Submission to: Chief Scientist

3 October 2012

Breakthrough actions to utilise research for productivity growth

The Office of the Chief Scientist posed the following question to the Learned Academies and others:

What are the top breakthrough actions that the Commonwealth and state/territory governments, research agencies, universities and the business community can take to utilise fully Australia's substantial research capability to contribute to national productivity growth through innovation?

This written response is based on submissions received from Fellows of the Academy of the Social Sciences in Australia (ASSA). We believe that there would be benefit also from a discussion between the Office of the Chief Scientist and a small select group of ASSA Fellows who specialise in innovation particularly as it affects the business sector. We could bring together such a group if OCS were interested. It was largely these Fellows who put together our 2008 Annual Symposium on "Fostering Creation and Innovation".

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Submission in full

Improved data infrastructure for the analysis of innovation and its effectiveness

The question posed by the OCS is not one that Australia is well placed to answer at present. No doubt, experts in various fields might be able to provide detailed anecdotes about which government policies have been successful, but that does not provide a systematic overview of where governments can get most "bang for their buck". In order to provide a meaningful response to this question requires a body of knowledge which is based on systematic, empirical data collection and analysis. At the moment, this does not exist in Australia.

Given this, a more constructive question might be: what needs to be done in order to get to a position where we can make informed public policy decisions about how to maximise the productivity effects of Australia's substantial research capability? This requires both the creation of better data infrastructure and the development of increased capability in the analysis of science and innovation policy, areas where social scientists have much potential to contribute. More specifically, we would recommend the following:

  • Build/support the creation of data infrastructure to enable quantitative analysis to be undertaken. Much of the data may currently exist, but they are held in separate repositories within the research funding agencies (ARC, NH&MRC), the research institutions (universities, CSIRO, medical research institutes), and possibly the Australian Bureau of Statistics. To create a useful data infrastructure, it would be necessary that these data be linked together so that we can observe how policy interventions (e.g., the ARC Linkage scheme) have changed scientists' behaviour (e.g., produced more patents or breakthrough publications) and, in turn, have then had an effect on firms' profitability/productivity.
  • Build/support capability development in the area of the "science" of science and innovation policy. Over and above point 1, supporting capability would involve making the data readily available (with the necessary confidentiality provisions) so that researchers in academia, government and industry can make the best use of the data.

This has been successfully achieved with other pieces of data infrastructure – such as the HILDA Survey that now has a community of several hundred analysts around the country who actively use the data to answer important policy-relevant questions in economic and social policy.

This type of evidence-based policy making contributes enormously to Australian society in a number of different areas, including labour market policy, health policy and education policy. It seems appropriate to apply similar tools, logic and techniques to the area of science and innovation policy. It is understood that the Industry, Innovation, Science, Research and Tertiary Education Department has funded an exploratory project along these lines and that, assuming the feasibility is proven, the funding of a full-scale study would be encouraged.

To summarise, our suggestion would be to focus on assembling and disseminating the evidence. More specifically this would entail:

Building the data infrastructure which links funding agencies, universities and firms. Providing funds to support research on the 'science' of science and innovation policy. Engaging with the community by disseminating these findings though conferences, seminars and the media.

Increase the availability of shared data sets to support social research

The bulk of social science research is based on secondary data (i.e. data collected by others). At present, the data sets tend to be disjointed and not always easily accessed. There is much to be gained in the development of new, innovative data sets that can be shared by research users consistent with appropriate privacy, confidentiality and data protocols.

There is usually a lag between an intervention and the impact so having data sets with a longitudinal element is most important. Linkage of data sets is a means of doing this. One longitudinal data set that already exists is HILDA. It is used extensively and provides an extremely valuable contribution to Australia's research infrastructure. We are sure that investigations would demonstrate that the benefits well outweigh the costs.

Furthermore, linking of data sets improves their richness. There have quite rightly been concerns about privacy when linking data sets but these concerns can be managed especially with the application of new technologies. The Scandinavian countries provide models that might be adapted here. It is not necessary for the linked data sets to be held as one big database. The necessary records can be linked for specific applications.

As well as privacy, access, confidentiality and pricing of data need also to be managed. Protocols should be developed. The data access facilities should enable access from multiple localities and remotely.

The sharing of data sets needs to go further than the academic community. It is essential in quantitative based social science research, that the research infrastructure funding involves partnerships with national data collection agencies such as the ABS and AIHW. They would also have strong credentials to be the custodians of such data sets.

Better understand the connection between research and economic growth

This is related to the previous two proposals but takes a different approach.

