Setting the scene
Australia’s future depends on investing wisely today in the foundations of economic competitiveness. Increasingly that competitiveness rests on the ability to develop and utilise new ideas and technology. To be successful we will need a world class research base, easy pathways for the commercialisation of new ideas and good access to the latest ideas and technology. Equally importantly we need a culture where innovation is actively pursued and encouraged in all businesses and in every research establishment.
Australia has a solid base upon which to build. It has a track record in developing leading-edge products and services and has in place some of the necessary research infrastructure and innovation support mechanisms needed to generate and act on ideas. However, we can not be complacent. There are areas in which we lag behind when it comes to innovation. When we benchmark our performance against international standards, it is obvious that we do not yet have a winning score card. Further other countries are boosting their efforts. It is clear that we need to act now if we are not to be left behind.
Innovation—Unlocking the future is based upon the recommendations of the National Innovation Summit. It presents recommendations in three critical areas: creating an ideas culture; generating ideas; and acting on ideas. Together, these recommendations form an integrated and comprehensive package which will strengthen Australia’s research and development capability and enable us to shine as a truly innovative nation. They require a significant investment by Government and business.
We recognise that many recommendations will take time to implement fully, but believe that all the key recommendations need to be addressed quickly and decisively.
Creating an ideas culture
Innovation thrives in a culture that is not afraid of risk-taking, promotes the value of experimenting, and rewards enterprise. We need to create the right culture to support us in our efforts to become better innovators. For example, improving our vision, attitude and strategic approach to innovation, the entrepreneurial expertise of our managers, and our graduates’ skills in creativity, oral business communications and problem solving.
To build a solid appreciation of the importance of innovation to our economic prosperity, the Group recommends a National Innovation Awareness Program. It would be based on a call-to-action across all sectors and include a national awards and recognition system to provide incentives for our innovators to pursue their ideas through commercialisation and to promote innovation ‘champions’. The program would require involvement of leaders at the highest level in business, government and the education sector.
To capture young people’s interest in and enthusiasm for innovation, we recommend that the Commonwealth Government and business support a program for young entrepreneurs. The program would strengthen networks for young entrepreneurs, and recognise excellence. An enhanced program for graduates to take part in industry placements would complement this.
To enhance teacher capability, the Group recommends that business and government work together to support a new program of Enterprise and Innovation Scholarships for teachers. This program would encourage teachers to take up learning opportunities with innovative businesses, and provide them with direct experience so they are better positioned to transfer this knowledge to students.
The Group recommends a suite of related initiatives, including a national review of teacher education, development of online curriculum, additional structured courses on innovation and commercialisation for students, enhancing data collection on innovation performance, and the development of appropriate ways to measure the significance of intellectual property and intangibles.
New ideas are fundamental to a dynamic and growing economy. A high quality and well-resourced research capacity is critical to Australia’s ability to compete. However, studies show that Australia’s investment in research and development (R&D) has been declining for several years. This is particularly marked in relation to business R&D. When compared to 24 other nations, we ranked seventh lowest in terms of business investment in R&D. Australian businesses invest less than one per cent of our Gross Domestic Product (GDP) in R&D. By contrast, business in many other Organisation for Economic Co-operation and Development (OECD) countries is investing more and more in R&D.
To turn the tide, the Group recommends restructuring the Commonwealth Government’s R&D Tax Concession to encourage more R&D by business. The Group recommends that the R&D Tax Concession base rate be increased to 130 per cent; that a cash-out option be created for small to medium sized enterprises; and that an incremental R&D Tax Concession rate of between 170 per cent and 200 per cent for R&D over and above a company’s current level of expenditure on R&D be made available.
Australia’s current level of public research funding will not be enough to keep us internationally competitive in the future. The situation is changing rapidly as other OECD countries announce major R&D initiatives involving significant outlays of funds. To strengthen Australia’s research base, the Group also recommends an increase in research funding, including doubling the Australian Research Council’s funding and increasing funding for infrastructure in universities.
Again, the Group recommends a suite of related initiatives, including more effective promotion and stimulus for philanthropy for science and research, more streamlined access to available innovation support programs through a one-stop access point and an advisory service for businesses.
Acting on ideas
Australia has a patchy track record of acting on good ideas. We sometimes struggle for a number of reasons, including:
• many small firms are less able to compete in export markets;
• lack of sufficient skills to take new ideas to market;
• a relatively new and immature venture capital market, especially at the seed end;
• difficulty in accessing research and technologies developed outside Australia.
The Group believes that Australia needs to strengthen its understanding, management and commercialisation of intellectual property. While the availability of seed capital in Australia has quadrupled in the past year, and other early-stage technology markets are also growing, this component of our capital market is quite small when compared to those of our trading partners.
To increase the growth and competitiveness of new technology firms, the Group recommends doubling funding now for the Commonwealth Government’s Commercialising Emerging Technologies (COMET) Program which supports early growth firms to maximise their potential to trade in new services and products.
Successful commercialisation depends not only on the individual performance of players, but also on how they interact with each other. Knowledge flow in Australian innovation is vital, including relationships amongst business, government, research agencies, non-government organisations and universities. To better coordinate and foster links between research organisations and business, the Group recommends that the Commonwealth Government develops a national technology incubator program. International R&D and other collaboration should be boosted to better tap into the 98 per cent of the world’s research that is taking place outside of Australia.
The Group recommends support for increased technology diffusion, international business R&D collaboration including through Cooperative Research Centres (CRCs), and more widespread business and researcher mobility and exchange. We need to maximise commercialisation of research conducted by Australian universities and other public research institutions by having the right incentives in place. Establishment of a pre-seed fund, access to appropriate commercialisation advisory services and appropriate research staff incentives would be major steps forward.
Under this heading the Group also recommends a suite of related initiatives, including a stock take of world best practice in innovation for Australian small businesses, strengthening Australia’s intellectual property protection system, minimising the regulatory burden for innovative start-up firms, ensuring that venture capital and start-up firms are not constrained by entity taxation in Australia, and ensuring that we take full advantage of the opportunities available for new businesses to develop through government purchasing.