Assessing Innovation Systems in Australia

Don Scott-Kemmis

Innovation Management and Policy ProgramNational Graduate School of Management

Australian National University

Evolution of Innovation Systems

NIS a useful concept but not yet a strong framework for analysis and evaluation

Innovation systems approaches challenging to apply in Australia – fragmentation, international links.

Systemic failure can be a driver of evolution

Analysing how innovation systems evolve and respond to failure should give insight into the NIS

The Laggard Perspective on AustraliaHigh dependence on natural resources- 80% of the top fifteen export

products are resource-based commodities with a low level of processing

Failing to develop new areas of specialisation and growth

Productivity growth in the 90's the result of one-offs: micro-economic & ICT

Weaknesses in new firm formation

The poor performance in R&D and patenting signals the weaknesses in management, scale and international positioning of Australian industry.

Declining position in many ‘high tech’ sectors indicates the extent to which Australia is being left behind the frontier of innovation and growth- Large and growing trade deficit in ICT products and services

      One of the lowest in the OECD in – BERD – investment in venture capital;– International patenting activity (per mill. Population)

The Boom Perspective on Australia

A broadly based dynamic and flexible economy, diversified across markets, and increasingly sectors, underpinned by competitive domestic markets and flexible labour markets.

High-level human resources and strong research organisations facilitate the rapid uptake of new knowledge produced anywhere.

Imported knowledge and equipment combined with local knowledge and capability supports active problem solving and systems integration in a range of sectors generating relatively high levels of productivity.

A ‘fast-user’ strategy combined with natural and human resources is a sound basis for future prosperity.

High and increasing productivity; Relatively high level of public sector R&D; Substantial growth in niches markets in key manufacturing sectors: automobiles

and components, wine, boats. Maintaining strong competitiveness in resources sectors through the effective

application of new technology, including IT; A strong ICT services sector and high growth in ‘knowledge based services’; Rapid and broadly-based uptake of new ICT.

Characteristics of Australian Innovation-1

Knowledge Based Resource Industries

Conservative Evolution– Scientific strengths– Technological specialisation– Patenting behaviour– Specialisation in export products

Changes in ‘revealed comparative advantage’ in Australian scientific

publications output in four periods

0.000

0.500

1.000

1.500

2.000Geosciences

Plant and Animal Sciences

Ecology/Environment

Agricultural Sciences

Astrophysics

Psychology/Psychiatry

Immunology

Computer Sciences

Molecular Biology and GeneticsMathematicsClinical Medicine

Biology & Bicohemistry

Neurosciences

Pharmacology

Multidisciplinary

Engineering

Materials Science

Physics

Chemistry

1982-86

1987-91

1992-96

1997-01

0 0.5

1 1.5

2 2.5

3 3.5

4 4.5

5 Agriculture

Oil & Gas, Mining Power Generation & Dist

Food & Tobacco Textiles & Apparel

Wood & Paper

Chemicals

Pharmaceuticals

Biotechnology

Medical Equipment

Medical Electronics

Plastics, Polym & Rubber Glass, Clay & Cement

Primary Metals Fabricated Metals

Industrial Mach & Tools Industrial Process Equip

Office Equip & Cam Heating, Vent, Refriger Misc Machinery

Computers & Peripherals

Telecommunications

Semiconduct & Electronics

Measurement & Control Equip.

Electrical Appl & Compon

Motor Vehicles & Parts

Aerospace & Parts Other Transport

Misc Manufacturing Other

1980-86 1987-93 1994-2001

Figure 3: Australia’s Revealed Technological Advantage

Science Linkage vs. Technology Cycle Time (1980-2001)

Denmark

US

Canada

AustraliaUK

Finland

Sweden

Norway

ItalyFrance

GermanyTaiwan

Japan

South Korea

-0.5

0

0.5

1

1.5

2

2.5

3

2 4 6 8 10 12 14 16

Technology Cycle Time (TCT)

Sc

ien

ce

Lin

k (

SL

)

Characteristics of Australian Innovation-2

Systems Integration Plus

No core technology production Problem solving – but sophisticated Technology mobilisation for resource based

industries and services ICT diffusion through the innovation system

Australia – major R&D fields of technological skills (RF),2000–01 (%

of GDP)

0 0.02 0.04 0.06 0.08 0.1 0.12

Computer Software

CommunicationTechnology

ManufacturingEngineering

AutomotiveEngineering

Medical & HealthScience

Resource Engineering

Information Systems

Misc. ICT

Approach to Analysis: Looking at Change.

