The emphasis the Turnbull government is placing on innovation is very welcome. It is innovation, the successful application of new ideas, which will underpin our future competitiveness and productivity. But in recasting the narrative of his “21st Century government” Turnbull must ensure the innovation focus isn’t too narrow.
Much of the discussion so far has, for example, been about encouraging high technology startup firms, with a special interest in learning lessons from Israel. While high-tech startups are an element of national innovation performance, they are only one component.
Israel, of course, possesses very distinctive circumstances, and we would more productively look elsewhere for lessons more appropriate to our industrial and political conditions and research system.
We should look to resource based economies, such as Canada, federal systems, such as Germany, and nations whose higher education systems resemble ours, such as Britain. Successful Asian economies, whose performance in this area has been stellar, provide valuable examples of policies that work.
There is also the fact that the best studies of startups show that in Australia we are at the top of the international list in providing supportive conditions for entrepreneurship. This contrasts with those studies that show we are embarrassingly near the bottom of the list when it comes to issues such as connections between business and research organisations, in management skills, and business expenditure on research & development. We are good at starting up companies and poor at growing them.
One of the most significant and enduring shortcomings of innovation in Australia is the way the institutions that support it remain fundamentally disconnected. Our system is like a doughnut, with industry, researchers and government operating around its edges and nothing in the middle.
Successfully innovative nations have highly connected large and small businesses, research organisations and governments. The only way we can compensate for our very small scale on a global stage is to be superbly well connected, building on the distinctive advantages all the various players bring.
Innovation flourishes when small firms contribute their initiative, flexibility and responsiveness, large firms their resources and clout in marketing, distribution and regulatory matters, and each benefits from research in universities and research organisations.
Innovation is not the preserve of single players in our innovation systems but results when all contributors work productively together. This applies nationally, regionally, locally and in specific industries and sectors. It is all about the connections.
Where does government fit?
Governments play a major role as the only player able to take an overarching view of how these connections fit together and can be improved. There are various levers and tools that government can use. Through its investments in research and education, for example, government creates options for the future, and along with its considerable purchasing power it can mitigate some of the risks of innovation.
All the ways of supporting innovation, however, have to be informed by a coherent innovation policy that supports broad national economic and social objectives. Success in this area in Asia, and increasingly in Latin America, is based on clear understanding of the role of innovation in supporting national development.
In Britain and Norway, innovation policy is a tool to diversify the economy away from their reliance on the finance and oil sectors. Finnish innovation policy provided a safety net following the demise of Nokia. Presidents Barack Obama and Xi Jinping continually emphasise the importance of innovation for the future of their nations.
The central role of innovation policy has not been so well appreciated in Australia. We have a kaleidoscope of small, piecemeal and short-term initiatives that are incoherent and confusing. Particular programs have been cursed by the partisan politics that always sees them changed along with new governments. We need clarity and consistency. A whole of government approach is essential.
There needs to be coordination across long established portfolios: Defence, Health, Education, Industry, Communications, and emerging areas such as cities and infrastructure (including digital infrastructure). There will be loud and persuasive voices from various lobbying groups: startups, venture capitalists, scientists, intellectual property lawyers, all addressing the concerns of their particular part of the innovation system. Each is important, but establishing priorities requires government having an overall policy framework in which to allocate resources.
Policy also has to be informed by sound appreciation of how innovation occurs. We mistakenly persevere with the major government support for innovation being directed towards the subsidy of R&D in individual firms, rather than the support for innovation in networks. As with innovation itself, there has to be policy experiments, prototyping and testing. The challenge for government lies in providing an overarching vision and framework and at the same time exploring and learning from emerging new initiatives that often occur at state and local levels.