Creating the right enabling environment for innovation

6 Aug 2018, by Amy Sarcevic

Minister for Jobs and Innovation, Senator the Hon Michaela Cash, opened discussions at last week’s AFR Innovation Summit – recognizing the need for Government to provide the “right enabling environment” for firms to innovate.

But what exactly is the right enabling environment?

The topic – which has caused significant controversy this year following the Treasurer’s announcement to impose a $4 million cap on research and development tax incentives (R&DTI) for firms turning over less than $20 million per annum – came to a head at the Summit, with speakers taking markedly different perspectives.

Senator Cash emphasised that the cap was essential to encourage greater R&D intensiveness in firms who were taking R&D more seriously – not just those using it to fund business-as-usual.

But Daniel Petre of Airtree Ventures, criticised the Government’s decision to bank the savings from the R&DTI scheme as general surplus. He argued that by pulling $2.5 billion out of the scheme in order to balance the budget, many SMEs would be forced to rely on venture capital, creating widespread and early dilution; and ultimately harming the innovation ecosystem. He also highlighted the likes of UK and China who are currently investing billions into R&D; and emphasised the need to remain globally competitive.

Similarly, Innovation & Science Australia Chair, Bill Ferris AC, said that, in his opinion, reinvestment of the R&DTI savings into direct (and non-self-assessed) R&D-encouraging initiatives was key to addressing Australia’s unacceptably low levels of business expenditure on R&D, relative to other nations. Yet, it was one of the few recommendations in his Australia 2030 Plan not supported by Government.

Dr. Stephen King from the Productivity Commission, addressed the concept of an ‘enabling environment’ in a different context. He told delegates that the growth of online business has created some significant issues with regards to competition, or more specifically, lack of it; and that controlling this was key to enabling innovation. He said that unless consumers were given better rights to control their data, that online tech giants such as Facebook and Google could continue to abuse their market dominance and deter competition; ultimately stunting the growth of future innovation startups.

Deloitte Doblin’s Larry Keeley, who flew in from the USA to address the Summit, spoke to us in an off-stage interview, also challenging the topic of an enabling environment from a different angle.

He argued that whilst both Government and Opposition’s arguments were well-articulated, they were too narrowly focused on technology innovation and lacked insight into the mechanisms which truly foster innovation in all of its forms.

“In my opinion, the right enabling environment is one in which a firm – any firm – can behave boldly and courageously and encounter as little economic or political friction as possible in the process”, said Mr. Keeley.

He also said that Australia’s comfortable lifestyle was thwarting an innovative mindset. “Anyone would agree that we are living in times of unprecedented transformation; yet innovation in Australia doesn’t currently reflect that”, he said.

“In my experience, truly great innovation is born out of adversity; by encountering an immense challenge, moving towards it with courage and solving it with elegance. When life in Australia is not characterized by adversity, business and governmental leaders will need to work even harder and more deeply to foster bold innovation”.

Meanwhile CSIRO’s  Dr. Larry Marshall emphasized the critical importance of nurturing the development of scientific skills. He argued that science skills outperform business skills in the innovation space and that fostering these is key to providing the right environment for innovation to thrive.

500 high profile delegates turned out for the Summit which heard insights from Australia’s top policy makers, business leaders, regulators and analysts.

To receive the program for the 2019 Summit, register your interest here.

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