Organic innovation is driven by international trends - globalisation, outsourcing, unbundled value chains. Open-source, networked firms are more likely to innovate if they are in a learning network with other firms.

Advanced Business Services - Key Agents of Innovation

Q. What are they?
A. Enterprises which provide a largely customised, problem-solving service to other businesses, where the services in question require application of significant intellectual effort or capital

e.g. financial advising and broking, research, design and engineering, legal, advertising, computer consulting, employment placement services.

Criteria for inclusion

• Derive most of their sales from business clients;
• Provide product development and / or cost management solutions which are specifically tailored to the needs of clients;
• Apply a high degree of creativity and intellectual analysis in delivering these solutions;
• Act as the primary provider of intellectual content.

Role of Advanced Business Services in Innovation

Classical / strategic leap innovation
- Protection of intellectual property
- Formal R&D
- Business strategy
- Marketing

Organic innovation
- Carriers of new ideas between businesses

Advanced Business Service Transactions

• Transmit knowledge and technology, propogate innovation and technology diffusion.
• These transactions are highly social in nature
  - built around networks of personal contacts and relationships accumulated over long periods.
• This inclines such firms to transact most of their business within a tight local domain and thus "distance decay" is a risk to innovation

What we need to do

• Firms need to size up risks and gauge opportunities through a highly social, personal, face-to-face process.
• Regions need advanced business services or they will lag behind.
• Sydney has almost 50% of ABS jobs, with Melbourne 29%, Brisbane 7% and Canberra 6%. Tightly concentrated in inner city of Sydney and Melbourne.

Australia may be dividing into driver and client regions regarding the information economy, in the

• national system of cities
• in terms of intra-metropolitan structure

A locationally-fixed core and periphery model of innovation "haves" and "have-nots" is wasteful of capital and socially divisive.

Urban Planning Policy response

• Sub-regions must offer the full coffee culture, cosmopolitan, full-service, cultural centre identity - 300,000 or 400,000 people. These centres are linked by high-quality public transport to compress and concentrate the labour market.
• Old manufacturing zones need to be reconceptualised - mix of services, products, assembly and R&D, not just manufacturing.
• Put transport network to best use - access to rail, port network - demand management through pricing policy.
• A national vision for the system of cities - a national spatial plan e.g. the role of Sydney, Brisbane, Melbourne.
• Metropolitan-wide governance - not just to Local Government and not just to State. Metropolitan Commission at arm's length to Government.
• We need development corporations - sub-regional CBDs won't just happen by market measures
• Pricing reform - charge for roads properly
• Value capture - land value in planning process, zoning, etc.