Are we winning or losing the innovation game? This question was posed at the Hunter Research Foundation (HRF) Centre’s recent Hunter Economic Breakfast. It gives rise to other questions.
Newcastle and the Hunter have proven track records of innovation in the face of change.
Why play the innovation game?
Estimates by the Organisation for Economic Co-operation and Development show that as much as 50 per cent of long-term economic growth of its member countries can be attributed to innovation. This contribution is expected to grow.
The Australian economy is undergoing a transition from a decade-defining resource boom to one dependent on knowledge and service products. During this transition, international competitiveness and productivity depend increasingly on capacity to innovate.
Australian micro-level data support the macro view that innovation is crucial for economic growth. Innovation-active firms are more likely to report increases in sales, profitability, productivity and growth in firm size than firms that do not innovate, ABS data show.
Is the Hunter a serious contender? Sydney is the state’s innovation powerhouse. It benefits from global connectivity as well as access to infrastructure and a deep pool of talent. Developing scale to deliver impact is more difficult in regional Australia. Yet, regions outside capital cities face the same pressure to innovate.
The HRF Centre has measured Hunter business innovation since 2009. The latest data show that 46 per cent of Hunter firms introduced new or improved products or services in 2017. That is the highest proportion since the HRF began collecting data, and on par with the national average for innovation active firms.
Newcastle also ranked well in 2016 in the volume of new business entries and patents, according to the Australian Innovation System Report. These measures were dominated by Sydney, and to a lesser extent Melbourne and Brisbane. Yet, the Hunter compared favourably to many non-capital cities, the Gold Coast, Geelong and Wollongong. What are the winning strategies? The creation of a viable local innovation and entrepreneurship ecosystem may be the first step. Innovation ecosystems relate to a networked group of individuals, businesses and institutions within a particular geography, working together to drive entrepreneurship and innovation. Critically they facilitate connection and sequencing of the necessary ingredients to drive business formation, investment and growth.
The Hunter has many of the elements to create a strong entrepreneurial and innovation ecosystem. However, gaps in the system are undermining the chance to capitalise on these existing elements.
The Hunter iF Project is led by a working group comprised of key players within the Hunter innovation ecosystem. Its objective is to develop a plan to unite, scale and champion the Hunter’s growing innovation ecosystem. It aims to create a world-class, sustainable model attracting entrepreneurs, investors and industry to the region.
In practice, its aim is to better connect existing assets through developing a stronger network for entrepreneurs and mentors. It can routinely establish links to other groups and events and improve branding. It needs to identify pathways for growing and connecting talent to corporate partners and ways to connect investment to opportunity. It proposes significant investment in soft and hard infrastructure to develop this program for connectivity, as well as plans for an open innovation lab and incubator.
Entrepreneurial activity is heavily influenced by the cultural environment surrounding entrepreneurs, according to Price Waterhouse Coopers research. Environments are needed where opportunities to start a business are easy to see, where people are confident in their skills and knowledge, and where entrepreneurial success is highly visible. In those environments, entrepreneurs are likely to progress more quickly to and beyond early-stage activity.
Entrepreneurs need to be encouraged to lead a start-up community to a critical mass in order to achieve long-term sustainability.
Newcastle and the Hunter have proven track records of innovation in the face of change. New investments can solidify Newcastle’s place as a dynamic, competitive and entrepreneurial city.
The region needs to act now to capitalise on growing levels of innovation, new business formation and scale-ups. The impact will be seen in evidence of strength in emerging industries.