STUART KENNEDY
February 8, 2017

ISA: Where are all the gazelles?

Policy

ISA: Where are all the gazelles?

Leigh Dayton: The Innovation and science ecosystem in Australia faces huge challenges

Australia ranks stone motherless last in one of the most critical measures listed in the Innovation and Science Australia report on how this country fares in creating wealth from brainpower.

The 200+ page Innovation and Science Australia Performance Review of the Australian Innovation, Science and Research System seeks to set a benchmark base for Australia’s innovation performance as we reported earlier this week.

Essentially, the report says Australia is OK at doing worthwhile research and poor at translating that research into real world results.

The dire consequences of this discrepancy are revealed in the report’s headline chart, the Performance Scorecard for the Australian Innovation, Science Research System.

The chart lists the three crucial ISR metrics area: knowledge creation, knowledge transfer and knowledge application.

Australia does reasonably well at knowledge creation when stacked up with our OECD peers. We are middle ranked at 15th of 37 OECD nations on gross expenditure of R&D as a percentage of GDP, and rank third of 36 when it comes to government and higher education researchers per thousand of our total employment.

The bad news arrives in the knowledge transfer and knowledge application arenas where we are 18th of 37 in the percentage of higher education expenditure on R&D financed by industry and a dismal 27th of 38 on the proportion of publications with industry affiliated co-authors.

In knowledge application we are 18th of 30 in VC investment as a percentage of GDP and 21st of 36 with business researchers per thousand employed in industry.

Still, there was one shiny metric in the knowledge application category that bodes well for the future. Australia was eighth of 38 nations in the total percentage of early stage entrepreneurship activity.

The whole scenario of good research and terrible application gets scary in the outcomes section of the report, especially when you begin to wonder why a country as well-endowed as Australia with brains money and stability has produced no Apples, Amazons, Googles or Microsofts.

Our high-growth enterprise rate measured by employment is a pathetic last place. We are 27th out of 27 OECD countries. Dead last.

The report defines high-growth firms as having an average annualised growth of over 20 per cent a year over a three-year period, and having 10 or more employees at the beginning of the observation period.

Our performance in the outputs column of the ISA report is also dire where we rate 23rd out of 31 OECD countries in the percentage of firms that introduced new or significantly improved goods or services to market.

In summarising how well our ISR system works the report’s authors were less than impressed with Australian business and its innovation readiness.

"The vast majority of innovation introduced by Australian businesses has a low degree of novelty and relies upon the adoption and adaptation of existing technology and knowledge (i.e. following best practices). This suggests that the ISR System is failing to capitalise on its above average performance in knowledge creation.’

On our dismal high growth enterprise ranking the report stated the obvious: “Australia needs to increase the number of high growth firms that will create future jobs, strong productivity growth and, through innovation, higher wages."

Observers of Australia’s ISR system were less diplomatic.

"The output stat for high growth enterprise tells the really sad story," says innovation sector commentator and consultant Sandy Plunkett.

"For a modern, highly educated nation – as Australia likes to see itself – being 27th of 27 is a shocker. We are clearly not applying the strengths we have in other areas such as research to scaling globally relevant 21st century companies,” she said.

“We may be getting somewhat better at starting them. But that’s the easy part. The real risk and complexity comes with scale."

Ms Plunkett believes Australia needs an injection of overseas talent with experience in managing high-growth digital enterprises.

"We talk about skills shortages such as STEM in Australia, as does this report. But I would argue that one of the biggest skills barriers here in quantity and quality is digitally savvy management capability.”

“We value finance, legal and governance adept managerial talent far more than digital skills across the board. This leadership mindset is so 80’s.”

Veteran science writer Leigh Dayton is in the midst of a PhD dissertation dealing with Australia’s inability to commercialise research and says the report’s findings are unsurprising.

“Our whole (ISR) system is based on weak sand. Our industry is notoriously risk averse and doesn’t want to invest. We have a few big players who tend to want to do their innovation overseas and then a lot of small to mid-sized organisations that often don’t have the money.”

Ms Dayton points to problems with a political system that constantly chops and changes innovation policy (as well as its relevant ministers.)

“Also there are two cultures. There’s the culture of research and there’s the culture of industry,” she said.

“Neither sector wants to interact with the other, they don’t agree with the other’s metrics or performance they don’t like working with one another they are not familiar with one another.”

“The research, the industrial and the political systems are poorly linked with one another,” she says.

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