Australia’s decision to join Horizon Europe has been widely, and rightly, welcomed. But as we fast-track our place in the final year of the Programme, this enthusiasm should be followed by questions as to why we aren’t discussing the most valuable thing Horizon has to offer our innovation ecosystem. Because it isn’t the funding. It’s the open innovation principle behind it and the idea that public funds should be allowed to flow freely across an entire innovation ecosystem to where they are needed, when they are needed. At a time when even the most vocal supporters of research and innovation in Australia know we can’t keep trying to build up our ecosystem program by program, pillar by pillar, this key funding principle sits ready for us to adopt here at home.
After years of advocacy, the Government has affirmed what universities, research agencies and industry partners have long argued: that participation in the EU’s multibillion dollar Framework Programme is in Australia’s national interest. Many have focused on the headline number, fair enough, at €95B it’s big! And it’s big because it represents an investment made by 27 member states and 22 associated countries spread over seven years. That’s almost 50 countries backing Horizon on the strength of returns from their investments in previous iterations of the Programme which now span four decades. Focusing on the number alone though misses what makes Horizon attractive to those countries, their researchers, industries and agencies. It is a lesson that seems to be hiding in plain sight for Australian policymakers and our many funders.
The EU has refined a key principle of Open Innovation that has become central to its aspirations for Horizon. That principle is grounded in the reality that if you want to build an innovation system that all participants want to invest in, you must treat them as equally important to the mission. In practice that meant doing something deceptively straightforward: allow all participants, public institutions and commercial entities, to be funded for their contributions no matter the thematic focus or the funding instrument being used.
Industry participation in EU Framework Programmes had been falling for fifteen years before Horizon 2020 reversed the trend. The industry share of participants dropped from 43% in FP4 to around 30% by FP7, as programme complexity and chronic under-recovery of costs made engagement financially unsustainable for many companies. SMEs were squeezed hardest and by the end of FP7 they were receiving only about 13% of total programme funding. When Horizon 2020 introduced more consistent open eligibility, the trajectory reversed across both participation and funding. The SME funding share rose to around 15% under Horizon 2020 and then over 20% in the first years of Horizon Europe, with total industry funding (SMEs and large firms combined) reaching close to 30%. The increase participation by large companies occurred primarily through dedicated Joint Undertakings and public-private partnerships that were designed to bring industrial partners in as co-investors rather than demand cash contributions from them at the door.
Critically this growth in industry participation did not come at the expense of universities and public research institutions. Higher education institutions remain the single largest recipient of Horizon Europe funding, and their share has remained essentially stable compared to Horizon 2020. The reason is structural as almost three quarters of all Horizon funding flows through collaborative projects averaging up to a dozen participants, and those consortia almost always have a university or research institute at their core. When industry joins, they join alongside universities and not instead of them. Open eligibility has worked to grow the EU funding pie, and not, as many often fear, simply redistribute slices from one sector to another.
Horizon has been criticised for not yet fully achieving its goals, but it takes time to shift participation away from its historical skew towards well-resourced institutions in a handful of high-performing member states. The trajectory that the open innovation principle has created is nonetheless evident. The extraordinary scale of unmet demand is itself evidence — the value of unfunded high-quality proposals has been twice that of the funding available, and the demand reflects strong participation from across the innovation system, including from industry. It is why the next Framework Programme is proposed to be nearly double the already impressive numbers for Horizon Europe. The lesson for Australia is not that Horizon is perfect, because it isn’t, but that the principle of a more open approach to funding is one we should consider implementing here to help us meet our own innovation system aspirations.
Australia’s Strategic Examination of Research and Development (SERD) didn’t have to look far to find the consequences of how we’ve failed to get it right. Our chronic underinvestment in publicly funded research has been linked to weak industry engagement, poor commercialisation outcomes, and stalled productivity growth. Low levels of investment have been compounded by fragmentation of government support for R&D across numerous departments, funding bodies and agencies.
The SERD panel’s report, Ambitious Australia, represents a serious and considered response to this diagnosis. The panel recommended a National Innovation Council, consolidation of funding around national priority pillars, and new governance architecture to bring coherence to a fragmented system. These recommendations deserve respect. Those of us who have worked within research governance know that coherence and coordination have genuine value, and that their absence carries its own significant costs. But the question is not whether structural reform has merit, it is whether it is sufficient on its own, and whether it can move fast enough. New oversight bodies necessarily consume political energy while finding their feet. Add to this the risk that the deliberate dismantling of collaborative infrastructure through program consolidation could stall collaboration before any new structures are in place and working, let alone proven. With Horizon front of mind there is a complementary, lower-risk path to aid R&D reform in Australia. It’s one that could work to advance, and alongside, the structural changes proposed in Ambitious Australia rather than waiting for them, or competing against them.
If Australian funding bodies universally adopted the EU’s open innovation principle, any eligible applicant to any government funding scheme, could name and fund any collaborator as a co-investigator. Like the Horizon experience, it would be expected that engagement between research providers and industry would be strengthened by the most reliable of incentives: mutual access to funding. Under Horizon, a university contributing research expertise to an industry-led challenge is fully funded for that contribution, making it easier to join industry consortia. At the same time, a company bringing applied expertise to a university-led project can likewise be funded for that role rather than being treated as a co-sponsor via mandated cash contributions. Importantly, this policy intervention could be implemented without new funding, under existing programs, across multiple funders, government bodies and agencies. This change would be genuinely complementary to, rather than in competition with, the structural reforms the SERD panel has proposed, but it could also be implemented without any changes to the number, focus or administration of existing funding bodies and agencies.
In considering this type of reform, and what it might mean in practice for individual institutions and agencies, we need to resist the temptation of zero-sum thinking. For example, the concern is often raised that allowing public funding to flow through universities to industry collaborators means less funding for our universities and institutes. The Horizon experience directly contradicts this. The framework’s open eligibility did not redistribute a fixed pool. It expanded the pool by making the system compelling enough that more countries, more institutions, and more industries chose to invest in it.
It’s important to acknowledge that many of the eligibility constraints that currently limit collaboration exist for legitimate reasons: accountability, auditability, and the management of conflicts of interest among them. The challenge is not that our funding bodies are acting in bad faith to limit collaboration, but that eligibility criteria designed for other purposes have, over time, become de facto funding boundaries that limit who can participate in publicly funded research. However well intentioned, the cumulative effect reinforces the very fragmentation that those leading our system are working hard to overcome. Allowing public funds to follow collaboration freely, across industry participants, universities and any other institutional boundaries could help reduce this fragmentation, perhaps more than reorganisation of our system’s priorities could do by itself.
Applied consistently across all Australian government programs, the principles that have shaped Horizon’s design, not its funding, could be key to helping Australia bridge the divide between publicly funded R&D providers and our innovative industries, both big and small. This is not a proposition that comes without risk or complexity because applying a supranational funding principle within a single national system would require careful design, testing and refinement. But as a complement to the structural reforms already proposed, it represents a faster, more direct path to generating the kind of returns that make almost 50 countries want to keep increasing their investment in the EU’s Framework Programme. Open innovation is a principle that seems to be hiding in plain sight, but if applied here, could help us take a significant step towards building what we’ve long admired in the EU but struggled to build, program by program, or pillar by pillar, across our own system.
Adrian has 25 years of experience in research strategy across government and academia. Through Research Strategies Australia he helps organisations get more from their strategic investments in domestic and international research collaboration, external funding and partnerships.
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