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Research and Development

Industry Commission inquiry report

This inquiry report was signed on 15 May 1995.

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Volume 1

Cover, Copyright, Signing Page, Contents, Abbreviations, Glossary, Terms of Reference, Overview, Recommendations


A1 R&D and Innovation
A1.1 Introduction
A1.2 Definitions and concepts
A1.3 Models of the innovation process
A1.4 The national innovation system

A2 Australia's Innovation System
A2.1 Introduction
A2.2 R&D performing institutions
A2.3 Incentive structures
A2.4 Policy making
A2.5 Conclusion

A3 The Performance of Australia's Innovation System
A3.1 Introduction
A3.2 Historical influences
A3.3 Inputs to innovation
A3.4 Outputs from national R&D
A3.5 Diffusion
A3.6 The contribution of technological innovation
A3.7 Conclusions

A4 R&D, Competitiveness and Economic Growth
A4.1 Introduction
A4.2 Competitiveness
A4.3 Innovation and firm competitiveness
A4.4 How valuable is R&D to firms?
A4.5 Technological competition, industry-wide R&D and innovation
A4.6 Implications for business R&D performance
A4.7 R&D and economic growth

A5 Rationales for Government Involvement
A5.1 Introduction
A5.2 R&D has ‘public good’ characteristics
A5.3 Other rationales for intervention
A5.4 Market failure may not require intervention

A6 Policy Approaches to R&D
A6.1 Forms of intervention
A6.2 Some guidelines for R&D policy design


B1 Features of Government Research Agencies
B1.1 A variety of government research agencies
B1.2 Government research agencies have a major role
B1.3 Sources of funds
B1.4 Why government research?

B2 CSIRO: An Overview
B2.1 A unique Australian institution
B2.2 How CSIRO operates

B3 CSIRO - The Key Issues
B3.1 What is CSIRO's role?
B3.2 Setting priorities
B3.3 Funding arrangements
B3.4 The value of CSIRO's research
B3.5 Dissemination of CSIRO's research
B3.6 Size, structure and efficiency

B4 CSIRO - Options for Reform
B4.1 External priority setting and funding
B4.2 Response by participants
B4.3 Implications for the Commission’s approach
B4.4 Other proposals
B4.5 The Commission’s proposals

B5.1 What is DSTO's role?
B5.2 Funding and outlays
B5.3 Issues


C1 Higher Education R&D Activities
C1.1 Introduction
C1.2 An overview of the higher education sector
C1.3 Some key issues

C2 Higher Education Research Funding Mechanisms
C2.1 Introduction
C2.2 Current mechanisms for funding research
C2.3 Institute of Advanced Studies - ANU

C3 General Funding Issues
C3.1 Introduction
C3.2 What should be the role of research in HEIs?
C3.3 Are funding arrangements appropriate?

C4 Competitive Funding and the ARC
C4.1 The Research Quantum
C4.2 Funding criteria: excellence, ‘relevance’ and priorities
C4.3 The role of the ARC
C4.4 ARC - other funding issues

C5 Other Funding Issues
C5.1 Infrastructure
C5.2 Funding for the Institute of Advanced Studies
C5.3 Taxing postgraduate students

C6 National Health and Medical Research Council
C6.1 Introduction
C6.2 How NHMRC operates
C6.3 Issues in evaluating NHMRC
C6.4 Priority setting

Volume 2

Cover, Copyright, Contents


D1 Characteristics of Business R&D
D1.1 Introduction
D1.2 What is business R&D?
D1.3 How has business R&D activity changed over time?
D1.4 How does Australia’s BERD performance compare with other countries?
D1.5 Government support for BERD: Australia and international context
D1.6 In what sectors and product fields is BERD mainly carried out?
D1.7 What types of company have mainly contributed to the change in BERD in recent years?

D2 Support For Business R&D
D2.1 Introduction
D2.2 Industry Innovation Program
D2.3 Other programs directly supporting private R&D
D2.4 Private sector initiatives

D3 The 150 per cent R&D Tax Concession
D3.1 Introduction
D3.2 How valuable to companies is the 150 per cent R&D tax deduction?
D3.3 Effectiveness of the R&D tax concession
D3.4 Suggestions to increase the value of the concession
D3.5 Unevenness in rate of assistance provided
D3.6 Syndication provisions of the tax concession
D3.7 Other modifications suggested by participants

D4 Competitive Grants Schemes
D4.1 Introduction
D4.2 Objectives and selection criteria
D4.3 Program costs and coverage
D4.4 Role of schemes in meeting specific objectives
D4.5 Role of schemes in encouraging additional R&D
D4.6 Commercialisation outcomes of supported projects
D4.7 Role of schemes in improving international competitiveness
D4.8 Role of schemes in overcoming market failures
D4.9 Additional comments on revised arrangements

D5 Commercialisation Issues
D5.1 Introduction
D5.2 R&D vs commercialisation costs
D5.3 Impediments to commercialisation
D5.4 Rationales for assisting commercialisation
D5.5 Programs assisting commercialisation

D6 Cost Recovery
D6.1 Introduction
D6.2 Mechanisms requiring repayment
D6.3 Principles for designing cost effective support
D6.4 Benefits of mechanisms requiring repayment
D6.5 Problems with mechanisms requiring repayment
D6.6 Cost to revenue effects of repayable schemes
D6.7 Appropriateness of introducing cost recovery in competitive grants

D7 Policy Implications and Proposals
D7.1 Introduction
D7.2 The 150 per cent R&D tax concession
D7.3 Syndication
D7.4 Competitive Grants for R&D
D7.5 Broad-based support for tax loss companies
D7.6 Preferred options
D7.7 Implications for grant arrangements
D7.8 Levy-based research associations?


