As night follows day, no sooner has the Bureau of Statistics announced the latest business research and development performance measure 0.89 per cent of GDP for 2003-2004 than a chorus of "not good enough" follows.
After 14 years of uninterrupted growth, Australia remains in the lower half of the league table for R&D. Should we be concerned?
It is useful to look behind this headline number at where research and development takes place. The best data is to be found in the annual report OECD in Figures.
This table shows how R&D expenditure is distributed across industries. "High-tech" industries are aerospace; office and computing equipment; drugs and medicines; radio, TV and communication equipment, and professional goods. "Medium high-tech" industries are motor vehicles; chemicals; electrical machinery, and other transport machinery. "Medium low-tech" and "Low-tech" industries are rubber and plastics; non-metallic mineral products; ferrous and non-ferrous metals; metal products; petroleum, and other manufacturing industries.
The most obvious point to be made is that there are structural differences in the make-up of business from country to country. There are very different rates in high-tech R&D.
In Finland, the electronics sector's R&D is 1.3 per cent of GDP. The major contribution comes from one business, Nokia. Italy, on the other hand, is a low-rate performer within the European Union, but the EU rates represent an averaging over countries of strikingly different evolution.
The rates for the United States and Canada show the interaction of the world's largest economy with one of its neighbours. In many industrial sectors Canada is a market, not a development base. Large corporations tend to keep their R&D close to headquarters.
Japan, with its large economy and its world markets, does everything from its offshore position on the Pacific Rim.
Australia does not compete in the high-tech or medium high-tech industries. We do have emerging businesses that compete, but it will take many years to reach a significant size globally. By way of comparison Merck, Intel and Microsoft each spend as much on R&D as the sum of all Australian businesses.
Where we seem quite large spenders is the low-tech industries with mineral processing. The surprising sector is the service industries. Performance here is apparently good, with a high level of spending. Perhaps this is because we are early adopters of consumer technology, the workforce is flexible, the sector is fast-growing and management is alert to technical developments. All this is very positive for the future of the country.
So the conclusion ought to be that business leads R&D, not the other way round.
Business sectors with high R&D intensity do not exist to a significant degree in Australia. Should we try to create them through government programs to encourage innovation? This is dangerous ground for politicians and bureaucrats. The urge to pick winners is powerful: windmills and ethanol immediately come to mind.
There is a long and well-documented history of failure from many countries and by many governments. Former French president Georges Pompidou is supposed to have counselled his successor, Valery Giscard d'Estaing, that the three great dangers for politicians were wine, women and technologists.
The Australian government turns to universities to play their part with research geared to Australia's needs. Experience and data show that universities make a very small contribution from research to direct innovation and a large contribution from education of graduates who move into business. We would do better to build up our tertiary education sector and let the complicated interplay of ideas and customers' needs in the market find new directions and products.
There is no compelling evidence that R&D is really the critical determinant for the economic wellbeing of the country. In fact, it is arguable that marketing and selling are more important, and that the interaction with customers and markets sets the direction for innovation which then drives R&D.
Boosting R&D will not help. It will be the market and business opportunities and opportunists that create the way forward.
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