Influencing innovation

Should we worry about innovation? The Venturous Australia report to the Minister for Innovation, Industry, Science and Research ought to tell us that innovation is no business of the government - but it does not.

It is a politically correct document that mentions the workplace and climate change but a word search has found no mention of working families.

Australia in the last 15 years has experienced steady growth placing it among the top performers in the OECD. It is not clear that this growth has very much to do with our innovations, science or research policies in any direct way.

The urge to innovate by politicians is both long lasting and bi-partisan. Indeed it is an OECD wide urge. Professor Alan Hughes from Cambridge University has diagnosed the original condition. The urge progresses through emphasising the importance of research and development, promoting the exploitation of science from research institutions through licensing and spinning out innovations and establishing new entrepreneurial spin-off companies

The popularity of this model arises from the view that this is the basis of the superior economic performance of the United States. It is a cargo cult approach as it is picks out and emphasises selective elements and ignores others.

A study of productivity growth in the United States shows most of the growth in the last seven years came in “low-tech” activities. “High-tech” activity is a small part of the US economy. It is a minute part of the Australian economy. However what is thought to be happening is that there is a spread of high technology applications enabling productivity improvements in the “low-tech” sectors of an economy.

In Australia the mining and agricultural sectors benefit from the dispersion of “high-tech” products. It the use that counts but the innovations may be sourced world-wide.

Research institutions can be put in context by looking at university patenting, licensing and spin-offs and by comparing the scale of this to the actions within industry. As an example, IBM registered 2,941 patents in 2005 while the University of California state system in the same period registered 388. As far as spin-offs are concerned, some 500,000 new firms are started each year while in 2004 462 US university spin-offs were established.

Even more interesting are the sources of innovation for companies. There are even Australian statistics for this which show the key sources of ideas are within business, customers, suppliers, meetings and competitors. Universities score about 10 per cent and R&D enterprises or even less!

Entrepreneurial spin-off companies are, in general, not as important as established companies. It is only in sectors where “destructive” technological change is creating opportunities that they have a chance to grow and prosper. The spread of the Internet is an obvious example where established businesses are battling with newcomers for news, music, film and the general delivery of information.

However the universities and public R&D do play a contributing part. It is the supply of human capital, making a key contribution in producing graduates who will invent, implement and deploy innovations for the benefit of their companies. The published research enables a spreading of information that is a public good. But most importantly the direct network of contacts from universities to companies and from companies to universities at many different levels provides what may well be the key link.

Perhaps the urge to innovate was seeded by universities. Academics are very good at sensing what makes governments fund research. There are also very persuasive in argument and innovation is a fascinating and important process. If national economic growth could be coupled to innovation and as directly as possible to the role of the university in the community then policy makers and politicians would be more generous in their funding of research.