Diversity and innovation in Australia

Chapter 7 Diversity and innovation in Australian

At the end of 2022, Australia’s unemployment rate was at its lowest level in about 50 years. Australia’s labour participation rate was at a record high, driven largely by women and young people entering the workforce. Net arrivals from overseas increased, helping meet the strong demand for labour and skills1. New research by IP Australia highlights that maintaining these labour market gains is important for long-run productivity because diversity underpins innovation in Australian businesses.

The research uses linked employer-employee data from the ABS. The data provides information on nearly 14.5 million individuals over 2010 to 2019, linked to employer data2, providing a unique insight into the demographic make-up of Australia’s innovation sector and the role of diversity in innovation. We focus on the top management teams of businesses, including start-ups, and their STEM workforce.

Key findings

  • International patent data shows Australia has a relatively high rate of migrant inventors. However, the representation of women inventors on patents is below the world average.
  • Compared to businesses without IP, those with registered IP have a notably larger share of women and migrants in their STEM workforce.
  • A migration background increases the likelihood that when a person transitions jobs, they will transition into a patent-holding business.
  • Among firms with a STEM workforce, the representation of women in leadership is associated with lower research intensity but greater efficiency in converting R&D investment into IP.
  • Cultural and ethnic diversity in leadership is associated with increased research intensity.

Diversity in the Australian inventor pool

Diversity spurs innovation: it increases the breadth and depth of innovative activity in the economy. When organisations embrace cultural and gender diversity, they tend to enjoy numerous benefits. For example, a business can gain greater marketplace understanding3 and diversity can enhance creativity and problem-solving ability4. Despite these benefits, there remain persistent and well-documented diversity and gender gaps in science output, including patents5.

Australia is traditionally a large receiving country for migrating inventors

According to one recent study, a new high-growth start-up is born for every 29–55 inventors that migrate into a region6. At a regional level, medium- and high-skilled migration is positively linked to patent, trade mark and design production7. Greater ethnic diversity within the inventor community, in particular, tends to raise its patenting rates8.

Several factors help explain the link between inward migration and IP output. Migration facilitates greater cultural diversity, which enables new perspectives and hybrid practices to emerge. Foreign-born inventors who remain connected with their countries of origin may have more extensive networks to draw on for information, resources and investments9. Through Australia’s skilled migration program, migrants are targeted based on their education and skill level and may bring competencies especially suited to innovation10. Indeed, Australia’s Temporary Graduate Visa program, targeted at skilled talent, has been linked to patent activity11.

International patent data shows Australia has traditionally been a major receiving country for migrant inventors12. Using more recent data, IP Australia’s study found that when a person transitions jobs in Australia, a migrant background increases the likelihood that they will transition into a patent-holding business. This result highlights the reliance of Australia’s innovation sector on people of diverse backgrounds and its role in attracting talent into Australia.

Australia has a low rate of women inventorship compared to the international average

Most patent applications filed globally by Australian residents are filed via the PCT. Based on data from WIPO, 26% of PCT applications filed by Australians worldwide name at least one woman inventor. Women account for 15% of unique inventors named on PCT applications from Australia. This represents a participation rate 2 percentage points lower than the international average (see Figure 7.1).

Under-representation of women on patents can be attributed to a variety of factors. Representation of women on patents varies across technology fields. In 2022, women inventors were named on around half of PCT applications in Biotechnology (61%), Organic fine chemistry (59%), Pharmaceuticals (59%), Analysis of biological materials (56%) and Food chemistry (56%). Consistent with this, women are more highly represented in the STEM workforce of life science businesses than in the broader STEM workforce.

Figure 7.1 Representation of global patents filed by women inventors via the PCT in 2022

Source: WIPO IP Statistics Database (2023).

Other factors that may contribute to the gender patent gap include the nature of women’s research13, under-crediting of women in science output14, and disparity in research funding15. Women entrepreneurs, for example, reportedly receive less funding and on less favourable terms than men when it comes to follow-on R&D investment16.

