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Networks and Collaboration4.4 International Comparison

4.4.1 Business funding of higher education R&D (HERD)

Business funding of R&D performed by higher education institutions provides a measure of R&D collaboration between the business and research sectors. Businesses may also support higher education expenditure on R&D (HERD) indirectly by paying to use the R&D facilities of higher education institutions, buying R&D results, or investing in spin-off companies.[124] Australia's performance on this metric is relatively modest compared to other OECD economies with 4.9 per cent of higher education expenditure on R&D financed by the business sector in 2018, which is below the OECD average of 6.2 per cent. Australia's below-average performance on this metric is persistent over time. Over the past 15 years the share of HERD financed by the business sector has remained below the 7.0 per cent mark, peaking in 2006 at 6.8 per cent. Among OECD member countries, the share of HERD financed by business in 2018 was highest in South Korea (14.3 per cent) and Germany (13.5 per cent)[125]

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4.4.2 Businesses collaborating on innovation

Australia's low rates of business collaboration turn up consistently across multiple metrics. One common measure is the share of innovation-active businesses that collaborate on innovation. On this measure, around 21.6 per cent of Australian innovation-active businesses are estimated to have engaged in some form of collaboration when developing or introducing innovation in 2016–17. By itself, this estimate may not seem particularly low — especially when compared with some of the other measures of collaboration — and it is certainly not the lowest result across the OECD countries. However, it is still considerably less than the latest available OECD average for this metric of 34.7 per cent. Another useful metric is collaborative R&D by R&D-active businesses. For 2016–17, 40 per cent of Australian businesses collaborating on innovation undertake R&D, which is below the OECD average of 47 per cent. Australia ranks 26th on this metric out of 35 countries.[126]

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4.4.3 Businesses collaborating on innovation with higher education or government institutions

Australia ranks last in the OECD for business collaboration on innovation with higher education or government institutions - at just 1.6 per cent of all product and/or process innovation-active businesses in 2016–17. This compares poorly to the OECD average of 14.2 per cent and far below countries such as the United Kingdom, Finland and Austria, where one in four innovating businesses collaborate with either the research or government sectors. It is also arguably the weakest result across a range of similar measures, and reflects unfavourably on the ability of Australian businesses and research institutions to maximise the return on public investment in science and research.[127] Noting the caveats around methodological and scope differences between the different data sources, the result nevertheless stands in stark contrast with both the high quality of Australia's research outputs and the solid rates of innovation across the business enterprise sector.[128][129]

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