Innovation, aside from being coined as the blueprint for success by the Turnbull government, can greatly benefit the local economy. Recently, Bloomberg released their US Innovation Index which added proof to the link between education, research and innovation. Out of the fifty states, Massachusetts was crowned the top state for innovation in 2015. Prompting the question, what can Australia learn from the innovative state?
Increasingly, it has been noted that firms draw upon their environment to innovate. For instance, research models from Cohen and Leventhal (1990), Lundvall (1992) and Edquist (1997) all support this ideology. In Bloomberg’s analysis, it was noted that the Massachusetts Institute of Technology (MIT) provides a “ripple effect for the local economy.” MIT grads have reportedly founded about 400 start-up companies over the past few decades. This can create a ‘cluster’ of companies which are attracted to the strong business environment, and in turn, propel the labor market and growth.
Certainly, innovation can stimulate demand throughout the local economy through expenditure linkages. A new firm in a local economy, for instance, means a greater number of employees who demand local services, such as hairdressers and restaurants. Hence, innovation is not only beneficial for entrepreneurs, but the local economy at whole. However, how can Australia emulate this when our younger generation is behind the digital revelation and our innovation culture has been shown to be lacking?
Massachusetts, like Australia, faces challenges comparable to Australia’s lack of scale and distance from foreign market. Boston, in particular, has created a purpose built innovation hub and the area’s “secret sauce” is a shared sense of purpose and a culture of collaboration, according to Microsoft’s “Accelerating Australia’s innovation ecosystem” report.
As the Bloomberg report reveals, local connectivity has had a fundamental impact on innovation and its economic value. Undeniably, innovation is a complex process with many feedback mechanisms. Therefore, for an establishment to innovate, it needs to have access to an appropriate institutional and cultural framework which enables interactive learning. Much of this learning is based upon flexible labor markets and legislative frameworks.
Evidently, the Turnbull government’s innovation agenda has come at the right time – although majority of the changes have yet to be put in place. The innovation agenda seeks to shift the culture in Australia, grow digital engagement and increase women in the STEM fields. Nonetheless, the government does have frameworks currently in place that can assist with expedition of innovation in companies in the interim.
In particular, one legislative model that can assist firms is the R&D tax incentive offered by the Australian government. The R&D tax incentive can enable executives and entrepreneurs to revitalise their own ingenuity and thrive in Australia’s burgeoning culture of innovation. It allows companies to achieve generous tax benefits, including generating cash for their past and future investments. Indeed, the R&D tax incentive allows Australia to have a global innovative mindset, while developing locally.
If you think your company may be eligible for the scheme, have a discussion with one our R&D tax specialists who will be able to answer any further questions or help you make your claim.