The institutional instruments of effective innovation progress

John H Howard, 13 May, 2026

This Innovation Insight was first published in Innovation Aus on 7 May 2026.

The Insight was written before the May 12 Budget, in which the Treasurer announced the formation of a National Resilience Council to advise on RDI objectives, priorities, and performance, and to improve the coordination of government R&D and industry initiatives.

Australia possesses many of the institutional ingredients for effective innovation ecosystem development. What it lacks is coordination among these instruments around shared, place-based objectives.

Each operates according to its own mandate, reports through its own accountability structure, and measures success against its own performance criteria.

The complementarity thesis applies as much to institutional portfolios as to technology systems: outcomes depend on what elements combine with, and the portfolio instruments examined in this Insight are not currently combining.

This points to a larger institutional question that Industry Minister Tim Ayres and his colleagues will need to address in coming months: what body should replace or subsume Industry, Innovation and Science Australia (IISA) as the primary governance mechanism for the research and innovation system, and how should it relate to the Government’s broader industrial strategy?

IISA, established under the Industry Research and Development Act 1986, performs its statutory functions competently. What it does not and cannot do under its current mandate is coordinate the portfolio instruments examined in part one of this series around shared strategic objectives.

The SERD report’s proposed National Innovation Council (NIC) addresses this gap in ambition but not in institutional design. The NIC as proposed is constitutionally untethered. Section 64 of the Constitution vests executive authority in individual ministers, not in cross-portfolio coordinating bodies.

 A council that purports to direct expenditure across thirteen portfolios without the authority of Cabinet or the Expenditure Review Committee would lack the institutional tethering needed to function.

The question of how to coordinate research and innovation instruments within a Westminster system of individual ministerial responsibility is not unique to Australia. Three comparable jurisdictions have addressed it in the past decade, each with instructive results.

United Kingdom Catapults

The UK’s approach, established under the Higher Education and Research Act 2017, brought seven disciplinary research councils, Innovate UK, and Research England under a single umbrella body, UK Research and Innovation (UKRI), now operating with a budget exceeding £8 billion.

UKRI is a non-departmental public body sponsored by the Department for Science, Innovation and Technology (DSIT). Each constituent council retains operational autonomy under a principle of subsidiarity, while the UKRI Board and Executive Committee provide strategic coordination.

The 2025 UKRI Framework Document explicitly describes UKRI as a “strategic delivery partner” for the government’s industrial strategy.

Alongside UKRI, the Catapult Network of nine technology and innovation centres, established by Innovate UK from 2011, provides place-based applied research infrastructure funded on a “thirds model”: one-third core government grant, one-third collaborative R&D funding, one-third commercial revenue.

The Catapults operate in over 50 locations and function as anchor institutions within local innovation ecosystems, bridging the gap between research and commercialisation.

Government confirmed £1.6 billion in Catapult funding for 2023 to 2028. The Catapult model is the closest UK analogue to the place-based coordination function that Australia’s portfolio instruments could perform if properly aligned.

The UKRI structure remains research-led in orientation, however. Innovate UK operates as one of nine councils, rather than as the coordinating apex.

An Australian adaptation might consider inverting this relationship: placing the innovation and industrial strategy function in the lead position, with research funding instruments coordinated to serve national innovation and industry priorities.

The UKRI model also operates in a unitary state. Replicating it in Australia would require careful attention to the division of responsibilities between the Commonwealth and the states in areas such as skills, land use planning, and regional development.

Canada and the Global Innovation Clusters

Canada’s research and innovation architecture offers the closest Westminster-system parallel to Australia’s coordination challenge. The federal government funds research through three granting councils, known collectively as the Tri-Council: the Natural Sciences and Engineering Research Council (NSERC), the Social Sciences and Humanities Research Council (SSHRC), and the Canadian Institutes of Health Research (CIHR).

These councils are the Canadian equivalents of the ARC and NHMRC, with SSHRC covering the humanities and social sciences that the ARC handles within its broader remit in Australia.

All three report to the Minister for Innovation, Science and Economic Development, which provides a single portfolio coordination point that Australia lacks.

In Australia, the ARC reports to the Minister for Education, the NHMRC to the Minister for Health, and the 15 Rural Research and Development Corporations to the Minister for Agriculture.

