Don’t restrict research tax incentive to STEM PhDs
First published in The Australian.
Access on QUT eprints.
The recent Ferris, Finkel and Fraser review of the research and development tax incentive has been warmly embraced by the university sector.
In particular, universities have lauded its second recommendation, which calls for a premium of up to 20 per cent for R&D undertaken with publicly funded research organisations, and a similar premium for the cost of the first three years of employing new PhD graduates from the science, technology, engineering and mathematics disciplines.
If adopted, it will encourage businesses to collaborate with universities and complement the measures from the recent Watt review of research funding. However, the recommendation to restrict the employment tax relief to only STEM PhDs, while understandable, misses an opportunity to profoundly change our business culture in the long run. STEM is undeniably important, but innovation is often more about new business models at the intersection of technology, regulation and consumer behaviour, and it is increasingly aided by design and creative input. PhD graduates in social sciences and many of the creative disciplines have much to offer firms that wish to innovate in the modern economy.
In fact, a case can be made that research training in any discipline nurtures a skill that may be a valuable leadership attribute.
A rapidly changing globalised economy needs more people capable of innovating beyond current business models, but who do so prudently. It is worth considering the role of research training in the development of such human capital.
Business leaders are often criticised for being either risk averse and unwilling to pursue new ways of doing things, or for taking too much risk. This is not to say that there aren’t executives doing both — breaking new ground and being disciplined. However, a rapidly changing globalised economy needs more people capable of innovating beyond current business models, and who do so prudently. It is worth considering the role of research training in the development of such human capital.
Individuals undertaking a PhD—or other forms of research training—need to work at the very limits of their discipline in order to add to its knowledge base. At the same time, their findings are often subject to the methods and norms of several disciplines as modern research work becomes increasingly interdisciplinary.
Over time, a researcher acquires the mindset of staring into the unknown and breaking new ground while considering each step rigorously. There are not too many formal educational experiences that train for the development of such capability. It is perhaps aspects of this ability that Malcolm Turnbull—a very successful businessman himself—was referring to in his address at the Prime Minister’s Prizes for Science event last week when he said: “We need to overturn the convention; we have to be more like you [scientists], prepared to explore the unknown … We’ve got to encourage people you work with to experiment, obviously in a prudent manner.”
To be sure, one does not need a PhD to acquire the skills for careful and productive exploration, but research training does formally and rigorously cultivate them. Also, not every PhD graduate is suited for the business world — but, for those who have the flair and the people skills, any incentive for businesses to hire them will go a long way in changing culture. Such incentives will also encourage universities to view research training from the perspective of educating leaders for the wider innovation system.
A significant increase in PhDs in business will yield many benefits. Such people are likely to attract and recruit others who are “like them”, and this will raise the level of human capital in our organisations over time. It is often commented upon that Australian businesses find university structures opaque and do not know where to go if they need assistance. More PhDs in our businesses will certainly help with this problem.
Of course there will be some additional cost in expanding incentives to include all PhD graduates. The review did not precisely define STEM, and depending on which fields are included, the eligible population could be anywhere between 42 and 62 per cent of all PhD graduates, so extension to all graduates could roughly involve a doubling of the cost. However, the cost increase may be less, since non-STEM graduates would be less likely to work in firms seeking tax exemption.
The recommendation is also silent on whether PhD graduates from overseas universities would be eligible, so we will have to wait on detailed cost estimates. However, the downstream benefits of increasing the intensity of research-trained people in our business workforce would outweigh the relatively small sums involved.
Finally, on a lighter note, every few years there is a scandal involving accusations that a German chief executive or politician has plagiarised their PhD thesis. While such individuals are rightly condemned for ethical failures, one can’t help but envy a society that values PhDs in leadership roles to the extent that it drives a minority of them to take career-destroying risks. We should also note—and it is no coincidence—that Germany is a knowledge-intensive economy that continues to be the economic driver of Europe.
Perhaps the Prime Minister was politely saying to the learned audience that, in the 21st century, the ability to stare into the unknown and to prudently find a path where none existed before is too valuable a skill to be left only for academics.
