Transcript Document

Australian Innovation Policy and Public-Private Alliances:
“Where we were and where we are going".
Dr Terry Cutler
Australia
Lima, April 2008
(Background paper for CEPAL’s project on alliances for export development)
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Caveat emptor!
What shapes my perspectives and observations on this subject ?
¶ Career has straddled corporate and public sector roles
- have sat on both sides of the fence!
¶ Work extensively internationally, especially in Asia
- so interested in differences across national innovation systems - no “one size
fits all model”
¶ Background in technology, but also worked extensively in creative industries and
their role in innovation
- so believe that a national innovation strategy is more than just a science and
technology policy
¶ Currently chairing Australian Government major review of innovation policy for Australia
- so obviously don’t believe we can ever stand still
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Dr Terry Cutler
The pitfalls around country case studies
For one’s own country:
tendency to overstate the country’s weaknesses and challenges,
and to understate strengths and embedded advantages
and
to over-emphasise the short-run at the expense of the long run.
There is also as much to be learned from policy failures (or mixed results)
as from obviously success outcomes
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Dr Terry Cutler
GREAT DESTINATION
Pity about no road!
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What is Innovation?
Innovation = creating value through doing something in a novel way
= ex post,
so we need ex ante understandings of the dynamics of socio-economic change
Innovating = creative problem solving
Being innovative = creative problem-solving in order to create value
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Dr Terry Cutler
There has been a lack of coherent theories of innovation to underpin development policies
Innovation is a virtuous cycle for socio-economic change and development.
KNOWLEDGE
PRODUCTION
Origination
creativity;
problem solving
or adaptation
productivity;
competitiveness
Diffusion and
KNOWLEDGE
DIFFUSION
absorption
entrepreneurialism
Deployment
Source: Terry Cutler 2007
KNOWLEDGE
APPLICATION
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There are thus three facets to innovation - each needs
balanced attention within a national innovation system
Creativity
-the generation of ideas and inventions
Requires fresh thinking and inventiveness
Entrepreneurship and
commercialisation
-linking good ideas to the right market
opportunities
Support for education and research
environments.
Public - private linkages for sourcing relevant ideas
- needs two way awareness of opportunities
and needs
(Good ideas or patents without customers
or users are worth nothing)
Industry should lead, but governments should
help reduce barriers to success
Requires entrepreneurs and risk taking
Firm-to-firm and firm-to-research provider
linkages become increasingly important in an era
of open innovation and “markets for innovation”
Diffusion and adaptation
-rolling out high potential innovations
across industry or the community
Capturing national benefit
Government can assist with awareness and
extension programmes - especially for SMEs;
Export facilitation
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Dr Terry Cutler
The triple helix of innovation policy:
(i)
market-oriented innovation to increase productivity and improve
competitiveness;
(ii)
innovations and changes in public policies and
service delivery around the production of public goods;
and
(iii) innovations and changes to address societal and
environmental aspirations and challenges, and the
mobilisation of private and public sector capabilities
around these challenges.
Dr Terry Cutler
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Dr Terry Cutler
Innovation occurs within a complex ecosystem of actors,
and relationships …. No one innovates in isolation!
SKILLS
INFRASTRUCTURE
GOVERNANCE
REGULATION
Community
service
providers
Government
PEOPLE
TAXATION
research
providers
firms
NATIONAL
CHALLENGES
CAPITAL
NATIONAL
PRIORITIES
COMMUNITY
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Dr Terry Cutler
Innovation system = the stocks and flows around innovation
• The elements of innovation involve both ‘stock’ and ‘flows’: stocks of
knowledge and capability, and the information flows of the innovation capital
around these.
• We need to invest in the capabilities required around each element of the
innovation system, as well as investing in the linkages and flows between them.
• Resources applied to innovation should be regarded as investment in
the future, not as expenditure.
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Dr Terry Cutler
Five key functions within an innovation system
• identification of opportunities
• creating capabilities
• managing risk and uncertainty
• building and maintaining infrastructures
• mobilising resources
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Dr Terry Cutler
Systemic challenges within an innovation system
(areas for potential system failure, over and above market failure)
1.
Inadequate infrastructure provision
2.
Inadequate institutional development and evolution.
3.
Lack of skills and learning problems (eg absorptive capacity).
4.
Structural adjustment issues and transitional problems in
economic change (eg technology lock-in).
5.
Networking and collaboration problems (loose versus tight).
6.
Heterogeneity and diversification versus specialisation.
7.
