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Cargo cult innovation

By Tom Quirk - posted Friday, 8 February 2008


What are we to expect from our new minister for Innovation, Industry, Science and Research?

A helpful critique of “The Innovation System” was recently given at a forum on innovative leadership by Professor Alan Hughes from Cambridge University.

He started his talk with a photograph of Melanesian cargo cult aircraft to illustrate one of the problems of constructing innovation policies. It is the difficulty of trying to understand how innovation occurs.

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We have all been there before. We have had the Multi-Function Polis from the 1980’s and 90’s that finally died in 1997. We have had Co-operative Research Centres. We have urged universities to become relevant by spinning out inventions into new companies and the CSIRO has its flagship projects.

Australia in the last 15 years has experienced steady growth placing it among the top performers in the OECD. It is not clear that this growth has very much to do with our innovations, science or research policies in any direct way.

Professor Hughes picks out three elements common to science and innovation policies of many countries:

  1. a tremendous emphasis on R & D;
  2. exploiting science from research institutions through licensing and spinning out innovations; and
  3. establishing new entrepreneurial spin-off companies.

The popularity of this model arises from the view that this is the basis of the superior economic performance of the United States. It is a cargo cult approach as it is picks out and emphasises selective elements and ignores others.

A study of productivity growth in the United States shows wholesaling, retailing, finance and insurance, administrative services and computer and electronic products accounted for most of the productivity growth in the last seven years. The first two on the list are two of the three key sectors in the last part of the 20th century. There is only one technology intensive activity in this list. The others are not traditionally identified as R & D intensive.

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“High-tech” activity is a small part of the US economy. It is a minute part of the Australian economy. However what is thought to be happening is that there is a spread of high technology applications which enable productivity improvements in the “low-tech” sectors of an economy. In Australia the mining and agricultural sectors benefit from the dispersion of “high-tech” products. It the use that counts but the innovations may be sourced world-wide.

Professor Hughes deals with university patenting, licensing and spin-offs by comparing the scale of this to the actions within industry. As an example, IBM registered 2,941 patents in 2005 while the University of California state system in the same period registered 388. As far as spin-offs are concerned, some 500,000 new firms are started each year while in 2004 462 US university spin-offs were established.

Even more interesting are the sources of innovation for companies. There are even Australian statistics for this which show the key sources of ideas are within business, customers, suppliers, meetings and competitors. Universities score less than 10 per cent and R & D enterprises even less!

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About the Author

Tom Quirk is a director of Sementis Limited a privately owned biotechnology company. He has been Chairman of the Victorian Rail Track Corporation, Deputy Chairman of Victorian Energy Networks and Peptech Limited as well as a director of Biota Holdings Limited He worked in CRA Ltd setting up new businesses and also for James D. Wolfensohn in a New York based venture capital fund. He spent 15 years as an experimental research physicist, university lecturer and Oxford don.

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