The task of drawing causal links, where possible, between research, innovation and economic growth has been something of a Holy Grail among Science and Technology Policy Units in Britain, Australia, and the US since the 1960s. Historically, what might be called 'breakthrough actions'—or at least ones that economic historians might recognise—include innovations flowing from water power, electricity, petrochemicals, electronics, systems theory, information and communications. But looking for single causes is fraught with difficulties. For this reason, OECD set up its Directorate for Science, Technology and Industry to look at many possible ways of identifying, let alone foreseeing, 'breakthroughs' with clearly discernible economic potential. Locating examples, that might benefit the narrow interests of a given nation state, is even more difficult. Should Australia leverage off this work and try to better understand the lessons it provides?

Studies of the CRCs—including those led by Tim Turpin and Stephen Hill—suggest that, well intentioned as they have been, not all the CRCs have contributed significant economic returns for Australia. A study of the CRCs may well provide a useful source for research into 'what works' and 'what doesn't work'. The same would be the case for the ARC Centres of Excellence which have also had varied degrees of success. It is often possible to learn more from failures than successes.

There is an abiding sense that a 'national approach' is the wrong way to look at the problem. We exist in a 'transnational' world, in which global cooperation in a narrow sense is the norm. How Australia might better configure itself to be part of a wider, cooperative research effort that may, in certain circumstances, lead to improved social benefits (and not merely productivity as measured by conventional economic parameters), is surely a question worth addressing. It would be interesting to know if the more successful CRCs and Centres of Excellence do that.

There appears a strong case for research into these aspects. The science policy units at Wollongong and ANU have long closed. It may be necessary to extend an existing research body, or establish a new one, to do this type work. It is a gap that needs to be filled. Application of brain imaging technologies—a case study This would be a case study of Innovation that may require further intervention to ensure commercial success.

The application of brain imaging technologies is more of a breakthrough action per se than one that would facilitate improved research capability but it may provide a case study of what needs to be done to ensure innovation has a strong chance of resulting in commercial success.

The project is most important because the use of brain imaging technologies provides the potential for Australia to become a world leader in providing health care solutions. More details are contained in the attached letter from Stephen Crain, Director of the ARC Centre of Excellence in Cognition and its Disorders. This is an ARC Centre that has collaborated internationally, in this case with a Japanese research institute.

Some of the new directions being considered are:

  • development of new sensors to focus on deeper brain structures to enable measurements of brain activity in elderly patients with cognitive deficits (e.g., dementia), that include degeneration of brain structure associated with emotion and memory
  • development of a new low field head-only compact MRI (cMRI). A low capital and low on-going cost alternative to current high field whole-body MRI systems. The cMRI would be used, among other things, for diagnostic imaging prior to surgery for recipients of cochlear implants (including children and the elderly). The cMRI could service regional medical facilities at low cost
  • enhancement of cMRI performance using signal processing and contrast agents to improve the visibility of internal brain structures, to assist with diagnosis of areas of brain damage following stroke, in assessing language development in children with cochlear implants, and in the diagnosis and assessment of the effectiveness of treatment in a broad range of special populations, across the life span.

This is just one example of a research output from a CRC where there is a strong chance of commercial success from innovation. Should special considerations be given to facilitate the commercialisation of worthwhile research outputs? Does more need to be done to set up a market for venture capital in Australia?

Ensure social science considerations are taken into account before implementing major new policies

Many worthwhile policy interventions fail, or are subject to very strong criticisms, because the human element is ignored even though the public is usually a major stakeholder in the policy intervention. The failure of a large proportion of the public to embrace climate change is a case in point even though the evidence is overwhelming that climate change is real and human activity is a major contributor. Social sciences potentially have a major role in understanding the reasons for resistance and what might be done to overcome that resistance.

Integration of physical and social sciences

Two ASSA Fellows have been collaborating on a proof-of-concept demonstration that one could fully integrate fundamental theory in materials science with demand theory in marketing and economics to be able to optimize the production of products to match the likely consumer demand in the market. It has been presented as a plenary address to the annual CSIRO Conference on Advanced Materials in Melbourne where the underlying theory, methods and the specific case application to sunscreen products was discussed. It is one example of where the physical and social sciences can work together to mutual benefit.

This is an example of what might be done more widely in many areas. That is, allowing the physical and social sciences to closely collaborate and provide new and innovative ways to evaluate potential new technologies, products and services. We also believe that being able to hold designers and producers accountable in advance of production is possible, thereby significantly reducing new product failures and/or costly rethinking, re-engineering, etc, of technologies and products that have failed to meet expectations.

