National Innovation System in Australia BY Jodtun1989 MASTER OF BUSINESS ADMINISTRATION BUSI 1358 Global Enterprise and Innovation Student name: Date of submission: 30th November 2013 Contents 1. National Innovation System in Australia The National Innovation System (N’S) means the flow of technology and information among people, enterprises and institutions which is the key factor for the innovative process on the national level (Edquist, 1997).
With the development of innovation, it will affect the technology and generate a complex set of relationships among enterprises, universities and government (OECD, 2012).This report focuses on the NIS in Australia, and tries to find out how the NIS in Australia affects business. First, we will identify and discuss the main features of the business environment in Australia; second, we will analyze NIS in Australia from serval aspects such as government support, finance support, and scientific and technological institution; last, we will focus on the innovativeness of the main industrial sector??”service 2. 1. Strength, Stability and Open Government Australia has a strong and diverse economy.
With a high consuming, commercialized and diverse, Australia is also recognized as the “test market”.A lot of multinational companies provide the service and goods in Australia to test the market before expanding into Asia or other global markets. Appendix 1 shows about Australian Real Gross Domestic Product (GDP) Growth by economic grouping (AEO, 2012).
Compared with the other developed countries, the average growth rate in Australia is highest. It means that Australian economy is strong and offers huge opportunities for the Foreign Direct Investment (FDI). Australia can set a low risk business environment based on the political and economic stability (Australian Government, 2012).It also ossesses flexible, accountable financial practices, open regulation and transparent government policy (World Bank, 2011). In Australia, common law and statute are mixed for the legal system.
In front of the law, all companies are placed in the same level. Moreover, in the Asia-Pacific, the Australian intellectual property protection is ranked in the second position. 2. 2. Language English is the official language in Australia. However, Australia is a multicultural society so that many other languages can be spoken, especially in main hub cities.
The other languages include Greek, Italian, Chinese, Arabic, Spanish, French and Japanese.This phenomenon makes the business easier for the foreigners and attracts more FID. 2. 3. Competitive Business Costs Compared with the other cities such as Seoul, Tokyo, Hong Kong, London, Paris and Singapore, Australia provides a global city office location with the lower costs. Additionally, Australia will offers some benefits such as the low wages for high trained labor and economical operating (Wei and Zhao, 2012).
2. 4. World Class Infrastructure and Communications Australia possesses a world class telecommunications infrastructure and the networks consist of fiber-optic, wireless, satellite and microwave systems.The main ommunication way was through fiber optic (Scott, 2012). Dense wave division multiplexing is considered as the major networks which is used to enable an easy upgrade.
3. Australian Government Foster Innovation 3. 1. Tax Incentive Since 1st July 2011, Australia carried out the new R tax incentive, which focused on three aspects. One is that some eligible R entities, which are less than $20 million in turnover per year, can get 45% refundable tax offset (Australian Government, 2012).The second one is that some foreign owned R have certain preferential policies such as 40% or 50% tax offset which depends on the group turnover Commercialization Australia, 2012). The last one is for some projects which are about renewable energy, energy efficiency and clean-coal technologies, the government will offer direct grants and loans. 3.
2. Australian Government Spending on Innovation Appendix 3 is about the Australian government spending on innovation, it shows the Australian government spent over $9 billion on the innovation projects every year and over $77 billion in the last ten years (DIISR, 2011).Most of the innovation spending is about four aspects, which are shown in Appendix 4. These four aspects re basic R, directed R, connections and capacity and commercialization and and Primarily Universities and the Commonwealth Scientific and Industry Research Organization (CRIRO). The Australian government spent $48 billion on basic R and S44 billion was used by PROS.
The directed R is founding for some research questions which were specified by the government. Only $10 billion was used for directed R and $9billion was for the private organizations.Connections and capacity focus on using some specialized training programs and interdisciplinary projects to improve connections and raise human capital.
For the commercialization and adoption, there is no doubt that the Australian government encourages the commercialization ideas by spending money. These two parts were only got little support and the others was for the tax incentives. 4. Financial Component of NIS 4. 1. The Australian Financial System In bank-based financial system, Australia focuses on the personal credit and commercial risk for the commercial lending.
In order to reduce the risk for the bank, the Australian government carried out the supervision system on financial risk (Australian Trade Commission, 2012). These measures help Australia avoid the the oss of financial crisis. Thus, enterprises can grant loan from banks if their credit is good. 4. 2. Lack of Access to Additional Funds From Appendix 5, it is easy to know that lack of access to additional funds are the important and main barrier to innovation.
