Submission 6 Don Scott-Kemmis, Pacific Innovation Major Project Development Assessment Processes Commissioned study

Policy Options

Cluster Development Strategies

Australia has become a major international centre of mining-related innovation and the development of METS firms. It has the opportunity to extend and deepen those strengths to become the pre-eminent global centre of mining innovation. To achieve that and to maximise the benefits that could be achieved a coherent strategy it essential.

At the outset five key challenges need to be addressed, and any strategy must take these into account:

1. 
   The major suppliers of core mining and mineral processing equipment are large multinational firms based outside Australia;
   
2. 
   Many Australian METS firms are small niche-focused firms and capabilities vary widely in the METS sector;
   
3. 
   The Australian mining-related public sector knowledge infrastructure is widely dispersed across organisations and across States –and has not been characterised by strong collaboration;
   
4. 
   METS firms and significant State government agencies are similarly dispersed across States; and
   
5. 
   A major step change in mining technology is likely, one that will require new standards to ensure inter-operability, and that will provide pressure for capability upgrading throughout the METS sector.
   

The key recommendation from this survey and the related studies it that a Mining Innovation Cluster initiative should be developed. Such an initiative could and must aim to stimulate substantially higher levels of research, innovation, human resource development and collaboration. The following principles should guide the development of the initiative:

Complementarity
In the development of a cluster upgrading strategy (as in any industry or innovation development strategy) a key point is the complementarities between public and private investment in innovation support. It is clearly the case that strong public investment in basic geological knowledge and mapping provides a knowledge base which stimulates private investment in exploration. Similarly, a strong public investment in knowledge infrastructure (testing, education, research) can stimulate private investment in innovation and upgrading through providing key inputs:

1. 
   human resources that become part of the innovation capacity of firms;
   
2. 
   reliable information and knowledge that informs decision making – eg geological maps, performance potential of technologies- and shapes the direction of search for deposits or for paths of productivity improvement;
   
3. 
   problem solving and research services that contribute to improvement and innovation activities in firms;
   
4. 
   knowledge that becomes components of the knowledge base for an innovation by a firm; and
   
5. 
   ‘innovations’ that form the basis of a technology commercialised through licensing or new firm formation.
   

In general the importance of these types of input declines from 1 to 5, although many research organisations prefer to focus on the latter types. Hence, three critical issues for any cluster strategy are:

• 
  The level of public investment in knowledge infrastructure- what is an optimum balance and should that balance change over time?;
  
• 
  The governance of that investment – ie who decides on the priorities for investment?;
  
• 
  The absorptive capacity of local industry. – are local firms able to participate in innovation, use new knowledge and express a focused demand for research services?;
  
• 
  The level of linkages between local firms and the organisations in the knowledge infrastructure.
  

Engaging the major mining firms
Many major mining firms have become more concerned with maintaining their ‘licence to operate’ and hence wish to be seen as socially responsible¹⁴⁷. One way of doing so is through constructive contributions to local economic development, including supporting local industrial and innovation capability? Here there is the foundations of a shared interest between the major miners and industrial development and research organisations – at least in the case of innovation-active mining companies. The possibility of enabling some reduction in the MRRT for such investment should be explored as this could provide a major stimulus for behavioural change among mining firms.

Technology/Capability Roadmapping
Roadmapping should be used to identify areas of priority for technology and capability development. This approach can also facilitate the development of long term strategies based on shared perspectives and on complementarities between mining companies, METS firms and research organisations. Focusing on significant technological trajectories that lead to new capabilities is more likely to lead to high levels of spillover to other firms and to other sectors. As firms undertaking the risks of opening new paths of development and new markets do often create spillovers for other firms, leading to a high potential for market failure, these forms of new venture or corporate venturing and innovation warrant strong support.

Cluster Development Organisation and Council
A new lean organisation, jointly governed by the public and private sectors, through a Cluster Development Board or Council, would work to stimulate, coordinate, monitor and support a range of cluster development initiatives that improve the flow of information and strengthen interaction. However, the main cluster development activities are likely to be pursued through self-directed and managed working groups that, for example, would link mining firms and suppliers and all firms and research and education organisations – and which develop their own flexible governance arrangements. This organisation might also explore the scope for international collaboration. Hence, the Council and the Cluster organisation would be a foundation for the institutional innovation that will be essential to rise to a higher level of performance.

A Cluster Development Vision
A process that aims to develop a shared vision of future opportunities and broad strategies – such a shared vision become a form of institution that shapes perceptions of priorities and appropriate behaviours. The ‘vision’ would provide a long term perspective, but also set specific objectives for the shorter term. The ‘vision’ should have ambitious but realistic goals. It should also be inclusive and include human resource development and entrepreneurship.

A Cluster Development Strategy
A strategy that addresses, inter alia, improving the basic business environment to support entrepreneurship and investment. A strategy for strengthening research and education organisations and activities. To be effective it would be essential that most initiatives had a high level of private sector leadership, participation and funding.

Public Support
Significant public funding, which could come from MRRT funds, will be essential for the development of research infrastructure and longer term research and training programs. It will also be essential for ensuring the credibility of stakeholders and initiatives.

The internationalisation of mining companies and of METS firms has been a key enabler of continued capability upgrading, and firm growth. As continued internationalisation will support higher levels of innovation programs to support such international development might be a component of cluster development strategies.