Australia’s innovation debate has drifted towards an overly narrow frame. The Strategic Examination of Research and Development (SERD), Ambitious Australia, is a welcome intervention. It addresses real weaknesses in funding architecture, foundational research capacity and institutional coordination.

The difficulty is that SERD treats the research system as though it were the innovation system. It is strong on the supply of knowledge but largely silent on the conditions under which new ideas are taken up, adopted, and applied by firms, governments and communities. The report reinforces a conception of innovation that is too research-centric and university-centred.

This Innovation Insight argues for two linked shifts. The first is to begin from innovation as the successful application of new ideas, rather than from the production of research outputs. The second is to widen the frame beyond science and technology to include creative practice, social innovation and the place-based ecosystems in which these interact.

Innovation as Successful Adoption, Application, and Use

Innovation is the successful application of new ideas. The emphasis falls on “successful” and “application.” Ideas, inventions and research findings carry no economic or social value until they are adopted and embedded in products, services, processes, organisations and behaviours. Most of that work happens outside laboratories.

This carries immediate implications. Universities, while essential generators of knowledge and talent, are not the primary locus of innovation. They are upstream providers of discoveries, inventions, ideas and capabilities that others must combine, adapt and deploy. The innovation system cannot be reduced to the research system plus a commercialisation bridge.

The system comprises the actors, capabilities, relationships, rules and cultural norms that determine how ideas are turned into value. That includes demand-side dynamics, management quality, organisational practices, user behaviour and institutional context. Policy should be judged by whether more organisations, in more sectors and places, are doing something different and valuable with new ideas.

From this vantage, the traditional pipeline model (basic research to applied research to development to commercialisation) looks more like a special case than a general model. Many innovations come from recombining existing technologies, borrowing ideas across sectors, adapting practices from elsewhere or responding to new constraints. Frontline workers, users and communities are sources of innovation as consequential as researchers.

Innovation policy should therefore begin with application contexts and work backwards to the research and knowledge inputs they require. The complementarity thesis is relevant here: that is, when research inputs are abundant but absorptive capacity, management capability or demand conditions are weak, additional research investment generates diminishing returns. The binding constraint lies elsewhere.

The Broader Drivers of Productivity

The link between innovation and productivity growth is well established. What is less understood in Australian policy discourse is that productivity gains flow from a broad range of innovations beyond science and technology. The OECD’s Oslo Manual recognises organisational innovation, management practice, process redesign and service delivery reform as innovation in their own right. In many sectors, these non-technological innovations may be the more consequential drivers of productivity.

The evidence on management quality reinforces this. The World Management Survey, initiated by Bloom and Van Reenen, consistently shows that management practices account for a substantial share of productivity differences across firms and countries. Green’s Australian benchmarking study, Management Matters in Australia, confirmed that while some Australian firms match global best practice, a long tail of underperforming firms lag well behind, particularly in people management. Addressing this gap would yield productivity dividends probably at least comparable to those expected from higher R&D spending.

Workplace organisation, workforce development and service design tell a similar story. In health, education, justice and community services, the largest productivity and quality gains often come from redesigning care models, reconfiguring teams or rethinking how services reach users. These are innovations in practice, not in technology, even where technology plays an enabling role. They draw on design thinking, professional expertise, user engagement and institutional learning.

The complementarity thesis sharpens the point. If management capability, organisational design or demand-side conditions are deficient, they become the rate-limiting factors, and additional research investment generates diminishing returns. In the Australian context, there is a strong case that non-technological innovation deficits are at least as binding as R&D shortfalls.

As Roy Green has argued cogently, Australia’s stalled productivity and real wage stagnation owe much to a narrow trade and industrial structure, but they also reflect persistent weaknesses in management capability and enterprise absorptive capacity. A strategy focused predominantly on research intensity and technology transfer will miss a large share of the productivity opportunity.

Productivity growth depends on the quality of management, the design of organisations and services, the adaptiveness of institutions and the capacity of places to orchestrate all of these alongside technological change.

The Research-Innovation Boundary in SERD

Ambitious Australia does valuable work in diagnosing weaknesses in research funding and proposing mechanisms to strengthen foundational research, infrastructure and coordination. It rightly identifies the need to improve translation, commercialisation and business R&D. The difficulty lies in what the report excludes.