Imbalances within and across the innovation system (eg.
forgoing leverage - in Australia, the parts are better than the
whole!)
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Dr Terry Cutler
Putting Australia into context - the innovation challenge of a small economy
¶ The tyranny of distance
¶ The tyranny of low density (sparcity)
¶ The impact of trade gravity
¶ The opportunities from natural endowments
(seas, space, land, resources, biodiversity, isolation)
¶ The challenges of federated, distributed systems
Dr Terry Cutler
AUSTRALIA’S ECONOMIC PERFORMANCE - SCORECARD
Strong GDP growth
Low unemployment, with skill shortages
But … all fuelled by commodities boom.
National savings through pension fund scheme
Reasonable productivity growth since mid-1980s
(impact of micro-economic reform agenda)*
Challenged agricultural sector 10 year drought, fuelling longer term
climate change fears
*The sustained productivity gains in the agricultural
sector have been more long-run
High household debt,
and housing affordability challenge
highly skewed exporting base
Inflationary pressures
Low trade intensity across economy as whole
(despite having doubled over past three decadesa function of the scale of the services sector?)
Dr Terry Cutler
Analysts often forget that technological innovation is especially important
for resource based economies
“Most of Australia’s massive deposits of minerals were of no use until
new technology liberated them. In the last two centuries Australia has
depended as much on the rise of new technology as on its own soil,
grasslands, minerals and other resources”
Geoffrey Blainey, A Shorter History of Australia, p.24
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Dr Terry Cutler
EVOLUTION OF AUSTRALIA’S ECONOMIC DEVELOPMENT
19th
century
1900-1920
Superior economic performance to US - off back of mining (gold) and wool
1901 - Institution building around new Commonwealth of Australia; key role for government
enterprises;
1914-1918 war - Disruption to civil imports; lack of local defence materiels
1920-1940
Push for greater local industrial self sufficiency, defence industry and public health capabilities
1940-1960
Sunset of Imperial influence: shift from UK to US alliance. Post war reconstruction, industrialisation:
“nation building” projects - including discussion of nuclear futures (off uranium resources).
1960-1980
Manufacturing stagnates behind protectionist barriers; beginning of second mining boom (iron; coal;
uranium)
1980-2000
Internationalisation of economy (with reduction of tariffs and floating of currency); programmes for
structural adjustment and micro-economic reform; privatisation of government enterprises. Focus on new
ICT and biotech technologies. Strong productivity growth.
2000 -
New challenges from global warming, energy futures, terrorism and preventable diseases focus new
national priorities; emergence of competition from BRIC economies; China now key trading partner
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Dr Terry Cutler
Some special innovation challenges for Australia:
Industry structure dominated by a very small number of big companies (many
MNCs) and a long tail of SMEs
Previously protected manufacturing sector now at risk of being hollowed out by
North Asia
Windfall mineral export earnings subject to external factors outside our control
(limited counter-cyclical safety nets)
Services sector traditionally very domestically focused (with oligopolistic
industry structures in telecommunications, banking, retail …. )
Domestically focused services sector now facing global competition (eg India)
Ageing population - increased health spending and future skill shortages
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THE INSTITUTIONAL EVOLUTION OF AUSTRALIAN DEVELOPMENT AGENCIES
Not comprehensive
1900-1920
1920-1940
1940-1960
1960-1980
1980-2000
2000 -
1926
CSIRO
1936
NHMRC
1930s
Statutory incorporation
RR&DCs
1953
ANSTO
Aust Research Grants Commission, 1965
ARC
ASTEC
CRCs
Establishment
Change or major review
AMC
Termination
R&D Tax
Concession
IIF
Austrade
NCC
Tariff Board, 1928
Industries Assistance Commission
Corporatisation
De-regulation & privatisation
Productivity
Commission
Govt
enterprises
Commonwealth Serum Laboratories
CSL Pty Ltd
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Dr Terry Cutler
THE INSTITUTIONAL EVOLUTION OF AUSTRALIAN DEVELOPMENT AGENCIES
Not comprehensive
1900-1920
1920-1940
1940-1960
1960-1980
1980-2000
2000 -
1926
CSIRO
1936
NHMRC
1930s
Statutory incorporation
RR&DCs
1953
ANSTO
A lot of the institutions date backAusta Research
long Grants
time,
Commission, 1965
albeit within an evolving framework;
ARC
ASTEC
We tend to forget abandoned institutions or programmes;
CRCs
Establishment
Change
or major of
review
Many
aspects
the current framework hark back to a very
Termination
different
industrial world - most current programmes were
conceived in a pre-Interent, pe-digital era!
