Five things about innovation Australia can learn from other countries.

The Conversation
2 December 2015

Roy Green, Dean of UTS Business School, University of Technology Sydney

John Hamilton Howard, Visiting Professor, UTS Business School, University of Technology Sydney

With the release of Prime Minister Malcolm Turnbull’s science and innovation statement expected in just under a week, expectations are running high, perhaps too high. Assistant Innovation Minister Wyatt Roy promises “a complete game-changer”, and nothing less is now anticipated.

By contrast, the government’s latest Australian Innovation Systems Report 2015 provides sobering reading. Despite evidence showing innovative firms are 60% more likely to report increased sales and profitability, only 16% have a “high-performance innovation culture”.

This is no revelation. Over two decades ago, the Science & Technology Budget Statement 1993-94 observed:

… our most urgent task is to build an innovative culture in industry … Above all, we need a cultural change – among business leaders, decision-makers and the community generally – which recognises the major significance innovation has for building national competitiveness.

In a now-familiar refrain, that statement noted “a weakness in the ability to exploit our R&D in many fields” and attached “a high priority to establishing Australia’s place in Asia”. And like the more than 60 Australian government reports that followed, it concluded that “a clear sense of direction, planning and leadership are needed to achieve our goals”.

Headless policy

So why has this not happened? One problem is that preparing for the future means learning from the past, which includes uncritical reliance on the commodity cycle for our growth and prosperity. Former treasury secretary Ken Henry referred recently to the collective amnesia among policy-makers:

Many departments have lost the capacity to develop policy; but not just that, they have lost their memory.

Yet the sophistication and diversity of the Australian economy may give us another chance to get the policy settings right. In 2015-16, the Commonwealth government will invest A$9.7 billion in support of science, research and innovation, compared with A$3 billion in 1993-94.

The question isn’t just whether this amount is enough, but whether it’s allocated as coherently and effectively as it could be. This was the very question posed by the current Senate Innovation System Inquiry. The inquiry has published an interim report and issues paper, and is about to release its final report this week.

The inquiry received 182 submissions and conducted hearings around the country. Significantly, many of the submissions pointed to the lack of an evidence base in Australia for the development of sound and credible policy.

Despite a fierce debate about the efficacy of the research and development tax credit – as against targeted spending measures, for instance – there’s little other than anecdotal evidence for the various positions. Given that this tax incentive absorbs a third of the available research and innovation budget, up from 15% in 2008, it is surely reasonable to expect reliable data to assess causality and impact.

Agencies, coordination and integration

It’s not surprising, then, that current policy discussion looks to international research and experience in innovation policy. And there’s much to learn from exemplars abroad, provided we are circumspect about their relevance and potential for adaptation to the Australian context.

There are five main areas where such exemplars might inform our discussion.

First, many countries have national coordination bodies and “knowledge foresight” exercises to guide policy priorities and strategic direction. These include the US President’s Council of Advisers on Science and Technology, the Canadian Science, Technology and Innovation Council, Vinnova in Sweden, the Research, Innovation and Enterprise Council in Singapore and the Presidential Advisory Council on Science & Technology in South Korea.

Such organisations have a major role in identifying target areas for science and innovation investment.

Second, many countries have national agencies with a clear remit for enterprise capability building and industry transformation. These include Britain’s InnovateUK, Finland’s Tekes, Netherlands TNO and Enterprise Ireland. These agencies variously combine initiatives in business innovation, research and development funding, research commercialisation, knowledge transfer, trade facilitation and foreign direct investment.

While no one single model can be picked up and embedded in Australia, there’s obvious advantage to drawing on better practices from elsewhere, bearing in mind issues of scope and scalability.

A compelling example is the US Small Business Innovation Research Program (SBIR). This has had remarkable success with public procurement policy, as has a UK variant.

Third, most countries have well-funded, integrated frameworks for research and innovation, striking a balance between basic and applied research, with an emphasis on research translation and collaboration. These include the US National Science Foundation, German Fraunhofer Institutes, Science Foundation Ireland and the UK research councils, Higher Education Innovation Fund and Catapult Centres.

The UK is considering further integration as a result of a just-released review. It proposes that InnovateUK become a single umbrella body for the nation’s research councils. In contrast, Australia’s Commonwealth research and innovation spending is dispersed across 13 portfolio areas and 150 budget line items.

Hubs and people

Fourth, countries, cities and regions increasingly recognise the significance of local innovation ecosystems in accessing global markets and value chains. They support the clustering of technological and creative talent through incubators, accelerators and co-working spaces, entrepreneurship training and connections with research organisations and venture capital.

Silicon Valley dominates as an innovation ecosystem, but cities and regions as diverse as Boston (US), Chicago (US), Austin (US), Tel Aviv (Israel), London (UK), Amsterdam (Netherlands), Berlin (Germany), Sao Paulo (Brazil) and Bangalore (India) are growing rapidly. Locally, Sydney is emerging as a contender for inclusion in this global map, with a vibrant entrepreneurial start-up community.

Finally, many countries are investing heavily in measures to prepare their workforces for jobs and skills of the future. Here Germany is the exemplar, with its commitment to a structured relationship between academic learning through universities and occupational learning through the vocational education system and in the workplace.

The challenge is to prepare not just for the jobs that currently exist, but for those that don’t.

These are the five areas where Australia has most to learn – and to gain – from international experience. They must also be accompanied by framework conditions covering tax and infrastructure, including high-speed broadband. Norway is an instructive example of a resources-based economy that used a resource rent tax and sovereign wealth fund to build its research and innovation infrastructure.

Australia’s next federal election is shaping up to be something of an innovation policy auction. If so, the nation will be the winner, provided the debate is about more than competing visions of the future. As former US president Bill Clinton’s adviser and Yale business dean Jeffrey Garten once put it, “Vision without execution is hallucination.”

This article is part of our series Why innovation matters. Look out for more articles on the topic in the coming days.