Katie McConchie

Katie McConchie

Digital Marketing Coordinator

Innovation and entrepreneurship have been a part of Australia’s history for centuries. So why then do we rank lower than many other countries when it comes to innovation performance? For a nation full of genius ideas and life-saving inventions, what’s going wrong?

History of Innovation in Australia

Australia is an ideas nation. Known for our ingenuity, we’ve developed countless technologies that have changed the lives of billions worldwide.

From the invention of Wi-Fi to the ultrasound scanner, for a country with a population of only 26 million, Australia has no shortage of ingenious inventions. Just check out the timeline for a history of life-changing technologies that were patented right here in Australia!

Australian innovation timeline

Science and technology have played a key role in supporting Australia’s growth and productivity. However, in the aftermath of the COVID-19 pandemic, Australia’s major trading partners struggle against a precarious and deteriorating situation. Combine this with rising inflation and a third of the world heading towards a recession, the development of science and technology couldn’t be more critical than ever.

Researching and developing our own science and technology not only improves productivity but also provides social and environmental benefits, builds resilience, and enhances international competitiveness.

But despite Australia’s strength in research, it has not been as successful converting this research into economic growth. The results of the recent Global Innovation Index are a shocking wake-up call to the reality of this.

The Results Are In

According to the most recent Business Characteristics Survey, innovation in Australian businesses couldn’t be in a more dire state.

In the two-year period ending 30 June 2021, only 52 per cent of Australian businesses reported being innovation-active.

Innovation-active is defined as a business that introduces any type of innovation. For example, the development of a new good or service, or the introduction of a new process. All innovation that is in action, in progress, or started but then abandoned during the reference period is counted.

Out of the 52 per cent of innovating businesses, large corporations stood out as the most innovation-active. 71 per cent of businesses with 200 or more employees were innovating. Compared to between 46 and 63 per cent for small-to-medium businesses.

This proves the common misconception that innovation is an expensive process that small-to-medium businesses cannot afford.

Process innovation was the most common form of innovation at a reported 40 per cent. This is followed by goods and/or services innovation at 22 per cent.

Australian businesses are seriously lacking in collaboration, with only 36 per cent stating they had collaborated or had a fee-for-service arrangement for innovation.

Without collaboration, innovation is just an idea that never comes to fruition. This is confirmed by Australia’s innovation struggle to bring research into development.

At 62 per cent, the information media and telecommunications industry were the most innovation active. Followed closely by retail trade, professional, scientific and technical services, and manufacturing.

Coming in last at 40 per cent is the agriculture, forestry and fishing, construction, and mining industries. This is concerning given a large portion of Australia’s GDP relies on these industries and which are already at threat due to changing global demands.

How Are We Doing Compared to the Rest of the World?

GII Top 25

The Global Innovation Index of 2022 captures the innovation ecosystem performance of 132 economies, tracking the most recent global innovation trends.

Australia comes in last for innovation performance in the high-income group of countries. Lagging behind countries like Finland, Ireland, and New Zealand.

Ranked 25th in the world for innovation, Australian organisations possess the talent to innovate but lack a strategic focus and a sense of urgency to bring ideas to fruition.

This lack of Australian innovation could be attributed to businesses’ perceived barriers to innovation, as found in the Business Characteristics Survey.

Barrier to innovation statistics

Australia sits at 19 in the world for research and development expenditure. We spend more on research and development than New Zealand, Ireland, Estonia, Luxembourg, and many others in the Global Innovation Index top 25. And yet the majority of businesses state that lack of access to additional funds is their main barrier to innovation.

6 per cent of businesses report lack of access to knowledge or technology to enable innovation. According to the Global Innovation Index, Australia ranks a shocking 37th for knowledge and technology outputs despite ranking 10th in the world for number of institutions. This confirms the few who state this as a barrier to innovating their business.

Additionally, 16 per cent of businesses state the lack of skilled persons within the business and labour market as their barrier to innovation. This contradicts ranking 5th in the world for human capital and research. But again confirms Australia’s lack of ability to turn research into development.

What Should We Improve to Be More Innovative?

As outlined by CIRSO’s Value of Science and Technology Report, investing in science and technology can promote economic recovery. Thus creating an innovation cycle and future resilience.

Australia has five main areas to focus on to overcome the innovation challenges and realise greater value from innovation investments.

Business Investment

As reported by the Global Innovation Index, ABS and CSIRO, Australian business investment in research and development has been declining. Additionally, investment is not being targeted for long term strategic goals or future challenges.

Refocusing investment in sectors with clear competitive and comparative advantages will enhance impactful and strategically balanced investment opportunities. Collaboration between businesses will further increase opportunities.

Commercialising R&D

Despite generating high-quality research, Australia fails to develop and deliver their ideas due to under-commercialisation and novelty. Combined with a cultural aversion to risk and lack of collaboration across industries, it is no wonder Australia is taking a deep dive off the innovation charts.

Promoting collaboration over competition and solutions-focused research for commercial and broader applications will assist in developing collaborative growth through innovation culture and turning our ideas into reality.

Skills, Knowledge, Capabilities

As found in the perceived barriers to innovation, a skills shortage and inability to absorb knowledge to adopt and adapt new ideas are stifling innovation.

Creating a more collaborative and supportive environment with opportunities for up-skilling and work-based continuous learning will effectively confront the skill shortage and close the skill gap.

Adoption And Diffusion

There are few Australian businesses that look beyond the domestic market and their own industries for innovations to adopt, restricting the spread of innovation across Australia.

Incrementally diffusing the integration of ideas from the international market and across industries, as well as incorporating non-R&D innovations, such as digital transformation and business model innovation, will assist in advancing innovation in Australia.

Benefits of innovation statistics

Businesses reported in the ABS Business Characteristics Survey the key benefits they gained from innovating. From increases in revenue and productivity to improved customer service and work safety standards, the benefits of innovation are greatly varied and experienced across all industries.

Science and technology innovation helps improve productivity, can provide social and environmental benefits, builds resilience, and enhances international competitiveness.

Businesses can realise greater value from innovation by driving purposeful and solutions-focused innovation. As well as sectoral and international collaboration, and fostering a ‘growth through innovation’ culture.

The ability to innovate plays a critical role in economic growth. It is time Australia wakes up to the need for innovation, collaboration, and commercialisation. It is time to turn all that research into value. Or, fall completely off the charts and behind the rest of the rapidly advancing world.