Alongside the Tri-Council, Canada operates the National Research Council (NRC), a federal agency that performs and supports applied research and technology development across a network of research centres.

The NRC functions as a combined applied research performer and innovation support agency, occupying institutional territory that in Australia is split between CSIRO and elements of the former Callaghan Innovation in New Zealand.

The Canada Foundation for Innovation (CFI) funds research infrastructure, analogous to Australia’s NCRIS. This creates a research funding landscape that, while dispersed, is coordinated through a single portfolio department in a way that Australia’s is not.

On the innovation and industrial strategy side, Innovation, Science and Economic Development Canada (ISED) administers the Global Innovation Clusters program (formerly the Innovation Superclusters Initiative).

The program invested nearly $2 billion over ten years in five industry-led, not-for-profit cluster entities, each with its own board and sector focus: digital technology, protein industries, advanced manufacturing, ocean industries, and scale AI.

The clusters operate on a co-investment model requiring dollar-for-dollar matching from industry, and have supported over 500 projects involving more than 2,400 partners.

The Canadian experience offers two lessons for Australia. The positive lesson is that industry-led cluster entities can mobilise private investment and create collaborative networks at scale.

The cautionary lesson is that the clusters bear limited resemblance to the geographically specific models they were intended to emulate.

With partners scattered across entire provinces and even the country, they lack the place-based density that characterises effective innovation ecosystems. A Parliamentary Budget Office analysis found slower-than-expected spending and difficulty measuring innovation outcomes.

The implication for Australia is that a coordination model needs genuine geographic specificity, not a national program labelled as place-based.

Canada also illustrates the federal coordination challenge. Even with the Tri-Council and the NRC housed within a single portfolio, ISED must work alongside provincial governments and Regional Development Agencies, each with distinct mandates and funding streams.

The evaluation of the Superclusters Initiative found that coordination between federal and provincial innovation programming was a persistent challenge.

The Australian coordination problem is more acute: the research funding instruments are spread across at least six Commonwealth portfolios (Education, Health, Industry, Agriculture, Defence, and Climate Change and Energy), with ARENA, the MRFF, the RDCs, and CSIRO each operating under separate legislation and reporting to different Ministers.

New Zealand: the end of Callaghan Innovation.

New Zealand’s recent experience provides a different kind of precedent. In January 2025, the government announced the disestablishment of Callaghan Innovation, the Crown entity responsible for supporting business innovation since 2013, as part of a broader restructuring of the research system.

Callaghan Innovation’s grant administration and R&D Tax Incentive functions are transferring to the Ministry of Business, Innovation and Employment (MBIE), while its applied research capabilities are dispersing to newly created Public Research Organisations.

The New Zealand case illustrates what can happen when an innovation agency lacks coordination authority and institutional weight. Callaghan Innovation performed useful grant administration and R&D services, but it operated alongside Crown Research Institutes, universities, and MBIE without the mandate or capacity to coordinate across them.

When the government sought to restructure, the entity proved expendable. The lesson for Australia is that an IISA successor needs sufficient statutory authority and strategic function to be structurally durable, not merely administratively useful.

Germany

Germany’s innovation governance operates in a federal system whose constitutional architecture offers the closest international parallel to Australia’s coordination challenge.

The Basic Law (Grundgesetz) allocates primary responsibility for education, science, and culture to the sixteen Länder (states), with the federal government holding specific but limited powers.

Article 91b of the Basic Law provides the constitutional foundation for federal-state cooperation in research, permitting the Federation and the Länder to cooperate “on the basis of agreements in cases of supraregional importance in the promotion of sciences, research and teaching.”

This provision, substantially amended in 2014 to allow permanent federal co-funding of universities, creates a framework for joint research investment that has no equivalent in the Australian Constitution.

The coordination mechanism through which these joint commitments are negotiated and adopted is the Joint Science Conference (Gemeinsame Wissenschaftskonferenz, GWK), established in 2008.

The GWK’s membership includes both the science ministers and the finance ministers of the federal and Länder governments, a dual composition that gives it direct authority over both policy direction and funding commitments.

Unanimous decisions of the GWK are deemed to have been approved by the heads of government of the federal and state governments, making them directly binding.

This standing intergovernmental body, described as Germany’s most powerful science policy body, is the kind of formal coordination mechanism that Australia’s National Cabinet could house but has not developed for innovation and research.