Entry by women into the Australian inventor pool

Evidence shows there are no systematic productivity differences between women and men in creative and innovative endeavours17. However, gender-diverse teams tend to produce more radical innovations and higher-impact scientific ideas18. Data on Australians’ patenting activity suggests that growth in women’s participation is occurring in mixed-gender teams. For example, in the three years to 2022, the share of PCT applications from Australia with at least one woman inventor increased by three percentage points to 26% (see Figure 7.2).

At the same time, the share of unique women inventors on Australian PCT applications remained relatively constant. In 2022, women constituted 14.6% of Australian inventors, the same level as in 2021.

Figure 7.2 Rate of women’s participation in patents over time

Source: WIPO IP Statistics Database (2023).

An alternative reading of these trends is that women inventors are filing patents more intensively without significant growth in the women inventor pool. This theory could at least partly explain the persistent gender patent gap. Research from the US shows that the gender gap is greatest in the first contact of inventors with the patent system. Among previous patent inventors, there is only a 6% gap in the number of women and men inventors who patent again within five years19.

Demographics of Australia’s IP sector

Representation in top management and STEM roles

A key driver of firm innovation is the composition of a firm’s leadership and R&D team. Based on this study’s analysis, on average, 37% of leaders in the top management teams and 18% of STEM workers in Australian businesses were women in 2019.

In contrast, individuals with a migrant background (born overseas) are more strongly represented in STEM (41.4% of the STEM workers in Australian businesses) than in their top management teams (33.8% of leadership roles). These figures illustrate a strong reliance of Australian innovators on skilled migrant labour.

Australia’s below-average participation of women in patents reflects the low representation of women in the STEM workforce. Australia has been more successful in increasing the participation of women in leadership. Australia is one of only three countries worldwide to have achieved more than 30% women board membership in its top listed companies without legislated quotas20.

There is a fair mix of international representation in the migrant STEM workforce (see Figure 7.3). No single region accounts for more than 25% of STEM workers, and most regions have at least 5% representation. This mix expands Australia’s networks for knowledge exchange, which is vital for technological innovation.

Workers of Central Asian origin accounted for the largest share of Australia’s overseas-born STEM employees in 2019. Central Asian STEM workers also saw the greatest growth since 2015. In comparison, the greatest decline in representation has been in migrants from North West Europe.

Figure 7.3 Source of Australian STEM workers born overseas

Source: MADIP, ABS, 2022; BLADE, ABS, 2022.

Gender diversity and migrant participation are greater in businesses that hold registered IP

Comparing businesses with registered IP rights (patents, trade marks, designs or PBRs) to those without IP, diversity in top management teams is consistent. However, in their STEM workforce, IP-holding businesses have a notably greater share of women and a greater share of migrants (see Figure 7.4).

Figure 7.4 Diversity in the workforce of Australian firms with and without IP rights

Source: MADIP, ABS, 2022; BLADE, ABS, 2022.

Start-ups that hold IP benefit from greater migrant participation in STEM

Entrepreneurs take new ideas or innovations and convert them into business opportunities, often resulting in the creation of new companies. Studies have found that migrants engage in more entrepreneurship than the average citizen21. This may reflect a higher risk tolerance, which is crucial in starting up a new endeavour, as the decision to emigrate itself is risky. Focusing on Australian start-ups (businesses less than seven years old), migrant representation in management is greater in start-ups than in the larger business population. However, migrants appear to be less well-represented in the management of IP-holding start-ups. This may reflect large concentrations of migrant entrepreneurship outside research-intensive sectors. Compared to the larger business population, those start-ups that do hold IP have a marginally more diverse STEM workforce (see Figure 7.5).

