CHECKPOINT INNOVATION: STILL A LONG WAY TO GO ON ROAD TO INNOVATIVE PROSPERITY

On the eve of the first National Innovation Summit, a study has found that Australia's innovation performance lags world-class standards and calls for an urgent policy re-think for Australia to capture the benefits of innovation.

The study, Innovation Checkpoint 1999, was undertaken for the Australian Business Foundation, an independent, private-sector think-tank sponsored by Australian Business Ltd.

The study looks at the data on key activities involved in business innovation.

It shows that although Australia has made good progress in some areas it has retreated further from internationally recognised good practice in others.

"The results are disturbing and suggest an urgent need for sophisticated policy developments and further commitment and investment by both public and private sectors if Australia is to realise its potential as a knowledge-based economy."

The report's authors, Professor Jane Marceau and Dr Karen Manley of the University of Western Sydney, give an updated picture on Australia's business innovation, which builds on the report done for the Australian Business Foundation in 1997, "The High Road or the Low Road?".

Innovation Checkpoint 1999 says Australia has performed relatively well in four key areas.
In recent years, there has been:

• continued growth in knowledge-based service industries
• increasing investment in machinery and equipment
• rises in venture capital, helping to turn good ideas into commercialised outcomes
• faster growth of high-skilled jobs compared to low-skilled jobs since 1996

However, Australia's innovation performance in the 1990s has been mixed.

The report also identifies five negative trends:

• Innovation Rates: A falling proportion of manufacturing businesses are involved in either product or process innovation. This cuts to the heart of Australia's innovation performance and, if continued, would seriously undermine Australia's position as a knowledge-based economy. The proportion of manufacturing businesses undertaking technological innovation fell by six percentage points , from 32 to 26 per cent, between the periods July 1991 to June 1994 and July 1994 to June 1997.
• R&D Personnel and Expenditure Levels: Substantial falls in R&D expenditure by Australian businesses since 1995 pose a significant threat to Australia's innovation performance. Manufacturing BERD (Business Expenditure on R&D), as a percentage of value-added, fell 9.6 per cent between 1995-96 and 1996-97 and 18 per cent between 1996-97 and 1997-98. The number of business personnel working on R&D showed strong growth between 1984-95, however a downward trend has emerged with the number of personnel declining 9.5 per cent between 1995-96 and 1997-98.
• Australian Management Skills: The quality of critical innovation skills, particularly those of Australian managers, is less than optimal. A 1998 investigation by Arthur D Little concluded that Australian managers had failed to appreciate and capture the value of innovation to the same extent as their international counterparts and had overestimated their own innovation capacity and performance.
• Industry and Trade Structure: The manufacturing sector accounts for an extremely low proportion of GDP compared to many OECD countries and continues to shrink. This affects innovation because manufacturing still contributes most of Australia's R&D and propensity to innovate. The composition of Australia's manufacturing sector is under-represented in high and medium technology sectors. Across OECD countries, between 1980 and 1996, the high technology manufacturing sector was the only group of manufacturing industries growing as a proportion of GDP. In Australia, this sector was shrinking as a proportion of GDP. Australia's trade patterns are skewed towards the lower technology, lower growth areas of economic activity.
• Training Commitment: The low and falling commitment of employers to staff training is seriously undermining Australia's innovation efforts because of the importance of skills in transforming information into knowledge and knowledge into innovations. Training hours per employee have fallen about 17 per cent between 1990 and 1996.

The Australian Business Foundation Chief Executive, Narelle Kennedy, said Innovation Checkpoint 1999 has shown some positive developments on the innovation front in Australia.

"Like the strong growth in knowledge-based service industries, some turnaround in high-skilled jobs, improved venture capital and machinery and equipment investment," she said.

"But Australia's innovation performance still cannot be considered world class. There are falls in R&D expenditure, in numbers of R&D personnel and in the numbers of manufacturing business innovating. Training commitments, education investment and Australian management skills and innovation capability are consistently below OECD norms."

Ms Kennedy said there remained a considerable challenge for Australia to make innovation a hallmark of its economic, business and educational life. "It is crucial the Innovation Summit is neither defensive nor complacent. We need to take an honest look at our strengths and weaknesses and chart a way forward," she said.

Ms Kennedy said Innovation Checkpoint 1999 concludes that action is needed to:

• Boost new business opportunities from clusters of firms and cross-sector linkages between industries
• Access and diffuse leading-edge technologies widely within the Australian business community
• Invest more in education and skills for the new economy
• Upgrade the detailed understanding and the measurement of innovation in Australia.