The NSW Innovation Blueprint 2035 represents an important effort to articulate a strategic vision for innovation in Australia’s most populous state. With clear goals, measurable targets, and specific action areas, the Blueprint demonstrates a commendable commitment to driving innovation-based economic growth.
However, despite its merits, the Blueprint reveals a persistent cognitive bias toward startup-centric innovation models at the expense of a more balanced approach that includes medium-sized and large firms, as well as government business enterprises (GBEs).
This was emphasised in the previously issued NSW Industry Policy agenda but not reflected here.
In this context, the Commonwealth Government’s Strategic Examination of R&D (SERD) Discussion Paper notes the correlation between the decline of manufacturing, the decline of business expenditure on R&D and the decline of productivity growth to historically low levels.
This suggests that the problem must be seen as a broad one relating to Australia’s narrow trade and industrial structure.
Strengths of the Blueprint
Released on March 31, the Blueprint’s greatest strengths lie in its strategic clarity and comprehensive structure. The document establishes a compelling 10-year vision supported by four well-defined goals: growing jobs through innovative businesses, scaling global businesses, increasing diversity in innovation, and leveraging innovation to address state challenges.
These goals are operationalised through five key action areas – Strategy, Funding, Places, People, and Engagement – creating a coherent framework for implementation.
Particularly noteworthy is the Blueprint’s commitment to measurable outcomes, with specific targets for growing innovation-intensive firms from 5,218 to 7,012, increasing their economic contribution from $39 billion to $66 billion, and expanding related jobs from 136,000 to 230,400 over ten years.
This level of specificity establishes clear benchmarks for success and reflects a serious approach to accountability.
The Blueprint also makes important strides in addressing the diversity gap in innovation ecosystems, acknowledging that only 7 per cent of venture capital in NSW went to women-founded businesses between 2020 and 2024.
Its focus on creating equitable participation opportunities represents vital progress toward unlocking the full innovative potential of NSW’s diverse population.
Some missing elements
Several critical components are under-addressed in the Blueprint:
- Medium-Sized Business Innovation: Limited mechanisms exist for supporting innovation in established SMEs, particularly those in traditional industries that could benefit from process and organisational innovations.
- Large Enterprise R&D: Despite their significant resources, market impact, and innovation leadership, larger businesses receive little targeted support for NSW-based innovation activities or incentives to collaborate with smaller innovators or for multinational corporations to locate some of their R&D in NSW through public private partnerships with Government, universities, and NSW government research organisations.
- GBEs as Innovation Drivers: Government Business Enterprises could serve as powerful catalysts for innovation through procurement practices, partnerships, and direct R&D investments, but this potential remains largely unexplored.
- Cross-Size Business Collaboration: Few initiatives specifically encourage innovation collaborations between businesses of different sizes, missing opportunities for mentorship, supply chain innovation, and shared market access. This can be important in the ICT and defence sectors, where prime contractors can dominate the industry landscape.
- Industry-University-Public Research Agency Collaboration: While the Blueprint acknowledges poor performance in university-industry research partnerships, it offers little in the way of concrete mechanisms to strengthen these connections between the eleven Universities headquartered in the state, and the Commonwealth public research agencies with a strong presence in NSW (CSIRO, ANSTO, DST, AIMS, and the BOM). There is no commitment to strengthening intermediary organisations, such as the highly regarded Fraunhofer/Catapult institutional frameworks.
- No commitment to funding: It is unclear whether there will be funding to deliver the five strategic actions in the forthcoming NSW state Budget in June.
The startup-centric limitation
Taking into account both these strengths and identified gaps, the Blueprint displays a significant bias toward startups and early-stage companies, following a pattern that has characterised much of Australian innovation policy discussion in recent years.
This bias manifests in several ways:
- Funding Mechanisms: The Blueprint’s proposed funding initiatives—including the MVP Ventures Program and Strategic Investment Fund – primarily target the venture capital ecosystem and early-stage companies, with limited mechanisms for supporting innovation in established businesses.
