Government and governance, Science and technology | Australia, Asia

2 June 2016

A national framework for innovation is a good start, but innovation is driven by local dynamics, writes Simon White.

The Australian Government’s National Innovation and Science Agenda (the Agenda) presents the case for innovation. Innovation, we are told, “keeps us competitive”, creates jobs and keeps “our standard of living high”. Innovation is about “new and existing businesses creating new products, processes and business models”.

The Agenda recognises the diversity of innovation outcomes: from urban-based “tech entrepreneurs” to farmers “using new technology” and businesses “bringing new products to market”. What it overlooks is the local context for nurturing innovation.

The Agenda will only succeed if it is complemented by state and, importantly, local government efforts designed to deepen the reach of innovation processes and respond to unique local opportunities and constraints.

As a national framework, it is a good start and creating the right conditions for innovation is a complicated process. It requires a broadly agreed view of what the future should look like and a good understanding of the impediments to getting there. The Agenda identifies a number of important national problems: limited access to capital for new ventures, poor collaboration between industry and researchers, declining competencies in STEM (science, technology, engineering and mathematics), and the reluctance of government to adapt quickly to new technology and practices.

Australia is not alone in this regard.

Across the OECD, governments have nurtured innovation through policies designed to improve the way in which information and knowledge is spread. While this traditionally focused on macroeconomic policies and framework conditions to remove barriers for new companies trying to break into the market, over time, a more targeted approach to innovation policies has been adopted.

However, when it comes to Australia, its prospects for innovation are not spread uniformly across the country.

Investors and entrepreneurs are drawn to the localities where innovation is more intense: Silicon Valley and Tel Aviv, for example. These places exhibit a strong culture of entrepreneurship; they have local investors looking for new and emerging opportunities, and they attract and nurture well-educated, highly skilled people with an appetite for change.

The Australian innovation agenda needs to be more firmly rooted in how specific places can drive innovation. Because while globalisation and more integrated markets make us more connected, place plays an essential role in the innovation process.

More on this: Innovation nation? | Lachlan Blackhall

It is this proximity and the relationships that are fostered by location that nurture exchange, build trust and support collaboration. Most innovation and the commercialisation of new technologies occurs in clusters––geographic concentrations of interconnected firms and institutions in a particular sector.

A recent Western Australian study describes the importance of proximity to opportunities and finds that innovative cities tend to have strong universities, effective business-university relationships and specialised industrial clusters.

Working within the national framework created by the Agenda, state and local governments have an important role to play to deepen the reach of innovation processes and respond to unique local circumstances.

State governments have considerable regulatory powers that can be used to quickly respond to industry trends, allowing for increased competition and change. Innovations typically push the boundaries of regulations and governments need to constantly improve the quality and responsiveness of industry standards and business regulation. The emergence of Uber being a recent case in point.

The state entrepreneurial ecosystem can be strengthened. States can promote innovation and entrepreneurship more strategically and in a more coordinated fashion across priority sectors and industries.

Local government also has a unique role to play in this context. Switched on local governments can provide leadership around a common vision.

There are exciting examples of local councils partnering with the private sector and non-government organisations to provide new facilities, such as innovation labs, incubators and co-working facilities. Some local governments have even provided innovation grants to local businesses. Of course it is impossible to provide a blueprint from the top. At its most effective, local government action stems from careful analysis of the local ecosystem.

This is an exciting moment.

Now that policymakers have embraced the term innovation there is much work to be done.

The Agenda’s best chance for success will come from local councils that are committed to experimentation and learning. No matter the size of a place, its ability to become the next Silicon Valley rests on its appetite for local action.

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White, S. (2016). The local dimension to innovation - Policy Forum. [online] Policy Forum. Available at: