In the last two posts I’ve been unravelling why, despite Australia’s consistent internationally comparable levels of investment in innovation, we are equally consistently slammed for our low levels of innovator-industry collaborations.  So far, we’ve noted that government invests funding to incentivize and stimulate innovation activities because, like any investor, it believes not only that it will receive a return on that investment, but that this return will be at least as valuable as any other use to which it could put that funding.  We’ve also established that the return governments are seeking on their investment is primarily about the economy-wide benefits that come from innovation spilling over and not simply benefitting the people who initially took the risk developing and implementing it. And that the fact these spillover benefits are generally several times the size of the innovators’ benefit is why many firms under-invest in innovation, which is why governments step in to stimulate investment. Which at first glance would seem to complete the circle nicely without having to even use the word ‘collaborate’. So where is the problem? 

Way back in the first post, when I said:

Whether you’re a government or an individual, everyone wants the money they spend to get them what they wanted

The return the government is seeking is not that innovation occur. The return is that the innovation – be it in the form of a new product, process, service or business model – makes its way into the broader economy and increases overall productive capacity ie the economy’s ability to get more output from the same input.

If that doesn’t happen, no matter how insightful the idea or impressive the effort put into the innovation, the investor hasn’t got what they wanted. They didn’t want time to be spent or effort to be made. They didn’t want papers to be written or conferences held, although this was certainly expected to be part of the process and an attractive by-product. They wanted lives to be saved, so they could continue to be productive members of society. They wanted new industries to be developed around technologies and processes so people could be employed and feed their families, and those families could grow up, be employed and feed their families. They wanted to find new and safer ways to do what we already do so people can improve their standards of living and meet their full potential, in every sense.

Which brings us to the nub of Australia’s innovator-industry disconnect.  Yes, Australia spends a lot on innovation both directly in terms of supplying funding for innovative organisations and employing innovative people, and in the form of direct and indirect financial incentives for firms to engage in innovative behaviour.  However, a lot – an awful lot – of that money is spent in higher education.  That’s not a bad thing in and of itself – it does, however, mean we’re at a disadvantage compared to countries where spillovers don’t have to travel across from as many industry sectors ie from higher education into a directly relevant industry, and from there to another related industry, and so on.

The Organisation for Economic Co-operation and Development (OECD) publishes an annual scorecard of Science, Technology and Innovation performance across a variety of indicators in all of the developed nations and the leading emerging economies.  When it comes to comparing the sectors in which researcher are employed, the 2013 figures shows 58.7% of Australian researchers are employed in higher education, with a further 8.9% in government. In fact, of the 34 countries surveyed, Australia was in the bottom 5 for its number of researchers employed in business.

Low rates of researchers employed in industry would not be as much of a challenge to realising the intended return on public monies if we had exceptionally high rates of successful commercialisation of innovations. Unfortunately, while our hits may have been spectacular, there are a lot of misses and quite a few didn’t-really-tries.  We also have to be realistic about rates of success in commercialising public research generally – according to OECD data, in the US the annual average number of spin-offs per university among its 157 universities is only four.  Even in Europe, where there is a tradition of strong links between universities and industry, 10% of universities account for almost 85% of licensing income (Science, Technology and Industry Outlook 2014).

Which leaves us with collaboration.

“But what about basic research?” I hear some of you cry. “Expecting return on investment across an economy is all well and good for applied or translational research and design, but there has to be ongoing development of the knowledge base.” To which I reply, yes: you are absolutely right. Without basic research (and frankly I prefer the term ‘fundamental’, because that’s what it is), we wouldn’t have the wifi I’m using to write this; without Zaha Hadid’s initial, almost unimaginable if not unbuildable designs, we would never have come up with new technologies and techniques that are being deployed in a boggling variety of discipline worldwide.  But under Australia’s current innovation funding model, we can’t all be doing basic research and trusting Someone will find a use for it. We simply can’t afford it.

The world is a fascinating place, and there are as many questions to be answered as there are minds to be intrigued by them. But when the money to support innovation is coming from a source that must also provide hospital beds, functioning infrastructure and safety in our communities, we have to accept there are limits on how many searches for answers can be funded in how many places. Which is why, albeit a little later than many countries (and my own State, remembering the Smart State days), Australia’s independent Chief Scientist has led a formal consultation process on new national Science and Research priorities.

Does that mean we don’t ask the remaining questions? Not at all. We just may have to get a bit creative in how we approach those questions, broadening our horizons in with whom and for what purpose, to secure the resources we need.

Maybe we should try that collaboration thing they keep banging on about…

Publications of the Organisation for Economic Co-operation and Development (OECD) are available on-line through their iLibrary at http://www.oecd-ilibrary.org/. For more information on the development of Australia’s Strategic Science and Research Priorities, please visit the website of the Chief Scientist.