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Innovation in higher education happens through social capital

Updated: Apr 4

28 November, 2022

The federal government should consider co-investing in joint state-university innovation partnerships that have the potential to reshape knowledge discovery.

With diminishing resources for investment in public science infrastructure, universities have been boxed into a corner. This has been a setback for many universities – but not the end of the world for others.

There are universities that want to move ahead. These are the ones that are financing infrastructure investments on their own through retained earnings, profits on international student revenues and overseas campuses, a broad range of commercial income and investments, research commercialisation, philanthropy, one-off state government grants and increased borrowing leveraged through their very high credit ratings.

University borrowings have increased substantially in recent years, with non-current borrowings standing at $6.3 billion, up from $5.6 billion the year before – an increase of 12.5 per cent.

These commitments reflect a clear understanding that investments in public research infrastructure are important to spur private-sector research activity. As important players in public science commitment, university investments are targeting research infrastructure that will encourage businesses to collaborate and co-invest.

Between 2016 and 2020, according to the most recent available data, five universities (Australian National University, Wollongong, Western Sydney, Sunshine Coast and Central Queensland) increased their investment in property, plant and equipment assets by more than 30 per cent totalling $2.2 billion.

A further seven universities (Australian Catholic University, Federation, Macquarie, Melbourne, Monash, Swinburne, and UTS) increased their property asset portfolios by more than 20 per cent, totalling $3.3 billion.

University investments encourage technology-intensive businesses to locate their operations on campus or close by to generate spillover benefits in learning and knowledge transfer.

Spillovers happen through direct collaborations between researchers and businesses, often reflected in formally executed contracts. Contracts can cover research commissions and PhD supervision for joint research projects. Contracts are much easier to negotiate when parties know and trust each other.

Rise of innovation precincts

Spillovers can also be generated from the mobility of researchers from a university to a business, either to existing firms or through the creation of new firms – particularly firms based on university IP. But perhaps most importantly, spillovers occur informally through interpersonal interactions, such as meetings and during events.

To capture spillover benefits, university leaders are redesignating their campuses as innovation precincts where new ideas are nurtured into new-to-the-world products and services that deliver economic and social benefits. These include opportunities for First Nations communities, social inclusion and equity, and the generally not-for-profit creative and cultural industries.

Some university innovation precincts are developing conjointly with broader government or privately supported urban development and renewal districts. These districts seek to link research, education and university student and staff inspired business start-ups with the knowledge worker requirements of technology-intensive companies and public health facilities. They try to expedite the knowledge spillover benefits of industry agglomeration and clustering.

Pure R&D plays, such as the biotech hubs in Melbourne and Brisbane started 20 years ago, are now much less common. These developments were founded with strong public support championed by their respective premiers – John Brumby and Peter Beattie.

The NSW government at the time showed little interest in investing in place-based innovation as a key element in a state development strategy. Fortunately, this is now changing, but there is much catching up to do.

The returns from those early Melbourne and Brisbane investments are now materialising with deep global research partnerships. It was known at the time that delivery of outcomes might take between 15 and 20 years. Melbourne universities have thrived, while Sydney universities slipped in their pre-eminence.

These early investments have also demonstrated that while providing physical capital in the form of places, spaces and centres in precincts is important for innovation, even more important is a commitment to developing social capital – the trust-based relationships, interactions, and networks that underpin effective collaboration.

In reshaping their futures, university leaders must ensure that new property assets are effectively converted into innovation opportunities through investment in social capital. The development of social capital is enhanced through the work of influencers and trusted intermediaries. Finding these people is one of the most challenging aspects of contemporary innovation strategy.

To build scale and scope for overall national benefit, the federal government should be co-investing with universities that are taking the initiative to secure their futures.


Originally published in The Australian Financial Review, 28 November, 2022

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