- Performance Metrics: Success metrics focus heavily on venture capital investment and startup creation rather than broader innovation measures like process improvements, productivity gains, or R&D intensity across all business sizes.
- Terminology and Framing: The document’s language consistently emphasises ‘startups,’ ‘scale-ups,’ and ‘founders’ rather than innovation within existing businesses or across supply chains.
This startup-centricity represents a missed opportunity to leverage the innovation potential of the ‘missing middle’ – established medium-sized businesses with the capacity to commercialise innovations at scale.
As highlighted by Innovation, Industry, and Science Australia (IISA) and Australia’s Chief Scientist, these businesses often possess the market knowledge, customer relationships, and operational capabilities to translate innovations into economic impact.
Initiatives in other states
The contrast with the Breakthrough Victoria initiative is instructive. Victoria’s $2 billion investment fund takes a more holistic approach with specific investment streams for research institutions, startups, SMEs, and large corporations.
Its deliberate spanning of the full innovation lifecycle and focus on five priority sectors represents a more balanced strategy that addresses innovation across different business sizes and stages.
The contrast with the Advance Queensland initiative is also notable. Queensland’s $755 million program offers a diverse innovation funding ecosystem spanning regional innovation hubs, startup accelerators, industry attraction, and commercialisation pathways.
Queensland’s strategy connects innovation directly to industry development with dedicated funding for manufacturing, defence, energy and aerospace sectors, creating a more distributed innovation model.
A more balanced approach
To strengthen NSW’s innovation ecosystem and address the limitations of the current Blueprint, the following adjustments should be considered:
- Diversify Innovation Funding: Develop dedicated funding mechanisms for mid-sized businesses, including matched R&D funding, innovation vouchers, and technology adoption subsidies, complemented by a specialised ‘missing middle’ initiative helping established businesses innovate and compete globally.
- Strategic Government Engagement: Implement innovation-focused procurement across NSW Government agencies and GBEs while assigning specific innovation mandates to GBEs regarding their operations and supply chains to create market demand for innovative solutions.
- Enhance Cross-Scale Collaboration: Establish industry-specific programs where businesses of various sizes work with research institutions on shared challenges, supported by vouchers incentivising partnerships between small and large enterprises to facilitate knowledge transfer.
- Strengthen Manufacturing R&D: Create specialised support to help innovative manufacturers scale production and integrate advanced technologies while offering targeted incentives for non-mining R&D-intensive enterprises through developed FDI strategies and public-private partnerships.
- Align with Policy Framework and Improve Metrics: Strengthen connections with the Industry Policy Framework’s missions of net zero, manufacturing and housing while expanding success measurements beyond VC investment to include productivity improvements, innovation adoption rates, and economic complexity.
- Ensure stronger connection between industry R&D, innovation and industrial transformation: Industries of concern include farming (particularly small family-owned holdings), traditional manufacturing (particularly in regional areas), construction (slow adoption of BIM and other digital tools), mid-tier and smaller mining companies, and traditional retail.
Conclusion
The NSW Innovation Blueprint 2035 establishes important foundations for the state’s innovation ecosystem. The clear vision, goals, and action areas represent valuable progress in articulating a coherent innovation strategy.
However, its startup-centric approach limits its potential impact by not fully leveraging the innovation capacity of medium and large businesses.
Building also on the Industry Policy framework, NSW could create a truly comprehensive innovation ecosystem with a more balanced approach and expanding its focus to include the full spectrum of business sizes and innovation types.
This would not mean abandoning support for startups but rather complementing it with equally robust mechanisms for innovation across the business landscape.
* Dr John Howard is the Executive Director of the Acton Institute for Policy Research and Innovation and a Visiting Professor at the University of Technology Sydney. He is an expert in science, research, and innovation policy and advises government, universities, and industry on enhancing R&D and innovation performance.
Comments from Professor Roy Green on earlier drafts of this article are greatly appreciated. If you want to learn more about these and related issues, please contact John Howard at john@actoninstitute.au.
Do you know more? Contact James Riley via Email.