Re-engineering Australia’s approach to innovation

The federal government will release its heavily anticipated innovation statement today. There’s been a lot of talk, but what hope is there of achieving anything concrete for the manufacturing sector? Brent Balinski reports.

Sharpening incentives

Creating an environment where innovation can flourish is no simple thing, though there’ve been rivers of ink spilled and countless hours of chatter devoted to the subject over the years.

Since the change of prime ministership, though, the topic has been given a particular workout. About a month ago the head of the Business Council of Australia Catherine Livingstone offered, "We seem to have gone from the word innovation being banned to suddenly being compulsory, regardless of context".

All this has led to and should inform the federal government’s innovation agenda. According to Fairfax papers today, it will feature 24 items worth over $AUD1 billion.

The task of making the country more innovative is urgent, according to some. The need to transition to a knowledge economy from a resources-led one is evident in the drop in commodity prices. Innovation, apart from becoming a much-used buzzword, is an important creator of wealth for an economy, and the biggest known contributor to productivity increases.

The amount of public money spent on science and innovation is not tiny – $AUD9.7 billion, spent across 13 portfolio areas. However, according to some experts, it could be better spent and could be delivering better returns – particularly important as revenues from things like iron ore exports shrink.

“The National Innovation and Science Agenda will sharpen incentives for industry-research collaboration, including international collaboration,” a spokesperson for industry minister Christopher Pyne told Manufacturers’ Monthly when asked what could be expected to improve the sharing of public researcher smarts with private business.

The issue features highly in terms of where improvement is needed, with Australia's collaboration rankings second-last in the OECD.

No easy task

One area where the country could help drive new technologies into the market is by not procuring “off-the-shelf” solutions. This has been suggested to encourage advanced manufacturing, with new-to-world products created (again, an area where improvement is needed) then potentially exportable.

The agenda would, “establish the government as exemplar, driving innovation in our own procurement and service provision,” according the Pyne’s spokesperson, when asked about what to expect.

Labor would later be announcing policies in the area, said shadow industry minister Kim Carr, following the launch of the federal opposition’s third tranche of innovation policies last Friday.

“We’ve got more to say on procurement policy,” Carr told Manufacturers’ Monthly, following Labor’s announcement of measures including 20 regional university/TAFE regional accelerator hubs as policy.

It’s also widely acknowledged that encouraging successful collaboration between universities and public research institutions is difficult.

Professor Göran Roos, an academic, consultant and businessman, listed several different issues when asked of the barriers involved. Any improvements on our collaboration record would be made slowly, he explained.

“Until a higher share of firms will want to grow, have the absorptive capacity, understand the type of problems that are appropriate, are focussing on innovation as opposed to problem solving and have the funding and an appropriate timeline and until the universities have the desire, the appropriate people and an understanding for the commercial reality within which the firms operates – success is unlikely,” Professor Roos told Manufacturers’ Monthly.

“In order to make a step change here many things need to happen (which means that it will go slower than everyone thinks and wishes.)”

An area where there could be a significant shake-up is in bankruptcy laws. Cited as contributing to a “fear of failure” among the Australian innovation system, changing the treatment of bankruptcy is something supported by the Australian Industry Group’s Innes Willox, new chairman of Innovation Australia Bill Ferris, and others.

"We want to make it easier for people to start again … I think we can probably look at bankruptcy and insolvency laws to help change our culture around risk," assistant minister Wyatt Roy hinted last month.

Labor isn't keen on the adoption of anything modelled on the United States’ Chapter 11 provisions.

“You don’t want to see businesses fail, but you don’t want to see people also engage in reckless behaviour on the assumption that they can walk away from their obligations,” said Carr.

“And most reputable businesses regard that with great horror, that they can do that, because it undermines highly credible and ethical businesses.”

A chance to make it work

Other policy areas various industry bodies and enthusiasts are hoping will change include taxation (groups including the Australian Advanced Manufacturing Council believe a UK Patent Box-style incentive could encourage the development of IP locally). There is expected to be tax incentives to encourage venture capital investment.

Whatever the case, it's also hoped that there's finally been something learned from the endless reviews and conversations.

According to Professor Roy Green, there have been 60 federal-level innovation reports in the last 15 years.

The massive volume of reviews – added to by last week’s Innovation System Senate inquiry, for which Professor Green was an expert consultant – have rarely referred to the others.

“So we have not seen an accumulation of expertise or experience – we've seen a lot of stop-go policies and re-badging, relabeling, and slicing and dicing,” Professor Green told Manufacturers’ Monthly of the approach to innovation policy over the last decade-and-a-half.

One of the recommendations of the senate inquiry was that “stable, coherent and effective arrangements” be adopted. A gripe by many in the industry concerns the chopping and changing of policies when governments change. Each side wants to put their stamp on things and is keen to tweak and rename innovation incentives, to the confusion of those who might use those incentives.

“At the present time we know what the problems are,” said Professor Green, but added that there’s a chance we could see improvements.

“It may not be done in one fell swoop but if the signals that come from the prime minister's innovation statement are well-based and provide the opportunity for change in our strategies and structures for science, research, and innovation, then I think we have a chance of being competitive in this space globally.”