E1 Rural R&D: Institutional Framework
E1.1 Overview
E1.2 R&D corporations and councils
E1.3 State governments
E1.5 Universities
E1.6 Cooperative Research Centres
E1.7 Australian Bureau of Agricultural and Resource Economics
E1.8 International comparison

E2 Why Support Rural Research?
E2.1 The nature of rural industries
E2.2 The benefits from rural research

E3 The Research and Development Corporations
E3.1 The evolution of the corporation model
E3.2 The levy system
E3.3 Setting priorities for RDC research
E3.4 Assessing research outcomes
E3.5 Accountability

E4 The Government Contribution
E4.1 The ceiling
E4.2 The ratio
E4.3 Small and emerging industries
E4.4 Addressing regional problems

E5 State Involvement in Rural Research
E5.1 Priority setting by State departments of agriculture
E5.2 Extension


F1 Linkages in the Innovation System
F1.1 Types of R&D linkages in the innovation system
F1.2 What role for government in creating linkage mechanisms?
F1.3 Linkage mechanisms funded by governments
F1.4 Some issues arising from linkage programs

F2 Cooperative Research Centres
F2.1 Introduction
F2.2 Objectives of the CRC program
F2.3 Features of the CRC program
F2.4 Issues in evaluating the CRC program


G National Priorities
G.1 Importance of priority-setting processes
G.2 Participants’ views
G.3 Recent developments in setting national priorities
G.4 Is there a better way?

Volume 3

Cover, Copyright, Contents


A Public Consultation
A.1 Consultancies
A.2 Information papers
A.3 Public hearings and submissions
A.4 Visits within Australia
A.5 Conference on R&D and economic growth
A.6 Roundtable discussions
A.7 Presentations
A.8 Other visitors to the Commission
A.9 Overseas visits

B CSIRO's Priority Setting System
B.1 Background
B.2 The priorities-setting framework
B.3 The assessment of relative priorities in practice
B.4 From national priority setting to resource allocation
B.5 Ownership of priority-setting process

C Other Government Research Agencies

D Higher Education Research and Development Funding Mechanisms
D.1 Unified National System
D.2 Australian Research Grants Committee
D.3 Australian Research Council
D.4 Other Commonwealth funding

E Business R&D Grant Schemes
E.1 Discretionary Grants Scheme
E.2 Generic Technology Grants Scheme
E.3 Automatic R&D support for tax loss companies

F Selected Rural R&D Programs
F.1 R&D corporations and councils
F.2 Other rural R&D related programs administered by DPIE
F.3 Cooperative Research Centres (CRCs)
F.4 Australian Centre for International Agricultural Research

G Major Linkage Programs
G.1 Research Centres Program
G.2 Collaborative Research Grants Program
G.3 Advanced Engineering Centres Program
G.4 Australian Postgraduate Awards (Industry)
G.5 National Priority (Reserve) Funding
G.6 Collaborative schemes under the Industry Innovation Program

H Government Research Agencies in Selected Countries
H.1 United States
H.2 Japan
H.3 United Kingdom
H.4 Germany
H.5 Canada
H.6 New Zealand
H.7 Taiwan
H.8 Korea
H.9 South Africa
H.10 India
H.11 Summing up


QA Quantifying the Returns to R&D: the Evidence to Date
QA.1 Methodologies
QA.2 Data issues
QA.3 Estimates of the returns to R&D
QA.4 Summary

QB Productivity Growth and the Returns to R&D in Australia
QB.1 Productivity performance in Australia
QB.2 The social returns to R&D in Australia
QB.3 Sectoral returns to R&D
QB.4 Conclusions

QC Economy-wide Effects of the Tax Concession
QC.1 An economy-wide model of R&D
QC.2 The impact of eliminating the 150 per cent tax concession
QC.3 The impact of company tax rate reductions in eroding the value of the tax concession
QC.4 The impact of redistributing the tax concession towards industries with the greatest private R&D spillovers

QD Assistance to Industry from Governments’ Support for R&D
QD.1 Introduction
QD.2 The concept of assistance
QD.3 Industries benefiting from R&D
QD.4 Assistance to business R&D
QD.5 Assistance to industries benefiting from R&D
QD.6 Conclusion
Annexes to Appendix QD
QD1 Standard measures of assistance
QD2 Derivation of nominal and effective assistance to the performance of business R&D
QD3 Derivation of nominal and effective assistance to industries benefiting from R&D

QE State Government Involvement in R&D
QE.1 Introduction and summary
QE.2 New South Wales
QE.3 Victoria
QE.4 Queensland
QE.5 Western Australia
QE.6 South Australia
QE.7 Tasmania
QE.8 Australian Capital Territory


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