concentration of resources to create substantial local research (25 percent of private sector R&D in manufacturing), development, and engineering organizations. Several companies established an effective system of joint overseas and local shareholding, local management with access to international skill, and interaction between this and local innovation. On balance, however, this mode of operation characterized the minority of companies. Many overseas companies then, as now, found it more efficient to operate in the branch plant mode—what the Canadians, in a similar situation, have termed the “truncated industry” mode—an industry with production and marketing but no local research, development, and engineering capacity, and so a much reduced capacity to innovate.

At the same time, between 70 and 80 percent of the best scientists were concentrated in the public sector. Their orientation to the centers of international science and strong scientific ethos produced much outstanding work, but most of it was in agriculture and mining, the community interest, and general science. Even now, no more than about a quarter of CSIRO’s work is related to the new manufactures. The stronger the pure science ethos in the public sector became, the less able the private sector became to use its results, and the less interest it took. This process, in turn, reinforced the scientists’ commitment to pure science.

The appropriate balance between scientific push and market pull is a contentious issue and varies between industries and countries. Economists have often made the point that fixed-factor technology transfer can be inappropriate if labor and capital costs differ between countries. Australia suffered from an inappropriate fixed-factor science structure, a higher ratio of basic science to applied R&D, and a higher ratio of scientists to engineers than most other nations. With 0.4 percent of the world’s population, Australia has produced about 2 percent of the world’s science—it is the eighth-largest producer of scientific papers—but owns only 0.3 percent of the world’s intellectual property.

The belief in omnidirectional scientific progress remains strong. Only slowly is the recognition spreading that in small countries isolated scientific achievements do not transfer to local technology, but flow into the international pool of science. The stark contrast to this policy is, of course, the Japanese and South Korean concentration on application and engineering during the technology importation phase.

The problem of converting public-sector science into technology is encountered in most countries. In small countries, however, it is aggravated by the following considerations:

  • Scale: a fragmented, diverse, import replacement-based manufacturing industry;

  • The difficulty of competing with international skill, amortized on a world market basis;



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