessed more effectively towards meeting our national aspirations.

I feel sure that your deliberations today will also assist in this process.

Thank you.