By David Myton

The recent Australian Innovation System Report from the Office of the Chief Economist is a 138-page blitz of facts and figures which reveals local business and industry are stepping up their innovation game – but still have a ways to go if they are to shine on the global stage.

The report is deeply descriptive and focuses mainly on the innovation performance of Australian business and industry. However there are some interesting takeaways for higher education.

The good news for highered is that business collaboration with research organisations such as universities and CSIRO has been found to more than triple the likelihood of productivity growth and increases in other performance measures.

The not-so-good news is that such collaboration is pretty thin on the ground. Australian business – large and SMEs – “fares poorly” on collaboration with research institutions, and is ranked the lowest of 27 countries in the OECD.

For all OECD countries, collaboration with “market sources” such as customers and suppliers are considered more important than institutions, and are more likely used as sources of ideas or information for innovation.

But when universities and businesses do collaborate, success is usually the result.

This knowledge presents good opportunities for universities seeking to pitch their services to business and industry. To be able to say “hey, it works and here is the evidence” is a positive way to begin negotiations.

However, the AISR reveals that universities are sometimes perceived to be lacking “real world” business sense – which is why customers and suppliers, who pay real money for real outcomes, are seen as better advisors on innovation.

The report notes businesses may have undervalued highered collaboration “because they do not have the capacity to understand what economically useful knowledge is outside of the business, particularly knowledge found in universities and other research organisations”.

This is where universities need to bolster their case for collaboration with evidence of success in other external engagement projects such as industry-relevant research, Work Integrated Learning and community building projects which demonstrate thorough understanding of business needs.

Research and Development

The report shows that businesses which undertake R&D “are almost always innovation-active businesses”, and are significantly more likely to be new-to-market innovators.

And the more a business invests in R&D the better it will be at adopting innovations deriving from these activities.

On the other hand, Australia has a relatively low proportion of R&D-active businesses and a below-average proportion of researchers in the industry sector by OECD standards. Unsurprisingly, the majority works in government agencies and higher education.

However, the share of researchers working in Australian businesses – although still below the OECD average – has increased in recent years. And a growing number of these researchers have moved from universities into business, which “may suggest that business demand for researchers is increasing”.

This presents an opportunity for individual academics to move from highered into a possibly more lucrative (if less secure) research role in business. It also indicates a growing awareness of the benefits of R&D generally and as such an opportunity exists for universities to actively pitch their relevant expertise.

Graduate opportunities

Australian businesses report that “a lack of access” to skilled personnel is a barrier to innovation. This pertains to all kinds of skills, including those that flow from studying the humanities, not just scientific, engineering or technical.

The report says 2011 data show that engineering and PhD graduates were highly concentrated within a few sectors of the economy.

Many industries in the private sector employ very low percentages of PhD graduates, with the majority filling management or technical roles in their sector of employment.

But the number of students completing higher degrees by research in Australia has grown “slowly but consistently” in recent years, almost doubling between 2000 and 2014.

This may mean that universities need to re-think how they communicate the benefits of advanced research degrees: not just to the students, but also to their potential future employers.

New innovation study

Meanwhile, Innovation and Science Australia in a review of Australia’s innovation, science and research system finds Australia is good at knowledge creation but needs to do more to transfer and apply knowledge.

On knowledge creation criteria Australia rates from three out of 36 OECD and associated nations for FTE researchers per thousand employed to 16th for GDP percentage expenditure on R&D.

On knowledge transfer Australia is 27th of 38 for papers with industry-affiliated co-authors. On knowledge application we are 8th for early-stage entrepreneurship but 22nd for patents filed.

The ranks for outcomes and outputs are not good, a rating of 23 from 31 for firms introducing new to market product innovation and 27 from 27 for employment increase in high-growth enterprises.