A linear framing persists

The report’s core diagrams and narrative devices, including the “innovation flywheel,” still encode a largely linear view in which research is the prime mover and innovation follows downstream. Even where the text acknowledges non-linearity, the system boundary is drawn around the research sector, the R&D Tax Incentive and direct support for firm R&D. Missing are the broader organisational, market, regulatory and cultural determinants of adoption.

Agency is skewed

Universities and public research agencies are treated as the central actors whose performance and incentives must be optimised. Firms appear primarily as recipients of research (via collaboration, commercialisation and the tax incentive) rather than as the principal agents of innovation. Governments are cast mainly as funders and coordinators rather than as designers of demand-side instruments and market-shaping policies.

This framing sits uneasily with the evidence on the management chasm. The persistent gap between research output and commercial application in Australia owes more to weak management and absorptive capacity in firms than to insufficient research supply. SERD does not engage with this diagnosis.

Ecosystem language without ecosystem substance

While the report uses the language of ecosystems, it does not operationalise an ecosystem perspective. It pays little attention to the distributed, multi-actor, place-based nature of innovation, in which local capabilities, networks, leadership and culture play a decisive role. Policy domains such as skills, competition, procurement, regulation, regional development and urban planning sit largely outside the SERD frame.

The result is a more coherent research system architecture without a correspondingly rich account of the innovation architecture around it. This is a missed opportunity, but also an opening: the next policy step after SERD could, and should, address the broader innovation system.

Re-centring Firms, Users and Places

If innovation is the successful application of new ideas, then the natural centre of gravity for innovation policy is not universities but firms, users and places. Each carries a distinct role in the system, and each is under-specified in SERD.

Firms

Firms are where technologies, capital, organisational capabilities and market knowledge combine to create products and services at scale. They make investment decisions under uncertainty, form and join value chains, and respond to competitive pressures. Their willingness to invest in innovation depends on management competence, access to finance, demand expectations, regulatory settings, skills availability and ease of collaboration.

When management capability, absorptive capacity or demand conditions are the binding constraint, expanding research subsidies or university output will have limited effect. The rate-limiting complement must be addressed directly, and that means engaging with conditions inside firms, not only with the knowledge flowing towards them.

Users

Users, whether consumers, citizens, workers or communities, shape innovation through their needs, preferences, behaviours and feedback. They co-create value, adapt technologies to local contexts and frequently originate innovations through lead-user activity and grassroots problem-solving. In public services, frontline professionals are often the principal innovators, developing new models of care, education or social support.

Places

Places, understood as regions, cities, districts and communities, mediate innovation by concentrating capabilities, networks, institutions and culture in specific contexts. Innovation ecosystems are inherently place-based: they emerge from local industry structures, research and education assets, infrastructure, governance and leadership. A national innovation strategy that ignores this spatial dimension will over-generalise, miss opportunities for specialisation and clustering, and fail to mobilise local leadership.

Re-centring firms, users and places means designing policy from their perspective: what makes it easier or harder for firms in this sector and region to experiment and invest? How do users and communities experience innovation in public services? What local institutions connect research, creative practice, entrepreneurs and civic innovators? Which missions matter most in this place?

Widening What Counts as Innovation

The second shift is to broaden what counts as innovation beyond science, technology and formal R&D. SERD, in common with many R&D-centric reviews, gives minimal attention to arts, creative practice, design, cultural industries, social innovation and institutional change. These domains matter as sources of value and as enablers of technological innovation.

Creative industries and cultural institutions

Creative industries generate content, experiences and narratives that shape demand and meaning, influencing how people value technologies, places and products. They pioneer business models in digital distribution, platform economies and audience engagement. They build skills in design, storytelling, aesthetics and human-centred thinking that increasingly differentiate products and services.

Design and creative practice are often the bridge between technology and adoption. Translating a technical possibility into a usable service, a trusted public system or a compelling product is a creative act as much as a scientific one. Many of the largest gains in digital service productivity and inclusion have come from design innovations rather than new underlying technologies.

Social and cultural innovation

Social and cultural innovation, including new ways of organising, governing and relating, can have as much impact as new technologies. Examples include novel models of aged care, restorative justice practices, participatory budgeting, community-led energy projects and cooperative platforms. These innovations often emerge from civil society, social enterprises and local governments.