AMC
R&D Tax
Concession
IIF
Austrade
NCC
Tariff Board, 1928
Industries Assistance Commission
Corporatisation
De-regulation & privatisation
Productivity
Commission
Govt
enterprises
Commonwealth Serum Laboratories
CSL Pty Ltd
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Dr Terry Cutler
Dept of Prime Minister
& Cabinet
National Departments*
Agriculture,
Fisheries &
Forestry
Rural R&D
Corporations
Industry,
Tourism &
Resources
AusIndustry
Environment
&
Water
Resources
Bureau of
Meteorology
Industry
R&D Board
Communications,
IT & Arts
NICTA
BITS
programme
Industry
Innovation
Funds
Health &
Ageing
National
Health
& Medical
Research
Council
Education,
Science &
Training
Australian
Research
Council
Defence
Treasury
National
Competition
Council
DSTO
COMET
programme
ANSTO
Austrade
EFIC
Aust Consumer
& Competition
Commission
AIMS
Auto
programmes
(ACIS)
Foreign
Affairs
& Trade
EMDG
Productivity
Commission
CSIRO
Invest
Australia
Pharma
Programmes
(P3)
Prime Minister’s Science,
Innovation and Engineering Council
Foreign
Investment
Review Board
CRCs
Legend:
Green: Direct Departmental or Ministerial control
Red: Statutory or ‘arms length’ agency
Blue: programmes under Departmental budgets
Geosciences
Australia
Aust’n National
University
University
funding
formulae
Council of Australian Governments: Federal and State co-ordination
State Administrations
Departments
of Primary
Industry
Departments
of Innovation,
Industry &
State Development
Departments
of the
Environment
* This does not purport to be a comprehensive mapping
For eg: CIO,
“Multimedia
Victoria”,
Film Victoria
Health
Services
Education
Universities
Emergency
services
Treasuries
Trade promotion;
Investment
attraction
Hospitals
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Dr Terry Cutler
Many Australian initiatives have focused on
strengthening public-private linkages - 4 examples
Example 1: Venture Capital
The problem: a systemic failure with VC for
early stage firms
Mid 1990s: Innovation Investment Funds
scheme
• Licensing of new arms-length private VCs
• Began with 2:1 $ incentive
• Returns to government capped
(upside to VC)
• Important aim to attract and build a cadre of
skilled professional managers
• US experience (see graph) shows that this is not a short-term challenge
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Many Australian initiatives built around
strengthening public-private linkages - 4 examples
Example 2: Co-operative Research Centres (CRCs)
The problem: Perception that universities and research institutes were not
sufficiently linked to industry
Early 1990s to date: Co-operative Research Centres
• Solicit competitive bids from industry and research consortia for matching
funds from government
• 7 year funding, with opportunity to re-bid
• Over 70 CRCs currently in place
• Recent review demonstrated significant RoI to country
• Has promoted new collaborative culture
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Many Australian initiatives built around
strengthening public-private linkages - 4 examples
Example 3: Rural R&D Corporations
In 1989 Government legislated to consolidate special rural R&D schemes
that date back to the 1930s.
Model: Industry levies on turnover matched by government funds (from 0.5 to 1:1)
Industry based Boards manage disbursement of funds to priority research
areas for the industry.
Complements similar schemes for rural industry promotion and marketing
Has facilitated highly networked industry clusters in wool, grains, and wine etc
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Many Australian initiatives built around
strengthening public-private linkages - 4 examples
Example 4: Australian Innovation Exchange Network (IXC)
Problem: Poor information markets linking organisations with capabilities and
organisations with strategic needs and capability requirements.
IXC pilot in 2004 - now fully established in 2006
Model of trusted intermediaries as innovation brokers between research
providers and firms, and between MNCs and SMEs.
The Network of IXC Intermediaries work inside multiple member organisations,
under a unique confidential structure, to search for and create connections for
business growth. Confidential information is not seen by other members. When
an opportunity is found, IXC Intermediaries then help members engage directly
through a step-wise disclosure process.
International affiliates being established (UK the first) and now our view is to
evolve to an IXC International this year.
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An innovation future for Australian industry
Australia’s new government has laid out a ten point framework for its innovation policy
which addresses many of the identified challenges going ahead:
1. Build a culture of innovation and new ideas by strengthening investment in
creativity and knowledge generation.
