How an Innovation Ecosystems Perspective can Assist in the Strategic Examination of R&D (SERD)

Roy Green, 21 October 2025

Readers of this column will be familiar with John Howard’s prodigious contribution to public policy debate on the evolution of our national research and innovation system. His deep understanding of both the theoretical underpinnings and practical application of policy in this area was reflected in his recent book Thinking in public: Australia’s missing innovation policy: Will it ever be found?

Now he has authored a new publication The Handbook of Innovation Ecosystems: Placemaking, Economics, Business, and Governance, which has arrived at a critical moment for the Australian government’s Strategic Examination of R&D (SERD), shortly to conclude its year-long deliberations.

The Strategic Examination of R&D

The SERD is seen by the Albanese government as “an important element of the plan for a Future Made in Australia. This includes achieving net zero, developing critical technologies and building sovereign capability. An effective R&D system increases the benefits of science, research and innovation for Australia. It can help secure our long-term prosperity, security and wellbeing.”

The Handbook provides a framework that directly aligns with this purpose: charting a course for Australia to “move from fragmented, project-based initiatives to a coherent, adaptive, strategically integrated innovation system”. It will be of assistance to the Minister for Industry and Innovation and Minister for Science Tim Ayres as he is faced with expectations of transformative action in a ‘budget neutral’ funding environment.

John challenges the assumption that innovation can be engineered through expenditure alone. He frames innovation as a systemic process requiring the deliberate alignment of four interdependent domains: placemaking, economics, business and governance. Each draws upon a shared foundation of physical, knowledge, financial and social capital.

The value of the Handbook is that it makes the case with unrivalled clarity and evidence for this systemic framing to extend beyond individual research programs to the design and stewardship of the entire research and innovation system.

R&D policy through an ecosystem lens

John’s central argument is that research and development outcomes depend on how well these domains operate in concert. This marks a shift away from the ‘pipeline’ model of R&D, in which research is viewed as a linear process from discovery to application. Instead, the Handbook shows how innovation is recursive and relational, emerging from the interplay of people, institutions and places. Specifically, universities, businesses, government and communities form dynamic networks of exchange and co-evolution.

John refers to the danger of the ‘input fallacy’: the belief that innovation outcomes can be purchased through funding alone. Money is necessary but insufficient. What matters is how investment interacts with institutional capability, social trust and governance. This observation goes to the heart of the SERD's challenge.

Australia's R&D policy has been dominated by fiscal considerations: how much is spent, by whom and on what. The Handbook suggests that effectiveness depends less on the volume of expenditure than on the coherence of the system surrounding it.

While the Treasurer’s recent economic reform roundtable missed the opportunity to move in this direction – instead caught up in tax and deregulation – Minister Ayres’ own industry and research roundtables made a positive effort to do so in the context of addressing Australia’s stalled productivity growth.

The four-domain framework

The Handbook’s four-domain convergence framework is offered as a diagnostic lens through which the SERD can examine the structure and performance of Australia's research and innovation system, and hence its contribution to productivity growth, economic resilience and net zero.

• Placemaking emphasises the spatial and infrastructural dimensions of innovation: how physical design, connectivity and shared facilities enable knowledge exchange, transfer and collaboration.

• Economics focuses on competitiveness, productivity and the industrial conditions that shape R&D investment.

• The business domain captures the firm-level dynamics of entrepreneurship, scaling and market entry.

• Governance refers to the coordination mechanisms that align institutional actors, establish legitimacy and sustain strategic direction.

John argues that alignment of these domains, rather than their separation, produces enduring outcomes. When physical design, economic strategy, business capability and governance architecture are mutually reinforcing, ecosystems become “resilient, adaptive and generative”.

By contrast, when fragmented, innovation stalls. For the SERD, this framework offers a way to analyse how the national system's components interact, overlap or, more problematically, work at cross purposes.

The capital bedrock

Beneath these four domains, according to the Handbook, lies the ‘capital bedrock’: physical, knowledge, financial and social capital. This base underpins ecosystem performance and explains why some innovation environments thrive while others struggle.

• Physical capital comprises laboratories, testbeds and digital networks. This requires resources.

• Knowledge capital encompasses the expertise, data and intellectual property that flow through universities, research institutes and firms.

