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entrepreneurs from overseas and strengthening links between
industry and universities. All of these measures are strong, but
despite that, we do feel that there are one or two risks to delivery
of the intention of the ideas boom.
One of the key findings in the report is that the level of funding
available for early-stage innovative activity – especially in the small
business sector – has fallen; from about 41 per cent to 16 per cent
of total investment over the last decade. That’s a concern because
investment at an early stage of a business venture is precisely
where the ideas come from, where the creative entrepreneurship
happens. To find that the share of investment at those early stages
has fallen is quite a cause for concern.
Why has this happened?
There a number of possible reasons for the drop. We know that
the economy in Australia, and indeed the world, has tightened,
and that may be leading people towards more conservative or
risk-averse investment strategies. It may also be the case that it’s
increasingly hard to attract overseas investment into Australia,
either through venture capital or later-stage private equity.
It’s clearly something we need to deal with. Incentivising new
businesses is critical to the delivery of Australia’s innovation
strategy. We need to understand why and possibly improve the
incentives for entrepreneurship in Australia.
Are there some policies in place that are placing barriers in front
of entrepreneurship?
A number of the barriers may be either legacy related or
geographical. Australia, as we know, is an isolated country, and to
a degree that could explain some of the difficulties, particularly in
attracting overseas investment. But the world has got smaller, so
that can’t be the lion’s share of the explanation. There are some
suggestions that the tax settings don’t sufficiently incentivise
investment, particularly venture capital investment. There are also
policies that perhaps penalise too highly businesses that may fail in
the course of their creative endeavour. These are all key factors in
reinforcing the momentum behind the ideas boom.
This report stated that larger firms are more likely to be active in
innovation. Could you give us a bit more detail about that and what
forms this innovation takes?
At one level that’s exactly right. We looked at the number
employees that were engaged in innovation. We also looked
at the degree of novelty of that innovation in either product
or process. Larger businesses do record a larger percentage
of inno