By Venni V Krishna
Economists call it the Australian Innovation Paradox.
Despite consistently ranking among the world’s best for its quality of education and basic research, the country has struggled to achieve sustained innovation leadership or economic impact through commercialization of the research.
Over the past decade, more than half of Australia’s basic research has been conducted by universities. However, Australian universities have remained constrained by funding models, governance structures, and policy settings that reward incremental excellence over risk-taking and system-level innovation transformations.
As funding tightens due to various factors, concerns are growing about its implications for research.
Academics such as Brian Schmidt, Nobel Laureate and former vice chancellor, Australian National University, and economics professor Richard Holden of the University of New South Wales, have raised serious concerns about declining public investment in research and development, particularly within universities.
Schmidt said: “I look around and I am scared”, pointing to the Australian government’s investment in its sovereign research capability, which was 50 percent higher 15 years ago as a fraction of its GDP.
Student fees and public funding
Over the years, the research model of Australian universities has become overly dependent on competitive public grants and international student revenue, reinforcing a ‘culture of revenue, profit and competition’.
In 2024, international student fees accounted for 47 percent of total enrolments across the Group of Eight (Go8) leading universities. They also conduct 70 percent of all university research.
Government support accounts for only around 20 percent of total research funding for the Go8, the Group of Eight universities that account for the bulk of university research.
Consequently, in March 2025 , when the Trump administration cut research funding to seven Australian universities by A$600 million, it came as a major shock.
In the national context, Australia’s Gross Expenditure on Research and Development (GERD) fell from 2.25 percent of GDP in 2008–09 to 1.7 percent in 2024, well below the OECD average of 2.7 percent, and behind Japan (3.3 percent), the US (3.59 percent), China (2.6 percent), and South Korea (4.2 percent).
As government support continues to decline, the management of this revenue stream risks becoming the dominant objective of university governance. This emphasis is unlikely to encourage universities to pursue translational research and development, and innovation for meaningful industrial and economic impact.
It is therefore understandable that Schmidt is “scared” about Australia’s research capacity.
The missing link
When we turn our attention to university-led innovation, a critical missing link comes sharply into focus.
Over the past decade, leading Australian universities have experimented with concepts such as “innovation districts, hubs and parks”. While these initiatives have had some success, they have not resulted in a fundamental transformation of universities into frontiers of national or global innovation systems.
Their impact has largely been ‘incremental’—supporting local collaboration, start-ups, and applied research—and to strengthen internal innovation capabilities within universities.
But these efforts have fallen well short of generating ‘radical’ or ‘blockbuster’ innovations of the kind associated with Silicon Valley, Taiwan’s Hsinchu Science Park (HSP), or the dramatic reinvention of Oxford and Cambridge over the past three decades.
For much of the 20th century, British universities—particularly Oxford and Cambridge—were deeply conservative institutions. Commercialisation, entrepreneurship, start-ups and applied research were often viewed as distractions from the university’s core academic mission.
However, by the late 1970s and 1980s, this stance became increasingly untenable. The rise of the US Ivy League and leading public universities—fuelled by federal mission agencies (National Institute of Health, National Science Foundation, Defense Advanced Research Projects Agency), venture capital, and university spin-offs following the Bayh–Dole Act—made it evident that Britain’s most prestigious universities were losing ground not in academic quality, but in innovation leadership and economic impact.
The success of Silicon Valley, Route 128, and university-linked biotech and ICT clusters exposed the limits of the British model.
In response, Oxford and Cambridge undertook a deliberate and far-reaching strategic shift in the 1980s in promoting science and innovation parks around their campuses.
Over time, this strategy produced dense local innovation clusters—most notably the “Cambridge Phenomenon”—characterised by university spin-offs, venture capital, multinational R&D laboratories, and sustained government support.
The Oxford Science Park, for instance, hosts about 100 businesses employing 3,000 professionals, while Begbroke Science Park accommodates 20 research groups and around 30 companies in 2025.
The total economic impact associated with Oxford University was estimated at about US$21 billion in 2019, around 50 percent of which came from research and knowledge-exchange activities—including IP licensing, 168 spin-out companies, and 32 other companies across both parks.
Multiple reports indicate that these impacts have increased by nearly 50 percent over the past six years.
Similarly, the innovation complex in Hsinchu Science Park (HSP) and its proximity to National Tsing Hua University (NTHU) and National Chiao Tung University (NCTU) has propelled Taiwan to global leadership in semiconductor technology—spanning design, fabrication, packaging, and sales—since the 1990s.
Drawing on the proven role of science parks in injecting dynamism into national innovation systems, the Singapore government too started making large, sustained investments in science parks from the early 1980s as part of a deliberate long-term strategy to position the country as a global knowledge and technology hub. Its approach was systemic, state-led, and tightly aligned with national technology transformative policies.
A defining feature of Singapore’s science park strategy has been its aggressive attraction and retention of global talent. Foreign researchers, engineers, and entrepreneurs are attracted by competitive funding, world-class infrastructure, regulatory clarity, and a high quality of life.
Unlike these global examples though, Australian initiatives have lacked scale, sustained mission-oriented funding, deep industry anchoring, and patient capital.
Innovation precincts have remained adjuncts to the university system rather than catalysts for the emergence of new technology platforms, globally competitive firms, or transformative industrial clusters.
Frontiers of innovation
Universities worldwide are increasingly moving beyond their traditional roles as providers of education and generators of scientific knowledge toward a more complex entrepreneurial university model.
University-based science parks could become highly attractive sites for deeper engagement with industry, venture capital, start-ups, and help procure government funding, as clearly demonstrated by the UK, Singapore, and China.
Interestingly, the Strategic Examination of R&D discussion paper cites the UK’s Catapult Centres —a network of nine organisations set up by the British government to promote research and development and exploit market opportunities — overlooks the highly successful models of the Oxbridge science park or the Melbourne biomedical one.
It is time the Australian government and the mandarins of science policy recognise this omission.
Given the proven success of science parks, it is surprising that Australian universities and government policy discourse have so far accorded very little or no importance to building science parks at leading universities, with Melbourne’s biomedical precinct being a notable exception.
While AUKUS, the QUAD, and the newly announced Pax Silica do open up possibilities to develop innovation, participation in these groups alone is not enough. Strategic national technological autonomy in quantum technologies, semiconductors, AI, renewable energy, biomedicine, and other emerging domains is also imperative.
The success of these will depend largely on universities as frontiers of innovation, advanced skills formation, incubation and start-ups, and early-stage technological development.
Yet Australia approaches this transition from a position of vulnerability. Chronic underinvestment in science and technology, reflected in a low Gross Domestic Expenditure on Research and Development (GERD) to Gross Domestic Product (GDP) ratio, sits uneasily with the scale of ambition now required.
A rapid doubling of GERD as a share of GDP within the next two to three years is essential if universities are to serve as anchors of technological capability and national resilience.
Venni V Krishna is a Professorial Fellow at the University of New South Wales, Australia and Editor-in-Chief, Science, Technology and Society – An International Journal.
