The Australian Centre for Innovation Limited
An Innovation Agenda for 2010 – Six Key Challenges
Professor Ron Johnston FTSE
Executive Director
Australian Centre for Innovation
University of Sydney
The recent announcement by Kim Carr, Minister for Innovation, Industry, Science and
Research of a review of the National Innovation System signals a welcome commitment
of the new Rudd Government to engage with the challenge of aligning the Australian
economy with the global drivers that are shaping the basis of future economic
competition.
On the basis of our national achievements and failings, and of the experience of other
countries (including Korea with its world 2nd ranking in business investment in R&D,
whose innovation system I am currently reviewing for the OECD), six major challenges
need to be addressed.
1. Active Government engagement with innovation
The neo-liberal view of the previous Howard government, with its reliance on market
forces and framework conditions (with the marked exception of agriculture) has been
shown to be patently inadequate in a global knowledge economy.
In recent years, driven by fiercer competition at global level for private investment in
R&D and innovation, there has been a shift in policy-making away from this limited
approach towards strategic decision-making, in the sense that the thematic portfolio of a
country and medium- to long-term perspectives are given a greater weight in science,
technology and innovation policies. At the same time, the complexity of innovation
processes is recognised by stressing the bottom-up component of networking and
clustering as important instruments for enhancing innovative performance in emerging
areas of specialisation.
In simple terms, governments around the world are shaping the national investment in
research and technology development so as to ensure adequate scale and supportive
infrastructure, in areas where the potential for substantial economic return can be argued,
and where the means exist to capture those benefits.
2. Promotion of a higher level of business expenditure on R&D
In 2007 the Business Council of Australia argued that there was no basis for criticism of
the level of investment in R&D by Australian business; given the structure of the
Australian economy, the level of R&D was, in best Goldilockian terms, ‘just right’.
ATSE argued in its submission to the Productivity Commission that this was an accurate
1
The Australian Centre for Innovation Limited
answer to the wrong question. What was important was whether the structure of
Australian industry, and hence its R&D investment, was appropriate to provide the basis
of a competitive economy in the future, when the mining boom eventually subsides.
While the long-held view of Treasury that what counts is what you do with technology
developed wherever, rather than relying on nationally generated technology, still holds
some water, the speed and intensity of investment in the new nano-, bio-, cogno- and IT
technologies is such that any nation without the capacity to understand and engage with
the new technologies is likely to be left as a slow, and dependent, follower.
The remedies will include some adjustment to the tax incentives, further strengthening of
the venture capital industry and links between universities, government labs and industry,
and greater efforts to engage with the great Australian diaspora.
3. Enhanced funding for Universities
The previous Government, almost alone among OECD nations, allowed the funding for
universities to substantially decline, but in addition matched its reduced budgetary
responsibility with greatly increased intervention. The result has been a very serious
weakening of the capabilities of the universities in Australia to play their crucial role as
generators, translators and transmitters of knowledge.
Two things are required – progressive restoration of an adequate funding base, and the
establishment of an explicit partnership between the government and universities to
collectively pursue the strengthening of the knowledge economy in Australia.
4. Rejection of the ‘commercialisation at all costs’ model of knowledge
exploitation
Over the past five years, the drive to extract value from the public investment in R&D
became diverted into a narrow cul-de-sac that emphasised only the commercialisation
route via licenses and start-up firms. While commercialisation remains an important
objective, which can be further strengthened, it must be recognised that much greater
value is generated vis the diffusion of knowledge to existing organisations in the private
and public sector.
In some quarters there has been a call for a ‘back to basic research’ movement. This has
some justification, but ignores the crucial point that in a knowledge economy, traditional
distinctions between basic and applied make little sense, or only within the context of one
player’s perspective. What is needed in an effective innovation system is widespread
recognition that there is potential in all knowledge to be used ‘to act on the world’. The
challenge is to facilitate the flow of the knowledge to its potential point of application.
In the context of the announced CRC review, let me emphasise that as a member of the
previous CRC review team, there was no recommendation that the CRC scheme should
fund only commercial research. Rather we emphasised that there was a need to
2
The Australian Centre for Innovation Limited
distinguish between the objectives of commercial return and public good, and evaluate
them against different criteria. It was the then-Government that chose the narrow
emphasis which has been demonstrated to be counter-productive.
5. Recognition of the crucial role of non-technological innovation
Too often in Australia, consideration of innovation becomes transformed into funding for
scientific research. While the latter is of course important, and needs to be maintained,
the view of industry and many others that much of innovation is based on reworking and
use of existing information in a better form, embodied in a new business process, or
service or marketing and logistics strategy. For example, the degree of innovation in the
financial services industry is huge (if not always to the benefit of all customers), and
while it is based on research, almost none of it is ‘scientific’. Knowledge-intensive
business services using IT platforms to deliver a vast array of new services generally
compose the fastest growing sectors of a knowledge economy.
In this manner, and through the creative industries, there is an enormous role for
appropriately directed research in the social sciences and the humanities. A very powerful
model of how to marshal this capability to address national issues is provided by the UK
Social and Economic Research Council.
6. Enhancing our strategic intelligence
The complexity, uncertainty and speed of change associated with contemporary issues
and capabilities make it increasingly difficult for governments, indeed all decisionmakers, to make effective and informed decisions. Two recent responses, complementary
to each other, appear to offer a useful approach.
The first is to invest, at the national level, in establishing a significant capability in
strategic intelligence – a capability that addresses and explores possible futures, through a
combination of horizon scanning, anticipatory intelligence, technology roadmaps and
foresight. A number of European and Asian countries have started on developing this
capability.
The second is to recognise the importance of what has been called distributed policymaking and intelligence. In this view policy making is not just about government, but
also about the joint impact of public and private decision-making and the networked
interactions that precede formal decision-making. In other words, the role of government
is shifting from being a central steering entity to that of a moderator of collective
decision-making processes.
Attention to these six challenges would appear to offer a useful place for the Innovation
System Review to begin.
3