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IPA

Australia’s innovation scorecard: pass or fail?

Vicki Stylianou

In the past couple of years, we’ve had a plethora of innovation summits, hackathons and the launch of the federal government’s “National Innovation and Science Agenda” (NISA), along with its four-pronged approach focusing on culture, capital, collaboration and talent. This is the latest wave in what has been decades of new innovation councils, cutting-edge summits and the mandatory expensive advertising campaigns that go with them.

While NISA is a noble and important initiative, Australians may remember, back in 2009, then-prime minister Kevin Rudd’s equally glorious 10-year innovation initiative “Powering ideas: an innovation agenda for the 21st century”, and before that in 2001, then-PM John Howard’s even greater “Backing Australia’s Ability: an innovation action plan for the future”, a $2.9 billion contribution via the National Innovation Awareness Council.

Obviously most of us will support any initiative that aims to help build a more innovative Australian economy and foster an entrepreneurial business culture. But it must result in tangible and sustainable benefits over the longer term and for the majority of citizens (and preferably for all citizens). Otherwise Australia may fall prey to those who equate innovation and technology with nothing more than job losses.

In Australia we can learn from past initiatives and consider how we objectively measure the outcomes and build on them, and how this can guide future innovation policy. We need to create the right environment that will foster risk-taking and a regulatory and legally friendly workplace framework that allows entrepreneurs to flourish without being punished and stigmatised if they make a mistake or stumble. It is often said that in the United States failure is seen as a positive and even encouraged, though it should be a case of ‘fail fast’ and ‘fail cheap’.

“The Global Innovation Index (GII) 2016” report includes a country ranking based on numerous measures. Overall, Australia ranks 17 out of 141 countries, while in 2015 Australia ranked 19 out of 128 countries. It may well be our ranking is helped by good placings in such areas as ‘rule of law’ (9) and ‘tertiary education’ (8). In other areas Australia ranks badly, including ‘graduates in science and engineering’ (79) and ‘innovation efficiency ratio’ (73). In the area of knowledge diffusion, which should be a major part of any innovation policy, Australia ranks a worrying 100.

Another weakness under this heading is ‘FDI (foreign direct investment) net outflows, % GDP (gross domestic product)’ at 107 and ‘ICT (information and communications technology) services exports, % total trade’ at 90. Another measure relates to venture capital (VC) funding. While VC fund raisings have been at record levels in the past 12 months, Australia still has seven times less available VC funds (when adjusted for GDP) than the US. Research shows Australia is ranked 23 in the size of VC funds raised.

Leading in the right direction have been policy measures around making insolvency laws less punishing for those who ‘fail’ and the rules governing VC limited partnerships. On the other hand, there has been much criticism of the changes to the research and development (R&D) tax concessions. Other policy suggestions for the government to consider include pragmatic deregulation, a tax allowance for companies investing in intellectual property protection and another for companies that generate licensing income from in-house new technologies.

In terms of access to capital for start-ups, there is a range of measures the government could introduce. One is a state-backed loan guarantee scheme. Australia is only one of 47 countries in the developed world without such a scheme. This would increase the availability of much-needed loan finance for small businesses to start operating or expand. Another option is a publicly funded VC fund where government support for VC is provided in concert with private VC equity to ensure risk capital is made available for high-potential start-ups.

The GII 2016 report concludes a new corporate innovation culture is required. This entails flatter hierarchies and increased cross-functional collaboration across R&D, supply-chain management and marketing, a diversified talent pool that brings in fresh perspectives and skills, an environment that encourages risk-taking, and experimenting with novel partnership models and inno­vation platforms. The report notes new ideas are emerging in different parts of the globe and successful innovation strategies have to leverage them effectively. Identifying barriers to global cooperation and the flow of ideas should be a new innovation policy priority.

Does NISA adopt the GII suggestions in one form or another or to one extent or another, or will the government of the day be launching another innovation initiative in 10 years’ time?

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