2. Focus incentives for business R&D to promote global competitiveness,
delivering the best outcomes for exports and economic growth.
3. Accelerate the take up of new technology, so Australian firms can access the
best ideas from around Australia and the rest of the world.
4. Make Australia’s innovation system truly international, by supporting partnerships,
collaboration and foreign investment in Australian R&D.
5. Use government procurement to support innovative Australian firms.
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Dr Terry Cutler
The ten point framework for Australian innovation policy:
6. … develop multiple pathways for industry to access the knowledge and
expertise in universities and research agencies.
7. Strengthen the skill base for innovation, including in maths, science and
engineering, and professional training for firms to manage innovation.
8. Develop and implement a set of national innovation priorities
9. Strengthen the governance of the national innovation system to support
higher expectations of government agencies and industry.
10. Review the bewildering array of government innovation and industry
assistance programs to reduce duplication and improve effectiveness.
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Dr Terry Cutler
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Dr Terry Cutler
Beginning with seven deceptively simply questions …
1. Can we imagine a better world?
Are we generating fresh ideas and pushing the boundaries of knowledge?
2. How do we solve the big challenges Australia faces?
3. Can we do everyday things better?
Creative problem solving everywhere, and incremental innovation.
4. How do we make better use of available tools and
technologies?
4. How do we make it easy for people to adapt and use tools
or ideas in new ways?
6. How do we better build and nurture human capital?
7. How might Australia, as a small country, prioritise its
innovation efforts?
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Proposing national priorities for innovation:
we can’t be good at everything
Some starting points ….
1. Start from leveraging Australia’s natural endowments or built strengths
2. Look to areas where there might be a distinctively Australian advantage
in developing solutions to globally relevant challenges or markets
3. Identify opportunities through innovation to transform and reinvent existing industries
and service delivery for competitiveness
4. Address the small country challenge in internationalising innovation
5. Maximising impact and national benefit from the supporting investments in
national capabilities, facilities and innovation infrastructure
Dr Terry Cutler
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5 discrete roles within a national innovation system:
both governments and business have a direct stake
Advancing frontier
science and knowledge
Science intensive
innovation
R&D
intensive
innovation
Creating or
transforming
industries
Knowledge
intensive
innovation
Delivering
incremental
innovation for
industry
Industry oriented
Solving major
national and global
challenges
Delivering community
solutions
Society oriented
(Public good research and
innovation)
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Dr Terry Cutler
Developing the different roles within a national innovation system
Managing an innovation portfolio that encompasses the spectrum of activity from breakthrough science
through to incremental innovation, all underpinned by crucial national facilities and capability building
National
policies and priorities
Science
intensive
innovation
Advancing frontier science
and knowledge
R&D
intensive
innovation
Creating or
transforming
industries
Solving major
national and global
challenges
Knowledg
e intensive
innovation
Delivering
incremental
innovation for
industry
Providing
community
solutions
facilities and infrastructure
Capability
building
regulation and institutions
education and training
Promoting a clear framework for national investment and decision making
(and for aligning the objectives and incentives of partners)
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Dr Terry Cutler
Investing in missions and capabilities to address national priorities.
Capability is ….
Skills, experience and know-how
CAPABILITY
infrastructure
(laboratories, equipment …)
collaborations and
relationships
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Dr Terry Cutler
Investing in missions and capabilities to address national priorities …
Matrix management - matching the right capabilities to priority goals
CAPABILITIES
‘enduring’ - but evolving
• structural
• long time scales
• ‘irreversible’ decisions
• capabilities for future
demands
PRIORITY
actions
• delivery path to impact
• reversible decisions
impact
goals
‘enduring’ - but evolving
• externality
• focus for impact
PRIORITY
NATIONAL
OUTCOMES
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Dr Terry Cutler
Some key learnings from our experiences
¶ Important to have mechanisms for promoting a “whole of country” framework a proactive national innovation system
¶ A proactive approach is facilitated by articulating national priorities and by having
an explicit ‘portfolio’ investment model for a national innovation system
¶ Public-private partnerships in innovation will vary by the objective and focus of
the innovation activity - there is no “one size fits all” model or approach
¶ Key government role in providing innovation infrastructure and building capability
¶ We must pursue local innovation within a global context
¶ Public innovation initiatives should emphasise:
- capability building
- clarity of national purpose - strategic leadership
- co-investment (to leverage funds and to strengthen industry linkages)
- a long-term view of investing in the future
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We are not in the business of reinventing the wheel…
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