Australian businesses need to look overseas to find the right workers that will keep them innovating, a new report from Innovation and Science Australia (ISA) says.

Stimulating Business Investment in Innovation, the ISA’s deep dive into the current state of Australian innovation, recommends that the government “continue to reduce barriers for businesses seeking to attract and deploy skills and talent not currently available in Australia”.

The report identifies international IT workers as a key provider of value for businesses looking to expand innovative programs.

“Many firms demand certain niche skills and capabilities that simply cannot be found in the domestic market as the industry or ability to gain that experience does not exist in Australia,” the report says.

“Facilitating access to these types of skills and capabilities from the global marketplace can assist in not only filling a capability gap within firms, but [also by] transferring skills and knowledge to the domestic workforce.”

Big data, AI, and IoT are three distinct technological areas that the report says Australian companies can leverage by importing talent.

Although it commends the government’s Global Talent Scheme – which has already begun attracting highly skilled professionals – the ISA warns that “continued vigilance” is needed to make sure the scheme “appropriately balances the need for flexibility in responding to technology developments with the robust requirements of all visa categories”.

Dragging our feet on innovation

Innovation is defined by the ISA as “a new or improved product or process” that companies either deliver to customers or use internally – and it is fast becoming a key indicator of business growth.

“On average,” the report says of its research findings, “large and small firms that invested in innovation outperformed firms that did not.”

“Small and medium enterprises that accelerated their investment in technology and were more sophisticated users of information technology had higher revenue and employment growth than firms that did not undertake those activities.”

Despite the correlation between technology investment and growth, Australia’s economy is still lagging behind on innovation spending.

Local business investment in innovation is currently 1.9 per cent of GDP, well behind the European average of 2.9 per cent and the top nations which sit at 3.3 per cent of GDP.

The form of innovation is also important with the ISA wanting to see a shift toward what it calls non-R&D innovation that tend to produce a high return on investment.

These are activities that “don’t stem from a scientific method or involve R&D” and include investment in enterprise software, intellectual property, marketing, or business processes.

ISA chair, Andrew Stevens, said it was time for the government to refocus its innovation agenda.

“Australia has had a long history and focus on stimulating business investment in R&D,” Stevens said.

“We should continue to encourage greater business R&D investment, however this new research shows the value of additionally encouraging our businesses to invest in non-R&D innovation activities.”

A reworked innovation strategy

Among the ISA’s recommendations – that include making it easier to procure international talent – is a push for “direct and targeted support measures” for non-R&D innovation.

In particular, the report says that “a focus on software, digital transformation and ICT is warranted” due to the impact digital technologies have on productivity.

But the ISA wants the government to keep targeting particular sectors in order to build a “comparative advantage” with advanced manufacturing, food, and agribusiness remaining the main areas of focus for the short term.

Importantly, the ISA recommends that government and business develop what it calls a “growth through innovation” mindset in order to encourage firms to up their innovation spending.

This ought to be achieved through the development of a “more inclusive innovation narrative” because businesses were feeling “estranged from the government innovation agenda”.

Those organisations thought the government was focused on “radical innovation, high tech sectors and cutting-edge industries” in Australia’s capital cities rather than having nation-wide scope.

A greater national focus on innovation would help bring Australia into line with its OECD peers, according to the ISA.

“Australian governments must deliver effective policies to help level the international playing field,” the report says.

“Without more active, well-targeted engagement to foster business innovation investment, Australian firms risk falling further behind their international competitors.”