Stimulating innovation: Business and government strategies in Australia and China

This paper reviews strategies to promote innovation, both at an enterprise and at a government level. Govemment' face a balancing act between two opposing considerations in trying to promote innovation. On the one hand, as the custodians of public money, they have an obligation to make sure that it is used wisely, minimising waste and risk. On the other hand, they want to encourage the development of new approaches and new initiatives, yet in doing so they face the high levels of risk and failure that these approaches can entail. Given this, it is not surprising that much government activity is focussed on policy, rather than participation in the development and delivery of products and services. Through the stimulus provided by taxation packages, incentives, and seed funding - often provided on a matching basis -a government can support new initiatives and approaches 'without being directly involved in them. The paper will compare the situation in Australia and in China. Australia is a relatively advanced country, with small proportions of the workforce devoted to primary production and manufacturing, and with a sophisticated and extensive service industry. On the other side, China is still developing its manufacturing and agricultural industries, and is' working hard to meet the needs of its huge population as it becomes more affluent. Despite these differences, both countries see the promotion innovation and its effective implementation as important. From an enterprise point of view, balance is also important. Here the challenge is to match the competing demands of reducing costs and improving efficiencies (and hence improving sales and profit margins), as opposed to investing in potentially risky projects to develop new and innovatory approaches. Most innovation is driven by new small and mid-sized businesses, whereas the focus on innovation I larger companies tends to be on continuous improvement.