Social and cultural factors also condition whether technological innovations are adopted and with what consequences. Trust, legitimacy, fairness and cultural resonance all influence uptake. Innovations that ignore these dimensions may fail, produce backlash or deepen inequalities. A techno-economic account of innovation alone cannot guide policy in health, education, climate, housing or social cohesion.

Recognising creative practice and social innovation as part of the innovation system is a substantive correction. It broadens the sources of innovation and the outcomes that matter, and opens new levers for change: from cultural policy and public engagement to institutional design and participatory processes.

From Research Architecture to Innovation Architecture

These shifts suggest a different way of reading SERD. Rather than treating Ambitious Australia as the definitive blueprint for the national innovation system, it can be read as a necessary but incomplete blueprint for the research architecture within that system.

The report clarifies how to organise funding and governance for universities and public research, how to adjust the R&D Tax Incentive and how to strengthen translational mechanisms. These are useful building blocks. But the innovation architecture that surrounds them, encompassing demand-side policies, capability-building for firms, creative and cultural infrastructure, place-based ecosystems and mission-oriented governance, remains largely to be designed.

The next policy step should therefore be an explicit innovation strategy. Such a strategy would start from innovation as successful application, and from the perspectives of firms, users and places. It would integrate arts, creative practice, design and social innovation alongside science and technology, and identify missions that matter economically and socially: net-zero transitions, healthy ageing, Indigenous knowledge, digital public infrastructure and cultural renewal.

The strategy would deploy a wider toolbox: public procurement, regulation, competition policy, skills and management development, regional and urban policy, and creative industry support. It would clarify roles: universities and research agencies as knowledge infrastructure; firms and social enterprises as the primary agents of application; governments as mission-setters and risk-sharers; and communities as co-creators.

Such a strategy would not need to undo SERD. A well-functioning research architecture is a necessary condition for a productive innovation system. But it is not sufficient, and should not be mistaken for the system itself.

Implications for Narrative and Governance

Narratives shape expectations, coalitions and institutional design. If the dominant story holds that universities will drive Australia’s economic future, policy will over-weight research supply-side fixes and under-weight the capabilities needed for firms, public agencies and communities to innovate. It will undervalue creative, social and cultural innovation and overlook the importance of place.

An alternative narrative would say: Australia’s economic, social and cultural future depends on innovative firms, governments and communities that apply new ideas in ways that create value and solve problems. Universities and public research agencies are essential enablers, providing knowledge, talent and problem-solving capacity, but they are not the main protagonists.

In this narrative, arts, creative practice, design and social innovation are integral to how ideas are generated, adopted and scaled. Innovation is inherently place-based, and local ecosystems determine how national policies translate into outcomes. The role of national policy is to align research architecture with a broader innovation architecture centred on application and place.

Governance arrangements should reflect this narrative. A National Innovation Council should not be an expanded research coordination body. It should bring together business, unions, universities, TAFEs, creative industries, social innovators, First Nations representatives and all levels of government to steward missions and ecosystems. It should be backed by mandates that reach beyond research funding into the wider policy domains that shape innovation.

Conclusion

Ambitious Australia is a valuable attempt to strengthen the research backbone of the country. But an ambitious innovation agenda requires more than a well-designed research system. It requires an honest account of where innovation happens and what conditions it needs.

That means re-centring firms, users and places as the primary locus of agency, and widening the frame to include creative practice, social innovation and the ecosystems that bind them with science and technology.

It also means recognising that productivity growth depends on a far broader range of innovations than a research-centric frame can capture. Management practice, organisational design, service delivery reform and institutional adaptation are not secondary to technological change. In many settings they are the binding constraints.

The task ahead is to build a system in which research, enterprise, creative practice and civic innovation interact productively, under a governance framework that recognises their distinct roles and interdependencies. SERD provides a starting point for the research architecture. It is now up to policymakers, practitioners and communities to build the innovation architecture around it.

These issues are also canvassed in the Innovation Insight of 12 April, "Constitutionally Untethered?" The SERD Panel’s National Innovation Council and the Constraints It Does Not Address"

This article was originally produced by Dr John Howard, Software Australia's senior advisor for innovation policy and executive director of the Acton Institute for policy research and innovation. Read the original here.

References

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