Australia’s Rank for Innovation “Input” and “Output”
Research indicates that Australia underperforms when it comes to commercialising its strong research base. A recent OECD paper found that Australia is behind in the technology race for what is termed “innovation output,” or exchanging knowledge and developing ideas to address a specific problem. Despite this, Australia performed very well in relation to “innovation input,” or originating new ideas, due in part to its world-class research institutions, ranking 8th out of 36 for highly cited publications.
Total Australian R&D spending is slightly below average, as a proportion of its economy, and the excellent quality of its research is not being transferred to yield economic benefits. Australian global patent applications (per billions of dollars) and the number of business researchers employed in the industry are below average, ranking 22nd out of 37 and 21st out of 36 respectively.
How Can We Improve?
Perhaps our academics need to work more closely with our entrepreneurs. In fact, Australia comes in last place when it comes to the proportion of businesses working with research institutions. Yet, partnerships are integral to innovation in today’s environment, as they are arguably the fastest way to deliver what customers want.
Not only would businesses benefit from collaborating more effectively with academia, but large and small companies should work together if they want to get ahead. We have only a few high-growth, start-up companies (we rank last for the high-growth enterprise rate, measured by employment growth), and large organisations cannot keep up with the speed at which current technology changes, so partnerships between the two could be key to growth.
The R&D Tax Incentive aims to foster innovation and growth for both small and large companies in Australia. There are many companies completing significantly new activities in their field that do not realise that they can make an R&D claim. If they were to claim, the R&D refund could then be re-invested into the business’s assets, allowing for more rapid national and international expansion.
Looking to the Asia Pacific Region
Currently, networks between Australian and international businesses are poor. Head of Google Asia Pacific, Karim Temsamani, has stated that Australian companies should take advantage of their close proximity to Asia when considering expansion. Google has recognised Asia as a leader of consumer behaviour, with their most popular apps used predominantly in these countries. This indicates that there is huge growth potential for Australian companies looking to expand here – often much greater than expanding to the USA or Europe.
Furthermore, it has been suggested that Australia look to the Asia Pacific region to learn about innovative trends and to accelerate its own, rather than looking to other Western countries. Over the long-term, innovation will allow us to build a better future, create new jobs and increase productivity.
Please contact one of Swanson Reed’s Specialist R&D Tax Advisors if you are interested in learning more about the R&D incentive and what this can mean for your business.