The GWK oversees the joint funding of Germany’s four major non-university research organisations, each performing a distinct function within the innovation system.

The Fraunhofer-Gesellschaft, Europe’s largest applied research organisation, operates 76 institutes with an annual budget exceeding €3 billion, funded approximately 90:10 between the federal government and the host Land.

The Fraunhofer model, in which institutes co-locate with universities and industry partners and derive around two-thirds of their revenue from contract research and public research projects, is the closest international analogue to the place-based applied research function that Australia’s portfolio instruments could perform if coordinated.

• The Max Planck Society conducts fundamental research across 84 institutes.

• The Helmholtz Association operates 18 research centres focused on large-scale scientific infrastructure.

• The Leibniz Association comprises 97 institutes conducting application-oriented basic research.

Together, these organisations receive joint federal-Länder funding negotiated through the GWK under the Pact for Research and Innovation, which provides multi-year funding certainty.

On the innovation and industrial strategy side, the federal government’s High-Tech Agenda (adopted in 2025, succeeding the High-Tech Strategy 2025) coordinates innovation policy across multiple federal ministries.

The Federal Ministry of Research, Technology and Space (BMFTR) leads the strategy, with implementation distributed across ministries responsible for economy, energy, health, defence, and other sectors.

The High-Tech Forum, an advisory body of industry and research leaders, provides strategic counsel. The Federal Agency for Disruptive Innovation (SPRIN-D), established in 2019, provides targeted funding for breakthrough technologies with a degree of operational autonomy from government.

Germany’s experience with mission-oriented innovation policy demonstrates both the potential and the difficulty of cross-departmental coordination in a federal system.

Fraunhofer ISI research on the implementation of the High-Tech Strategy 2025 missions found that inter-ministerial coordination groups were effective where they were established, typically bringing together working-level staff from two to three ministries around specific missions.

Where such groups were absent, “cooperation in delineation” and forms of negative coordination were observed, with ministries defining boundaries to minimise overlap rather than actively aligning their activities. The lesson is that coordination requires standing institutional mechanisms, not ad hoc goodwill.

The German precedent is instructive for Australia in three respects.

Article 91b and the GWK demonstrate that a constitutional provision for federal-state research cooperation, combined with a formal intergovernmental body with both science and finance ministers, can produce durable coordination arrangements.

Australia has no equivalent constitutional provision, which means that intergovernmental coordination on innovation and research must be built through National Cabinet agreements or ministerial councils rather than through constitutional amendment.

The Fraunhofer model demonstrates that applied research organisations co-located with universities and industry can anchor regional innovation ecosystems when their location decisions are made in consultation with state governments and industry partners, a function that CSIRO’s property consolidation could perform if coordinated through the proposed Commission.

The High-Tech Agenda’s difficulties with cross-ministerial coordination confirm that even in a system with strong institutional frameworks, coordination across portfolio boundaries requires dedicated mechanisms with clear authority. Informal arrangements are insufficient.

Non-Westminster comparators

Finland

Finland warrants brief mention for a specific design feature that could inform Australian practice.

The Research and Innovation Council, chaired by the Prime Minister, coordinates innovation system development across two ministries while maintaining separate delivery agencies for research (Research Council of Finland) and innovation (Business Finland).

The council’s authority is grounded in legislation: under the Act on Research and Development Funding (2024), the government is required to adopt a multiannual plan for public R&D funding each electoral term.

This dual structure acknowledges that research and innovation are complementary but distinct activities requiring different institutional cultures.

The requirement for a statutory multiannual plan, binding across electoral cycles, is a mechanism that Australia could adopt through legislation without constitutional amendment.

Singapore

Singapore’s Research, Innovation and Enterprise Council (RIEC), chaired by the Prime Minister, achieves more comprehensive coordination by aligning the Economic Development Board, Enterprise Singapore, and the Agency for Science, Technology and Research (A*STAR) under five-year RIE plans.

The current RIE2030 plan directs S$37 billion toward research and innovation priorities.

This structure achieves the kind of integration that Australian policymakers aspire to, but operates in a city-state without subnational governments and offers limited structural guidance for a federation.

This article is the second in a series of three that explores innovation and industrial strategy for place-based ecosystems.