Andrew Leigh

I spoke in parliament yesterday about a valuable roundtable on boosting innovation.

Innovation Roundtable, 14 August 2012

This morning it was my pleasure to attend a roundtable discussion at Government House on the topic 'A National Conversation on Capturing the Benefits of Basic Research in Australia'. The event was organised by recent Nobel Laureate Brian Schmidt and moderated by Ken Henry. It operated under the Chatham House Rule so I will not list all 26 participants, but they included heads of research bodies, senior government officials, business leaders and the Governor-General herself. The very thoughtful Senator Arthur Sinodinos represented the coalition.

The discussion occurred in a context where the government is thinking hard about innovation and has commissioned a number of important reports. We are also making record levels of investment. Only yesterday I represented the Minister for Health when opening stage 3 of the John Curtin School of Medical Research, which will house a new neuroscience wing. Innovation is an important priority for the government. Australia's gross spending on R&D as a share of GDP is at about the OECD average, but commercialisation has long been recognised as a challenge. If we are to boost traditionally sluggish productivity growth rates, one way is to increase innovation.

Australia has had commercialisation successes. CSIRO developed fast wireless, extended wear contact lenses and GM cotton strains that are insecticide resistant and herbicide tolerant and are now used in 95 per cent of the Australian market. In each of these cases there was a clear focus on the market and there was an international vision from the outset. There are other elements that separate these case studies. In the case of wi-fi, the CSIRO was unable to get industry buy-in for much of the research phase and patented their work in order to get investors on board. There is also a certain degree of serendipity, even in the commercialisation stage. It is said that in the case of extended wear contact lenses the optometrists only got talking to the polymer chemists when they sat next to one another at a conference dinner.

One of the participants described what was called a 'valley of death' in commercialising innovations. The notion was that an innovator often needs to pay the cost of patenting before they are able to attract external investment. An important part of boosting innovation is encouraging interactions—interactions across institutions, across different sectors and often within the same institution. It can be that the brilliant bench scientist is not going to be the one who works an innovation through to the commercialisation phase. Taking an innovation to market can take 20 to 25 years, so teaming great scientists with great appliers can be valuable.

The Productivity Commission has argued that there are two strong rationales for public funding of science and innovation. One is that better funded R&D is important for innovation in government functions, such as health, education and environmental goods. The other is that there are innovation spillovers, which are not captured by private returns. As one participant pointed out, we also need to remember that the benefits of basic research go well beyond the commercial spinoffs. There is a large consumer surplus even if we do not get the producer surplus.

Among the ideas mentioned were the valuable role that the medical model plays, in which patients talk to clinicians who are also themselves researchers. Innovation in the medical space does not just show up in commercialisation; it can show up in better medical outcomes, such as the supine positioning of infants to reduce SIDS. A participant suggested that perhaps we ought to foster more innovation in the defence sector, perhaps learning from the US DARPA model. Another suggestion was that there ought to be more funding of researchers to reach specified targets, thinking there about the examples of the prepurchase of malaria vaccines or the Netflix prize. It was suggested that we might encourage more international collaboration through the ARC and the NHMRC working more closely with their New Zealand counterparts. Consideration of the right level of IP to give to university researchers is appropriate, too.

We need to make sure innovation has a global mindset—the Southern Cross Venture Partners model is a valuable one, and the Israeli perspective is also useful in building Australia into a start-up nation. It was an important discussion, and I thank Professor Schmidt for facilitating it. I hope it will feed into the good work already being done by the government on innovation.