We also believe that these advances could very significantly benefit Australia in general by helping us to understand what to produce which consumers want and are willing to pay for. That should lead to significant national benefit in both internal and export markets by both reducing costly mistakes and better targeting of what people want to buy and will pay for. As an example, the researchers referenced above are working with Grain Growers to model how flour millers choose to buy wheat. The results should allow farmers to understand for the first time what wheat varieties to plant under what conditions and who wants what types of wheat with what characteristics at what premiums or discounts.

These are two examples of the benefits of the integration of physical and social sciences.

Funding for proof-of-concept studies

The two examples mentioned under the previous heading have used a proof of concept approach. They provide grounds for the case that relatively more funding should be devoted to proofs-of-concept in areas of significant national priority and where the chance of innovation success is high.

The importance of maintaining flexible labour markets

The attached article by Professor Geoff Harcourt illustrates the importance of flexible labour markets for businesses being able to take full advantage of innovations. These types of factors are often overlooked when looking at how to make innovation more effective.

One apposite quote contained in the article has it that…

… it is particularly desirable that the market for labour should cut across inter-industry boundaries, thereby ensuring that comparable labour has the same price in expanding and declining industries. The argument that an industry cannot 'afford' higher wages is, in the long run, extremely dangerous. If it were accepted and wages were based on the 'capacity to pay', employment would be perpetuated … in industries which should properly decline to make way for more vigorous industries. Equally dangerous is the argument that industries which are prosperous because of new techniques have the 'capacity to pay' high wages. This would penalise the expanding industries on which so much depends.

As well as being largely self-evident, empirical data confirms its veracity. What do we need to do to increase the flexibility of Australian labour markets especially where geographic location is important?

See also:

PDF G. C. Harcourt. The Systemic Downside of Flexible Labour Market Regimes: Salter Revisited

PDF Stephen Crain. Custom-engineering health-care solutions using brain imaging technology.

Additional material

There are two books by ASSA Fellows that may be worth studying. One is Creativity and Innovation in Business and Beyond, edited by Leon Mann and Janet Chan. It was based to a large extent on the proceedings of the 2008 ASSA Annual Symposium on Fostering Creation and Innovation which was organised by a team led by Leon Mann.

Creativity and Innovation in Business and Beyond
Mann, Leon & Chan, Janet [Eds.]
2010, New York: Routledge

A review of the publication says:

In many modern economies, creativity, the essential prerequisite for innovation, tends to be assumed or neglected while the catchphrase "innovation" dominates the field of business as the key to national performance and competitiveness. Creativity and Innovation in Business and Beyond illustrates the ways in which creativity spurs innovation - not only in the realms of business and management, where the innovation is regularly acknowledged and discussed, but throughout the social sciences. With contributions from experts in fields as far-flung as policy, history, economics, law, psychology, and education, in addition to business and management, this volume explores the manifold avenues for creativity and innovation within and across a multitude of disciplines."

The other book is Innovation: A Very Short Introduction, by Professor Mark Dodgson and David Gann.

Innovation: A Very Short Introduction
Dodgson, Mark & Gann, David Gann
2010, Oxford University Press

The review of the publication says:

What is innovation? How important is innovation in business? How can we use it to succeed? In the last 150 years our world has been transformed—largely due to innovation. Our parents were born into a world where television had yet to be invented, and there was no penicillin or frozen food. Our great grandparents began life in a world with no light bulbs, cars, telephones, or airplanes. This Very Short Introduction looks at what innovation is and why it can affect us so profoundly. Mark Dodgson and David Gann also consider the extent to which our understanding of innovation has developed over the past century and how it might be used to interpret the global economy we all face in the future.

Dennis Trewin
Chairman
Policy and Advocacy Committee
Academy of the Social Sciences in Australia

Submission based on contributions from the following Fellows:

  • Emeritus Professor Geoffrey Harcourt, University of NSW
  • Emeritus Professor Roy MacLeod
  • Dr Amanda Barnard, CSIRO and Professor Jordon Louviere, University of Technology Sydney
  • Professor Stephen Crain, Director of ARC Centre of Excellence in Cognition and its Disorders
  • Professor Deborah Cobb-Clark, Melbourne Institute of Applied Economic and Social Research
  • Adjunct Professor Dennis Trewin, former Australia Statistician

For more information, please contact:
Mr Murray Radcliffe
Deputy Director
murray.radcliffe [at] assa.edu.au
+61 .2 62491788