Figure 7.5 Diversity in the workforce of start-up businesses with and without IP

Diversity and firm innovation

Women’s participation is linked to greater productivity in innovation – especially for R&D businesses and start-ups

Greater gender diversity in leadership has been associated with higher rates of patenting and greater R&D productivity (future sales from R&D)22. Gender diversity within the R&D team is also positively associated with more radical (new to market) innovation23.

IP Australia’s study modelled the relationship between women’s representation in Australian businesses and their innovation investments and performance. The analysis compared businesses of similar size operating within the same industry.

Women’s representation in leadership and STEM was associated with lower R&D intensity. These results differ from previous studies that used data from other countries24. Nevertheless, among R&D businesses, those with a greater share of women in leadership were more efficient in converting R&D investment into patents25. For every 10 percentage point increase in the women’s share of leadership, efficiency in converting R&D expenditure into patents increased by 0.1%. This result is consistent with international research on corporate innovation and female board representation26.

In addition, among R&D businesses, those with stronger women representation in leadership held more IP on average, controlling for other factors27. The representation of women in STEM roles also predicted incrementally higher IP output by the business.

Women’s participation in the management team of start-ups was associated with increased overall IP holdings. Separately, it predicted increased holdings of trade marks, designs and PBRs. The effect was incremental, at around 1% or less for every 10 percentage point increase in women participation.

Improving the flow of capital to female-led start-ups

Anne-Marie Birkill, Co-founder, Venture Partner and Director, One Ventures

In 2022, 23% of Australian venture capital deals included at least one female founder, a record for the sector. However, only 10% of total capital was committed to these deals28, which is significantly below the US (16.3%)29 and Europe (11.8%)30. Worryingly, globally less than 3% of all venture capital is committed to female-lead ventures and this metric has remained relatively static for decades, according to a variety of sources31.

Given WIPO data confirms that on average 17% of global PCT applications are made by female inventors, it is possible that there is a disconnect between female inventorship and translation of those research outcomes, to the extent that venture capital is required to facilitate that translation.

More work needs to be done to determine whether the perceived difficulty of obtaining funding to commercialise IP contributes to the gender gap in patenting, but there is no doubt that we must do more to improve the flow of capital to female-led start-ups. The Australian venture capital community is working collaboratively to facilitate change with a focus on ensuring equitable access to capital for female founders and increasing the number of female decision makers in venture capital firms32.

Year-on-year, diversity is improving in the ecosystem and more females are building successful careers as investors and founders. 

Participation of migrants in leadership is linked to greater research intensity

Ethnic and cultural diversity has been associated with more radical innovation that can translate to superior returns for companies33. Studies show that ideas produced by ethnically diverse groups tend to be considered higher quality than those produced by homogenous groups34.

IP Australia’s study found that migrant participation in leadership predicts an incremental increase in research intensity. In addition, businesses with strong migrant participation perform on par with other businesses in generating IP from R&D and income from IP. The study found that migrant participation in STEM is associated with an incrementally lower level of patent output. The result could be an artefact of migrant leaders concentrating in less research-intensive industries or point to access barriers.

Diversity underpins innovation in Australia

Overall, the study suggests that gender and cultural diversity underpins innovation in Australia. Foreign-born workers comprise a significant component of Australia’s STEM workforce, and their participation in leadership increases the research intensity of Australian businesses. While research investment is lower in businesses with higher women participation, they are more productive in converting R&D into patents.

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  2. While many people may hold multiple jobs over a year, this research focuses on the outcomes and transitions in their primary job, defined as a job in which they earn at least half of their total annual earnings.
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  25. R&D businesses are identified as those that employ at least one worker in a STEM role.
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  27. We estimate that with every 10 percentage point increase in the women share of managers, total IP holdings increase by an estimated 0.3%. This effect is largely driven by an increase in trade mark holdings.
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  30. European Female Founders DashboardPitchBook (2023).
  31. US Female Founders Dashboard. Reported for the US at 2.1% in PitchBook (2023). Funding to the Female Founders. Reported at 3% in Crunchbase (2020).
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