• Financial capital provides the risk-bearing capacity that allows ideas to move from concept to market.

• Social capital (trust, reciprocity and shared norms) enables coordination across institutional and sectoral boundaries.

This framing has immediate implications for R&D policy. Public investment should be treated as the construction and maintenance of a multi-dimensional infrastructure system, rather than a sequence of discrete programs.

Strengthening research infrastructure without building financial or social capital will achieve little. For the SERD, this perspective provides a conceptual foundation for analysing the completeness and balance of Australia's R&D infrastructure.

System integration and intermediaries

A recurring theme is the importance of ‘system integration’: the process through which disparate actors and resources are connected to form a functioning whole. Successful innovation ecosystems depend on intermediaries with the capability to bridge boundaries and translate between institutional logics.

Internationally, this role is played by organisations such as Germany's Fraunhofer Institutes, the United Kingdom's Catapult Centres and the ManufacturingUSA network. John’s analysis highlights the relative absence of such institutions in Australia. As he points out, efforts to establish equivalents, such as Cooperative Research Centres or industry growth centres, have been uneven, sporadic and under-resourced.

Australia's innovation system remains a patchwork of programs rather than a mission-led, integrated network. For the SERD, this suggests that reform must extend beyond funding instruments to institutional architecture.

Connecting to the productivity agenda

Importantly, the Handbook provides a conceptual bridge between innovation policy and Australia's productivity agenda. It demonstrates that innovation ecosystems are the enabling infrastructure for productivity growth. By mobilising talent, capital, and ideas across organisational boundaries, ecosystems create the conditions under which knowledge circulates, capabilities deepen and new opportunities emerge.

This perspective allows the SERD to connect research investment directly with enhanced economic complexity and productivity outcomes. It moves the discussion beyond inputs (funding and projects) to the systemic qualities that make innovation productive: coordination, capability and diffusion.

This establishes a shared logic for integrating R&D, industrial strategy and the productivity agenda into a single framework for long-term national competitiveness. It also provides a context for increased business R&D as policy measures diversify Australia’s narrow trade and industrial structure, where high value manufacturing has been crowded out by a resources heavy export mix.

From program management to system stewardship

Perhaps the most consequential implication lies in the re-conceptualisation of government's role. John proposes a shift from program management to ‘system stewardship’. Governments must see themselves as custodians of the conditions that allow innovation to thrive. This involves investing in governance capability, maintaining policy coherence across electoral cycles and building the trust and legitimacy that underpin collaboration.

This argument aligns with recent commentary from the OECD, which emphasises the importance of institutional coordination and learning in national innovation performance. The Handbook goes further by demonstrating that the craft of stewardship (patient leadership, transparent governance and adaptability) is as important to R&D outcomes as any single funding mechanism.

Where to Now?

The Handbook of Innovation Ecosystems provides an intellectual foundation for reconceiving Australia's research and innovation landscape. It bridges disciplines and sectors, offering policymakers a coherent vocabulary for discussing how places, institutions and actors interact to generate value. Its insights point towards an R&D system built on relationships, alignment and capability.

By drawing upon the ‘four-domain’ and capital frameworks, the SERD can move beyond assessing inputs and outputs to understanding the conditions that make innovation systemic, adaptive and enduring. John’s argument is that innovation ecosystems succeed when design and intent replace fragmentation and inertia, when governance becomes integrative rather than administrative, and when R&D is understood as part of a living, evolving system of national capability.

In sum, the key message of the Handbook is that renewal of Australia's research and innovation system depends on recognising innovation as both an institutional craft and a civic responsibility, one that demands a well thought through combination of practical measures with long-term vision. It should be essential reading for all those interested in how to create a more dynamic, inclusive and sustainable knowledge economy in Australia.

*Emeritus Professor Roy Green AM is Special Innovation Advisor at the University of Technology Sydney.

This Insight was originally published as "The why and how of innovation ecosystems" in @AuManufacturing on 20 October, 2025.

Book Details

The paperback edition of the Handbook is available through Amazon Publishing and as an eBook through Kindle.

Publisher: Acton Institute for Policy Research and Innovation | Publication date: 4 October 2025 | Print length: 559 pages | ISBN-13: 978-1764140713.