May 2nd 2024

Towards 3% R&D – the lesson of the SBIR model of innovation by Jefferson Harcourt

Towards 3% R&D – the lesson of the SBIR model of innovation by Jefferson Harcourt

May 2nd 2024

Towards 3% R&D – the lesson of the SBIR model of innovation by Jefferson Harcourt

From the @AUManufacturing's series – Towards 3% R&D – Turbocharging Australia’s Innovation Effort – turns to successful overseas models boosting innovation such as the US SBIR model. By Jefferson Harcourt.

Research and Development (R&D) is essential in driving economic growth and maintaining a competitive advantage, and in Australia there’s a pressing need to enhance R&D efforts to be relevant on the global stage.

One effective approach is to draw inspiration from successful models, such as the United States Small Business Innovation Research (SBIR) programme, which has been instrumental in catalysing innovation.

By adopting a similar framework tailored to Australia’s unique needs and bolstering government procurement of homegrown innovative technology, the nation can significantly amplify its R&D capabilities.

The US SBIR Model:

The US SBIR programme, initiated in 1982, has emerged as a beacon of success in fostering innovation among small businesses.

This programme allocates a portion of federal research funds to small businesses, enabling them to conduct R&D with the goal of commercialising innovative technologies.

The programme operates in three phases: feasibility study, R&D, and commercialisation.

Successful projects receive funding at each stage, providing crucial support for turning innovative ideas into marketable products or services.

Crucially, the end goal of many projects is a government purchase order, allowing participants to raise capital to support the endeavour; SBIR is not a fully funded grant program, and is a more efficient use of government money.

Adapting the SBIR Model to Australia

To replicate the success of the US SBIR programme, Australia can establish a similar initiative tailored to its economic landscape and research priorities.

This could involve allocating a portion of government R&D funds specifically for small and medium enterprises (SMEs) through a phased approach, similar to the SBIR model.

By providing financial support and guidance throughout the innovation lifecycle, Australian SMEs would be empowered to pursue high-risk, high-reward R&D projects, driving technological advancement and economic growth.

Key Elements of an Australian SBIR programme:

  • Funding Allocation: The Australian government can allocate a percentage of its R&D budget to support SMEs through competitive grants.
    These grants would be awarded based on the potential for commercialisation and alignment with national research priorities.
  • Phased Approach: Like the US SBIR programme, the Australian initiative could consist of multiple phases, each providing increasing levels of funding to support R&D activities. This phased approach ensures that promising projects receive ongoing support as they progress towards commercialisation.
  • Emphasis on Commercialisation: To maximise the impact of R&D investments, the Australian SBIR program should prioritise projects with clear pathways to commercialisation, and select vendors with a track record of delivery
    • And conditional purchase order, based on an agreed set of acceptance criteria. The Government sponsor works with the vendor to achieve success, thereby supplying Government with a product or service that meets their exact requirements, and providing the vendor with a new revenue stream to commercialise and scale.

    Government Procurement of Australian Innovative Technology

    In parallel with the SBIR programme, government procurement plays a pivotal role in driving demand for homegrown innovative technology.

    By leveraging its purchasing power, the Australian government can stimulate market demand for products and services developed through R&D initiatives, creating a pathway to commercialisation for SMEs.

    Benefits of Government Procurement:

    • Market Validation: Government procurement serves as a stamp of approval, validating the quality and efficacy of innovative technologies developed by Australian SMEs. This validation is crucial for attracting investment and gaining traction in domestic and international markets.
    • Economic Stimulus: By prioritising local procurement of innovative technology, the Australian government can stimulate economic growth and job creation. Increased demand for homegrown products and services translates into expanded business opportunities and a thriving innovation ecosystem.
    • Strategic Alignment: Government procurement can be strategically aligned with national priorities, such as advancing clean energy and biodiversity projects, enhancing healthcare delivery, or strengthening national security. By directing procurement efforts towards areas of strategic importance, the government can drive targeted innovation that addresses pressing societal challenges.
    • And global Competitiveness: Procuring Australian innovative technology not only supports domestic industries but also enhances Australia’s global competitiveness.

    By showcasing homegrown innovation on the world stage, the nation can attract foreign investment, forge international partnerships, and position itself as a leader in key industries.

    Government procurement would serve to accelerate the development and adoption of these cutting-edge technologies, bolstering national security and protection of our most precious resource, water, while fostering economic growth.


    Australia stands at a critical juncture in its pursuit of innovation and economic prosperity.

    By embracing the principles of the US SBIR programme and enhancing government procurement of Australian innovative technology, the nation can unlock new opportunities for SMEs, drive technological advancement, and strengthen its position in the global innovation landscape.

    Through strategic investments and collaborative partnerships, Australia can unleash its full potential as a hub of innovation and entrepreneurship.

    Jefferson Harcourt founded Grey Innovation Group in 1998. A leading technology commercialisation company, Grey was designed to unlock the most promising research in security, health and environment, and keep the benefits in Australia. Portfolio companies include GreyScan, Eco Detection and Canopy Blue.

    This series is brought to you through the support of our principal sponsor, public accounting, tax, consulting and business advisory BDO, and R&D tax incentive consultancy Michael Johnson Associates.


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