Webster, Elizabeth. “Does Australia Have a ‘National Innovation System’?” Australian economic review 42.1 (2009): 84–87. Web.

1. Importance of Innovation: Innovation is essential for increasing productivity, which is achieved through skill enhancement or the discovery and application of knowledge. However, there’s a market failure in knowledge creation because its benefits (social benefits) often exceed the private returns to the innovator. Empirical studies suggest that social rates of return from knowledge creation are significantly higher than private returns, indicating a strong role for government in stimulating innovation.
2. Role of Government: The article references the Cutler review of the Australian innovation system, which aimed to enhance public policy’s role in promoting innovation. This review assessed the concept of a ‘national innovation system’ and made recommendations for improving Australia’s system.
3. Definition of National Innovation System: There’s no universal definition of a ‘national innovation system.’ Various authors define it differently, ranging from the flow of information between people to the relationships in the production, diffusion, and use of new knowledge. Some emphasize the types of institutions promoting innovation, while others consider incentive structures and capabilities. The definition can be broad enough to include various factors affecting national productivity.
4. Australian National Innovation System: The article critiques Australia’s national innovation system, comparing it unfavorably to more developed systems in health and education. There’s a perception in Australia that high rates of new firm mortality are natural and beneficial in the long term, akin to a Darwinian view. This perspective has led to a lack of comprehensive programs for nurturing and developing new firms. Furthermore, academic research in this area is often limited and tends to focus on minor issues.
5. The Need for a Clear Definition: The author argues that defining what a national innovation system should look like is valuable for policy determination. Important questions to consider include the proportion of the economy devoted to innovative activities, the best policy instruments for achieving an optimal level of innovation, and whether there are synergies in the interaction of innovative activities. The system could encompass institutions, tax structures, and other policy instruments depending on what’s deemed critical for achieving key goals.