Appendix 6 shows that compared with same period in the last year, the percentage of Australian business seeking for innovation has decreased by 40% (ABS, 2012).Australia has a private equity industry, which includes venture capital and later stage private equity. Venture capital indicates the high risk end of private equity, it is also a mechanism to help the new nnovation companies to grow. Later stage private equity is about late expansion, company buyouts and turnarounds. From Appendix 6, it easy to find out that venture capital and later stage private equity investment in Australia have decreased since 2007 (WEF, 2012).
This phenomenon does not occur in Australia, it also takes place in the other global private equity markets. 5.Scientific and Technological Institution 5. 1. The Role of Universities in NIS In Australia, the relationship between universities and innovations has shown in the Department of Innovation, Industry, Science and Research (DIISR), which is created by he government. This department assumed the responsibilities for program with university research funding and industry policy (Australian Government, 2012).
The universities play an important role in NIS without any doubts, in other words, it means that the work and services, which universities offer, are significant to maintain a strong, flexible and resilient economy.In wider range, the contributions of universities are by focusing on short term and direct measures of commercial value. This will be dangerous, because it ignores the larger social,economic, culture and nvironment effects and results on national reputation and credibility.
For example, in the international discussions on some global problems, Australia plays and influential role, at the same time, Australian universities showoff the contributions to identifying and analyzing options for dealing with these issues (Henderson et al, 2010).Moreover, multinational enterprises formulated some FDI decisions which were considered about the success of a countrys public sector research system. 5. 2. There are 41 universities in Australia, there are only two private universities.
The ederal government science agencies spent through Australian universities and medical research institutes more than twice for the R (Mueller, 2006). Mainly competitive grants and block grants are the two main forms designed to support the indirect costs of research which was provided by the sectors’s research fundings.To support universities research and research training activities, the Australian government invested about $2. 73 billion (Australian Government, 2012). 6. Industry Component of NIS 6.
1. The Service Industry in Australia Tourism, telecommunications, banking and insurance are the main services provided y Australia and it is considered as very important part of Australian economy and accounts for 70% of Australian GDP. It also employs four out of five Australians as well (Australian Government, 2012). Service industry plays a significant major role in Australian international trade.From 2006 to 2011, services exports grew with an average of 4% per year (Australian Government, 2012).
In 2011, total trade in service industry was about 17. 9%. Meanwhile, Services exports was about 16% of Australian total exports in goods and services of Australia (Australian Government, 2012). 6. 2.
Australian Government Spending on Healthcare System In order to better analyze service industry, this part choose healthcare system as the example to find out how the government innovate healthcare system.The national health insurance scheme, medicare, and pharmaceutical benefits are being administered by federal government. The federal government is making funds for the public hospitals and health programs related to population and also regulates some health system including private health insurance, pharmaceuticals, and medical services (AIHW, 2012). The Council of Australian Government (COAG) in 2011 endorsed an agreement under the National Health Reforms, stated that the role of he Australian government had been empowered in relation to the funding and governance of public hospitals and primary care (Healy et al, 2006).The eight states and territories are controlling in its own specific way in administering health services subject to fund and intergovernmental agreements. They are charged with administering public hospitals in well mannered way and regulating all hospitals and community based on health services (Healy, 2011). Environmental health and some public health programs except clinical service are taken care by the Local governments.
7. Conclusion and Recommendations From the analysis of NIS in Australia, it is obvious to know that Australia is a potential market for the multinational enterprises to invest.The government carried out some new policies such as the R&D tax incentive and increase the budges for the R&D. As a result, Australia government has created a welcome attitude innovation environment for the firms. There are some challenges for Australia, the main challenge is the aging of the Australia population (Department of Health and Aging, Residential Care, 2011).
It means that there is not enough labor for Australia in the future. However, it lso provides some opportunities to develop the service industry.In order to meet the health of needs of an aging population, it is not only to provide healthcare for people, but also to allow people to engage in the workforce for longer and more Innovation is key to productivity in an aging Australia. The big opportunities and challenges ahead will be met through a diversity of innovation strategies and the development of new industries, which will address not only Australian demand, but also that of other aging countries. References Australian Bureau of Statistics (2012) Key Economic Indicators. Available at: http:// ww. abs.
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Appendix 2 Competition among Firms in Australia Sources: Australian Innovation System Report, 2012. Appendix 3 Australian Government Spending on Innovation Source: Department of Innovation, Industry, Science and Research, 2011. Appendix 4 Australian Government Spending Source: Department of Innovation, Industry, Science and Research, 2011. Appendix 5 Barriers to Innovation for all Australian Businesses Source: Australian Innovation System Report, 2012.
Appendix 6 Business Framework Conditions and Other Incentives to Innovate