Jeremy Byrne’s AussieInnovation weblog

Part II: Recommendations

After seven months reviewing the National Innovation System—poring over a vast stack of 730-plus submissions which, themselves, demonstrated little “common purpose” or “mutual understanding” of such a thing^[13]—the review committee has, perhaps unsurprisingly, come back with a massive swathe of policy recommendations and spending proposals it feels should help make whatever the National Innovation System may be work better. In his InnoFuture presentation, Cutler explained that the report, formally titled Venturous Australia: Building Strength in Innovation, identified needs for more entrepreneurial firms and innovative workplaces; an expanded talent pool; freer information flows and innovation opportunities; and mandatory internationalisation.

In achieving those “key thrusts”, the committee feels we should concentrate on “leveraging the national endowments and existing strengths”, “concentrating on the ‘rules of the game’” such as re-establishing distinct roles for the public and private sectors, and “prioritising and specialising”; and Cutler emphasised that the role of government in supporting these four thrusts is “core”. Beyond that, however, there’s not much in the way of concrete prioritisation of the committee’s 72 individual recommendations. While the report is full of suggestions about quality assessment and metrology for innovation itself, it is notably weak in setting tangible milestones,^[14] or providing indices by which progress can be measured.

According to the Minister, “the report’s big ideas include […] adopting national innovation priorities to focus our efforts and our resources”.^[9] “Australia is a small country with only so many dollars it can devote to research and innovation,” he explained to the Committee for Melbourne. “That’s why it’s so important to set priorities”^[8] So, what the report does prioritise is industry sectors.

The report identifies as “national priority” industry sectors “[a]griculture and food security (productivity and yields; nutriceuticals; food safety, biological testing and certification); climate change mitigation and adaptation; population health; tropical solutions (disease management; education delivery; logistics and infrastructure delivery); broadband applications (open democracy; database and privacy standards for health information; educational uses; traffic systems and standards; national collections of information and knowledge).” Additionally, it nominates a second tier of “opportunities”, where private sector investment should be encouraged, including: “resource industries; space and astronomy; finance and risk management; marine industries”. These priorities are intended to focus on existing strengths and “have been selected because of their existing market structures and capital availability.”^[15]

In something of a contrast to its tight-focus industry-sector specialisation, there’s an emphasis in the report on what Cutler sees as the “strong case for incentivising early innovators”, as an alternative to the “less risky strategy of being a global follower […T]he bottom line is not to count the successes and failures but, like a venture capital firm, say what’s the return on the overall portfolio, because that’s the bottom line for the country.” In the Minister’s words “we need to be less risk adverse in this country. We need to take some chances.”^[8]

The other “big ideas” in the report relate to its call for the restoration of government funding for science and innovation to the 1993/94 level of 0.75% of GDP, from its current 0.55%. These big ticket items include a move to full government funding of University research—accompanied by an altered funding allocation model which would both reward success in competitive funding rounds and take note of the centralised “research quality rankings” from the Excellence in Research Australia initiative—and the scrapping of the four existing R&D tax concessions in favour of a refundable tax credit—50% for firms under and 40% for firms over $50M turnover, which the review recommended be paid more regularly (“at least quarterly in arrears”). While the first represents an ideological shift, the second is merely catch-up. As Carr told the Committee for Melbourne, “In the nine months since Labor came to office, New Zealand, the United Kingdom, France, Belgium, the Netherlands and Spain have all introduced or extended tax incentives for business R&D. Japan and the United States have flagged their intention to do likewise.”^[8] (The US passed a 20% tax credit as part of the $700bn bailout bill four weeks later.^[16])

The New Directions document, which identified “169 government programs in Australia aimed at supporting business innovation”, defined the review’s primary purpose as “work[ing] with the States and Territories [to reduce] the fragmentation of innovation assistance.”^[5] In the end, Venturous Australia makes no recommendations about eliminating funding packages, but it does identify a range of programs it believes should be initiated, continued or extended.

It recommends extending the business networking Enterprise Connect program to include services firms and the addition of a new Knowledge Connections program; expanding and continuing the Commercialising Emerging Technologies (COMET) program for five years—precisely echoing the recommendations of the ostensibly independent COMET evaluation report released on 15-September^[17]—boosting the Innovation Investment Fund; continuing the Pre-Seed Fund; and providing grants to local angel investment firms to help them raise their profiles, network, and mount investor education programs. Additionally, it recommends introducing a $150M Competitive Innovation Grants program to help capitalise high-risk “proof of concept” stage innovation in a target 200 firms within the range of industries identified as “national innovation priorities”, with firms to repay the grants from earnings—although whether reporting and audit burden will be worth the effort is debatable^[15]—specifically encouraging US and other foreign venture capital through a range of measures including the partial opening up of the tax concessions to overseas firms (which provide nearly 20% of Australia’s venture capital^[18]); and a new $15K research voucher scheme to allow small firms to purchase services from public research agencies.