Sectoral Approach– more or less!

Building Blocks Actors and Networks: interaction,

competences

Knowledge Bases: appropriation, acquisition, increasing returns

Institutions: coordination, incentives, ‘rules of the game’, standards.

Technological structure

Problem solving

Innovation System Evolution Phases

Growth Renovation

Emergence

Techno-economic opportunity

Techno-economic problem

Different Stages Need Different Assessment FrameworksKey Challenge Driver Locus of

action

Emergence

Techno-econ insightFirm buildingEstablishing a trajectory

Vision, OpportunityChampions

Entrepreneur

Growth Virtuous circle, System buildingInstitutional complem’y

Increasing returns, SpecialisationComplementaritiesproblems

Entrepreneur, Manager, Kn & info transfer Organisations

Renovation

Addressing systemic failuresUnpackaging the paradigm

Systemic failuresCrises

Entrepreneur, Manager, collaborationExt. actors

A Possible Approach to Functions in the Evolution of Innovation Systems

Identify Problems

Create new Knowledge

Incentives to innovate

Resource supply

Guide Search

Based on Johnson, 2001

Recognise the potential for

growth

Facilitate Kn & Info

Exchange

Stimulate/ create

markets

Reduce social uncertainty

Counteract resistance to

change

Selection

A Possible Approach to an Innovation Systems Failure Framework   ‘Rules’: System failures

Actors – missing actorsDemand

Compan’s

Kn. Org’ns

Third Parties

Infrastructural failures:

       

 Institut’l failure

Hard:        

Soft:        

Govern’ce

       

 Interact’n failure

Weak        

Strong        

Capabilities failure        

Systemic Problems and Responses in the Evolution of the Wine Industry

  Knowledge Base Actors & Interaction Institutions

1960sExcess

capacity

major corpns brings prof’l mngmtDev’t of export market Kn.

Old family companiesGrowth of large local wine companies

Breaking out of the euro paradigm

1970Developin

g the robust

product design and the ‘system’

Kn. Based prod’n 

Specialisation in all aspects Strong networking Strong training organisations

rural R&D framework.industry associations effective collective action & lobbyingExport standards Industry ‘visions’ 1980-

2000 

Rapid growth

Strong kn. base in major firmsKn. sharing. use of int’l Kn.new analytical techniques 

Increasing scale specialist service providers

vocational training. 

Consolidation of the institutional framework.

Systemic Problems and Responses in the Evolution of Minerals Exploration

  Knowledge Base Actors & Interaction

Institutions

Focusing search

Development of new tools for AustraliaLocalised kn. of geology

survey agencies- survey & store data

Government funded pre-exploration surveys

  Resourcing innovation

Sophisticated capital markets for financing exploration

collaborative development of tools

exploration permit systemData standards (JORC) mandatory info sharingTaxation and share market risk funding. Native title

Knowledge

acquisition &

assessment

New tools need a new kn base New tools for visualisation  

Specialisation in explorationSpecialisation in riskPublic sector R&D for tools & kn frameworks.Bridging organisations Collab’n for new innov’n

Funding of collaborative programs Major firms more global

Emerging Photovoltaic Innovation Systems

Increasing returns

Institutional Alignment

Standard’n and Reuse of knowledge

System Failures (examples)

Lack of economies of scale

Ad-hoc policieslack of political & social legitimation  Low level of subsides and incentives Excellent science base but policies have limited the level of experimentation

Relevant but fragmented knowledge base -mainly exploited by overseas innovation systems  Much of the RAPS based knowledge cannot be applied to urban systems

Lack of industrial actors with resources to bring technology to mass-production Level of incentives to attract large firms Lack of a national climate for supporting renewable energy

Focus and Change Specialisation and Coordination

-organisations and institutions for bridging, collaboration, coordination

Local problem solving and global search

Focus and Diversity-Co-evolution of supply and demand, -Broad kn & education base ensuring

diversity for perceptions of problems & opportunities, initiating new trajectories problem solving, renovation of knowledge bases