The Gap in Australian Innovation Policy
This fundamental truth highlights a gap in Australia’s innovation policy. Current policies are centred around funding collaborative projects: researchers develop breakthrough science, industry participates in demonstration projects, and then…?
We have built an ecosystem around project-based grant funding, and we wonder why Australian companies struggle to scale locally to serve global markets. The challenge isn’t research quality – our institutions are world class. This isn’t a funding problem, it is about market structure and timelines.
Market Structure
Innovation doesn’t cross the Valley of Death, companies do. Technology commercialisation does not follow project timelines; it is determined by market forces.
Instead of supporting Australian companies that commercialise solutions for industry, our public funding is skewed towards project partnerships between researchers and end users. We have accidentally broken the supply side of Australian innovation.
Competitive pressure and market dynamics build commercial maturity, driving quality, viability, and scale. Without a strong vendor ecosystem, there is no commercial pathway for local innovation. We have to adjust the balance of funding towards Australian vendors; local companies who are willing to take on the risk of commercialisation, and already invest and persevere with innovation.
Time is of the essence
Time is another key factor for consideration. Commercialisation does not follow project timelines; it follows market needs. Technology development often requires years of sustained investment, with market-responsive adaptation and customer validation. Take 3ME Technology for example. This Newcastle company electrified underground mining equipment before expanding into marine and defence. It took more than six years of sustained development before achieving its initial commercial breakthrough. Universal Field Robots automated mining equipment before expanding into agriculture and defence. Cross-sector technology transfer occurred through commercial market discipline over extended timeframes — beyond those of an individual project.
These companies persevered through market forces, not finite projects. Their success reflects normal technology commercialisation timelines, not project funding cycles.
Lessons from abroad
In Australia, we often debate international models such as Singapore, Silicon Valley, or the UK. But we tend to overlook economies structurally more like our own.
Sweden for example, is a historic mining economy. Rather than funding mining companies to overcome their challenges, Swedish policy channels innovation funding through technology vendors, who collaborate with researchers to solve industry challenges. This preserves local economic structures, while creating globally competitive suppliers.
New Zealand’s Callaghan Innovation model provides multi-year support directly to companies (rather than projects). New Zealand recognises that small economies must be born global, requiring commercial expertise from inception. Companies receive patient capital with commercial accountability; revenue targets, export development, employment creation, not academic deliverables or patents.
Even South Korea’s Chaebol innovation partnerships demonstrate this point. Government–industry partnerships there provided sustained company development over decades, not grant cycles. Korean technology companies such as Samsung and LG achieved global dominance through persistent, company-centric support that preserved commercial accountability while enabling long-term technology development.
These approaches share common principles: preserved commercial incentives, competitive dynamics, extended time horizons that match commercial development realities, and accountability to market outcomes rather than academic metrics.
Deliverables vs outcomes
A further challenge of project-based funding is accountability to deliverables rather than outcomes. Research measures success through publications and patents filed, grants received, TRL’s, collaboration agreements signed, and project completion rates. Projects end regardless of success or failure. They deliver what they deliver. And while the research itself may be impressive, it is almost impossible to measure outcomes.
The ARC’s own analysis for example, recognised that substantial investment in resources technology research has generated more than 1,200 patents. They have certainly delivered outstanding research, but then what?
To be clear, this is not a criticism of research; it isn’t the job of the ARC, and it shouldn’t be. Australian research is world class, and we must keep it that way. The question is, where do we measure the products created, companies scaled, revenue generated, or jobs sustained? The issue is that project-based accountability systems are incompatible with commercial objectives.
International evidence shows that academic excellence and commercial excellence require different competencies, governance structures, and accountability frameworks.
Australian success stories
Australian technology success stories demonstrate the importance of sustained, company-centric support rather than project-based funding.
TechnologyOne exemplifies this principle through systematic company development since 1987. The enterprise software company has doubled in size every five years through sustained 20% R&D investment over decades, not grant cycles. This 37-year timeline demonstrates how companies endure and compound innovation investments in ways that project-based funding cannot replicate.
NextDC achieved data centre technology leadership through 14 years of systematic expansion, now scaling into Asian markets. The company’s success required patient commercial development over timeframes that exceed typical project funding cycles by 400–500%. NextDC’s international market entry demonstrates how commercially mature companies sustain technology development through market cycles that would terminate most project-based initiatives.
These companies succeeded through commercial ecosystems that preserved market structure dynamics and enabled sustained technology development over decades. This could not be achieved with short-term project funding. But they certainly have the skills and capabilities we need as a nation to get more of our home grown innovation to market.
The company-centric approach
Australia needs to reset the balance of our industry policy. We need to support companies over extended timeframes, and an accountability framework aligned to commercial outcomes. This could mean redirecting commercialisation funding towards Australian technology vendors, to act as commercial intermediaries, translating research into globally competitive products and services.
Success can then be measured through revenue generation, export development, employment creation, and international market penetration, rather than publications and patents. Effective commercialisation would attract further investment, moving us closer to the 3% of GDP target often stated as our goal. The return on investment to government comes from tax revenue, employment, and exports, with direct national economic benefit.
Support should focus on the needs of Australian companies with existing customer bases, technical integration capabilities, and international market access capable of sustained commercialisation. This will allow our research institutions and organisations to focus on research excellence, leaving the building of commercial translation capabilities to Australian businesses.
A sophisticated economy
Australia’s innovation challenge is not research quality, our institutions are world class and should remain focused on research excellence. The challenge is not an academic one, it is a commercial; the missing support for our local vendor ecosystem.
Project based innovation policies fail at commercial translation because they bypass the market structure dynamics that drive innovation success. We fund the valley walls (research institutions and end-user companies) while bypassing bridge builders at the expense of our economic complexity.
The solution requires policy makers to recognise commercial timelines differ from academic timelines, that market structure preservation drives innovation success, and that companies, not projects, carry innovation forward with the patience and commercial discipline necessary for sustained market development.
International evidence demonstrates that company-centric innovation policy drives superior commercial outcomes. Sweden, Israel, and Germany achieve technology export success through sustained company support that preserves competitive market dynamics.
Australia can achieve similar success by rebalancing innovation investment. Commercialisation funding should flow to the vendor ecosystem, while our research institutions remain focused on research excellence. Projects do not build companies — companies build innovation. Supporting Australian firms as commercial intermediaries over sustained timeframes, with accountability to market outcomes, is how we will grow revenue, create jobs, and deliver sustainable national prosperity.