To be fair, the report does make some attempt to address its original purpose, suggesting that “governments together develop a single mechanism (such as a web portal) for providing information to clients about access to the full range of Australian and State and Territory government innovation programs.”

Amongst the plethora of less costly recommendations are a number of bureaucratic shuffles, including rebadging the Prime Minister-led Science, Engineering and Innovation Council as the National Innovation Council, and the establishment of an Office of Innovation. Perhaps more practically, the report calls for the establishment of an Advocate for Government Innovation to coordinate initiatives such as leveraging government procurement policy to favour innovation and share risk, manage the ongoing review of policy, and encourage public sector innovation through prizes, trial funding and conferences. It also recommends that a permanent Chief Scientist be appointed: a recommendation which, fulfilling a promise in the New Directions document, has already been met, with the appointment of Professor Penny Sackett on 30-September.^[19]

The report includes a range of shifts in emphasis and direction less tied to specific funding proposals. The “core roles” issue, “[t]he need to actually get a better fit between the public and private sectors when it comes to the questions of research and development and the broader innovation system” is, says Cutler, “the great strength of this review. It actually talks about how we could achieve that outcome.”^[9] There’s a strong focus in the report on extending innovation beyond its traditional areas and into the Creative Arts, the Humanities, and the Social Sciences, as well as the politically mandatory “recognition of the special importance of preserving indigenous collections and the unique value of indigenous traditional knowledge and practices within Australia’s innovation system.”

This translates into recommendations for national consistency in funding Tertiary Creative Arts training, and the extension of the National Collaborative Research Infrastructure Scheme to explicitly include these areas. The same “humanities, arts and social sciences” trio appeared prominently in the Strategic Roadmap for Australian Research Infrastructure, described as “an important input to the government’s white paper response”^[19] to the review and released prior to the review on 04-September. Similarly, the O’Kane Collaborative Research Centre Review report Collaborating to a purpose recommends more focus on the Humanities and Social Sciences.^[21]

There’s also a lot of talk around a “National Information Strategy” intended to maximise the flow of information, focussed on open publishing and archiving of publicly funded R&D results and a change of emphasis in Intellectual Property management from the legal to the economic (”IP policy […] should make the same transition as competition policy did in the 1980s and 90s”^[22]). Most of the surprisingly sparse ICT-centric recommendations concentrate on this “open innovation” push, which includes hat-tips to Social Networking and the uptake of “Web 2.0” technologies by government. At the micro-level, Cutler sees a need for “real incentives” to individuals as well as enterprises to continuously develop our skillsbase, via programs such as a “lifelong-learning account, like a Permanent HECS scheme”^[12] (itself a “Deploy” idea in the Final Report of the Australia 2020 Summit^[23]). The report suggests extending the income contingent loans system to fund individuals’ tertiary education outside universities and sole traders seeking to fund innovative projects. It also recommends the favouring of “human capital” (ie. knowledge and skills) over economic capital in immigration assessments.

end of part two

[13] Mark Dodgson, “Content Analysis of Submissions by Leximancer“, University of Queensland, 08 June, 2008

[14] Kwanghui Lim, “ideaCHECK: Venturous Australia: Report of the National Innovation Review, September 2008″, Melbourne Business School, September, 2008

[15] John Haining, “Venturous Australia: It’s not Commercial Ready all over again”, Innovation Is Industry Policy, 22 September, 2008

[16] Grant Gross, “Congress extends R&D tax credit as part of bailout”, NetworkWorld, 03 October, 2008

[17] Ministers for Innovation, Industry, Science and Research, “COMET Evaluation Report released”, Media Release, 15 September, 2008

[18] Australian Bureau of Statistics, “Venture Capital and Later Stage Private Equity, Australia, 2006-07″, 14 February, 2008

[19] Ministers for Innovation, Industry, Science and Research, “Professor Penny Sackett Australia’s New Chief Scientist”, Media Release, 30 September, 2008

[20] Ministers for Innovation, Industry, Science and Research, “New Roadmap Sets Out Research Infrastructure Needs”, Media Release, 04 September, 2008

[21] Ministers for Innovation, Industry, Science and Research, “Government Welcomes Release of CRC Review”, Media Release, 05 August, 2008

[22] Terry Cutler et al, venturous Australia: Building Strength in Innovation, 09 September, 2008

[23] Warwick Smith, Julia Gillard et al, “The productivity agenda: education, skills, training, science and innovation”, Australia 2020 Summit - Final Report, May 2008