Jared Mondschein
August 15, 2018

Tech's elephant in the room

Innovation

Tech's elephant in the room

Tech bridge: The level of discussion on innovation in Australia is poor 

Innovation is about change and new thinking. You would hardly know that from the recent AFR Innovation Summit, which featured speakers making the same well-known talking points, including the self-congratulatory call that ‘Australia invented Wi-Fi’, the meaningless platitude that ‘Canberra is innovative and supporting innovation’, and the consistent lament that “the government isn’t doing enough to support innovators.”

As the discussions on Australia’s innovative capabilities have gone unchanged, so too has Australia’s global rankings in the Global Innovation Index, where it has moved from 18th to 20th from 2010 to 2018.

Innovation drives business and job growth and is crucial to Australia’s economic future, but Australia’s lackluster discussion of innovation is reflective of an equally uninspired whole-of-country approach that focuses almost exclusively on internal developments while largely ignoring what is going on overseas and – most critically – how to bring more of it here.

To its credit, the Australian government has implemented a number of efforts to better foster domestic innovation, including providing future-focused educational curricula that embrace STEM, reforms to vocation education that prioritize tech literacy, and research & development (R&D) tax incentives.

Yet these policy tweaks don’t address Australia’s more-pressing challenges when it comes to innovation.

The central challenge to Australia’s embrace of innovation is this: when Australia does R&D, an integral process for innovation, it only does half the necessary steps; it researches but does not develop enough.

Put simply, Australia doesn’t commercialise very well. Australians can pat themselves on the back about research discoveries like Wi-Fi, but does any Australian company make Wi-Fi routers?

Furthermore, Australian businesses are investing in far lower levels of R&D than the government and business in similar countries.

If Australian businesses don’t invest in R&D and bring new products and services to market, then where does Australia plan to innovate?

There’s a simple solution for making Australia more innovative in the near term: importing it. While education is a critical component of the innovation equation, it is only one part of what should be multi-pronged approach to innovation.

Australia should be seeking to develop the local skills and infrastructure necessary for embracing innovation over the long term, but it should simultaneously be welcoming the sort of foreign firms and talent that can introduce innovative practices and skills into the economy.

Countless overseas firms, particularly from the United States, are commercialising their innovations – exactly what Australian firms are not doing enough of themselves.

Many of these firms, like Boeing and Google, do significant R&D in Australia, with US firms spending more than A$1 billion every year on R&D in Australia since 2009. This has led to Australian-made innovations like a new carbon fibre technology on the wings of Boeing’s 787s and Maps for Google.

Foreign investment not only provides money and jobs but also “spill-over” effects of skills and knowledge transfers that promote innovation. Boeing has helped Australian firms like the Victoria-based Lovitt Technologies, over the course of its 20 years working relationship with Boeing, grow from a local automotive supplier to a global aerospace component supplier.

Integral to this foreign investment is foreign talent and the critical role it plays in training the next generation of innovators.

Major investments from anchor firms like Google have led to a number of Australian startups being founded by former Google employees.

Unfortunately, however, little of this is discussed in conversations about making Australia more innovative. There are, however, plenty of debates about how AI is going to impact the future workforce, how there is not enough cooperation between academia and industry, and how to regulate big technology firms.

Amidst disquiet about the tax avoidance of US firms and misuse of foreign worker visas, it has become taboo to admit that Australia should in fact be welcoming foreign firms and talent.

A widely-respected senior government official confirmed as much when I asked if Australia was missing out by focusing on clamping down – instead of welcoming – foreign firms and skills. His response, “Yes, of course, but I could never say that publicly.”

While any and all foreign expertise is not a cure-all because many foreign firms primarily use Australia as a sales and marketing hub, Australian innovation will remain deficient as long as little consideration is paid to attracting foreign firms and talent who would innovate and commercialise such innovations in Australia.

Australia’s geographic remoteness and unforgiving climate has helped engender a tough and practical approach to problems that ignores rigid traditions and formalities – excellent building blocks for innovation.

At the same time, however, Australia need not ignore the opportunities already available to it beyond its shores. It can and should take advantage and welcome the foreign firms and talent that can inject a much-needed boost to Australia’s lackluster innovation.

If nothing else, the additional firms and talent would at least lead to a change in conference talking points.

Jared Mondschein is a Senior Fellow and Senior Advisor at the United States Studies Centre at the University of Sydney. His research focuses on the US-Australian trade and investment relationship as well as innovation and entrepreneurship.

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