Migration and the innovation agenda



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MIGRATION AND THE INNOVATION AGENDA


Roger Smith

Department of Innovation, Industry,
Science and Research


Working Paper 2011–02
April 2011
Economic Analysis Section
Industry Policy and Economic Analysis Branch
Industry and Small Business Policy Division
Department of Innovation, Industry, Science and Research
Canberra
The views expressed in this paper are those of the author and do not necessarily reflect those of the Department of Innovation, Industry, Science and Research or the Australian Government.

Abstract


Approximately 98 per cent of global innovation takes place overseas. One of the key means by which Australia taps into this global knowledge pool is through policies for the migration of the highly skilled into and out of the country.

There is a growing body of literature internationally on the links between migration and innovation. Several research studies undertaken in North America and Europe have found a positive correlation between immigration and innovation output in the domestic economy. Moreover, this link to innovation has been associated with the enrolment of overseas graduate students, temporary migration of highly skilled workers as well as with permanent migration. Diversity and complementarities between skill sets acquired in different countries are thought to be drivers of innovation. Further, migration policies that minimise migrants’ impediments to innovation—such as language and adjustments costs associated with unfamiliar institutional structures—and maximise the exploitation of the technological and/or organisational advantages that migrants possess over local workers are most likely to contribute to innovation.



Despite the fact that Australian literature and official policy on the links between migration and innovation is limited, migration policy settings in Australia are edging toward a human capital approach that is likely to already be producing gains for innovation. This is particularly the case in respect of the increasing educational and skill levels of recent migrants and changes to the points test and the skilled occupation list that give increasing importance to human capital.

Research into whether a statistically significant link exists between immigration and innovation has recently been undertaken in New Zealand. Australian research in this area would support the next steps in the innovation agenda toward facilitating greater international collaboration. In addition, more research is needed into how the ‘brain circulation’ and repatriation of Australians following acquisition of skills and collaborative networks abroad might facilitate innovation.

Contents


Abstract 2

Contents 3

Introduction 4

Theories around Migration and Innovation 4

International literature on immigration and innovation 4

Australian literature on immigration and innovation 8

Current Trends in Australian Migration—Contributing to Innovation 9

An increasingly large and diverse flow 9

An increasingly highly skilled and targeted program 9

Recognising the global market for skills through temporary migration 10

Business skills to drive innovation 11

Onshore pathways 11

Emigration and repatriation – the gap in migration policy 11

Conclusion 12

References 12



MIGRATION AND THE INNOVATION AGENDA


Roger Smith

Introduction


Human capital accumulation and movement is a key driver of innovation. Aside from the domestic education and training system, the primary means by which Australia addresses its human capital needs is through migration—encompassing both the official Migration and Humanitarian Programs and other population flows into and out of Australia that are recorded for the purposes of Net Overseas Migration (NOM).

Approximately 98 per cent of global innovation takes place overseas (Marsh & Edwards 2009, p.402). Therefore how Australia taps into this knowledge network is of paramount importance for our national innovation system. Along with foreign investment and institutional collaboration, migration is a key mechanism for the global transfer of knowledge and research and development (R&D) expertise. It is the means by which globalisation and skills come together as drivers of economic growth in dynamic economies.

Although there has been increasing emphasis over the last 15 years on skilled (as opposed to family stream) migration to meet Australia’s labour market and broader economic needs, there is surprisingly little reference in official government reports or Australian academic literature on how migration contributes to the national innovation system.

This paper examines some of the literature around the links between migration and the innovation agenda in Australia and overseas; current trends and issues in Australian skilled migration; and recommends some further steps in investigating how migration might contribute to Australia’s longer term innovation and productivity challenges.


Theories around Migration and Innovation

International literature on immigration and innovation


There is significant and growing academic interest internationally in how immigration might contribute to a country’s national innovation system. This is particularly the case in the United States with its well-documented history of how immigrant scientists helped it develop nuclear capability in the 1940s and subsequent superiority in rocket technology in the 1960s.

In a recent study, Hunt and Gauthier-Loiselle (2009) examined the specific contributions of migrants in the US to innovation over and above their purely economic benefits. Their inquiry stemmed from the fact that 26 per cent of US-based Nobel Prize recipients during the 1990-2000 period were immigrants—despite migrants only accounting for 12 per cent of the US population in 2000 (p.1). The research found that immigrant college graduates patented at approximately double the rate of native-born college graduates (pp.10-11), but this patenting advantage was explained by migrants disproportionately holding science and engineering degrees (p.20-21). The authors postulated that a one percentage point increase in the proportion of the population made up of migrants with college degrees would increase patents per capita by 6 per cent (p.13). But the benefits to patenting per capita could be as high as 9-18 per cent (p.5) due to positive spillovers to fellow US-born researchers, the attaining of a critical mass in specialised fields and contributions in complementary fields like management and entrepreneurship (p.1).

An earlier study found that fluctuations in the issue of H-1B visas used in the US for temporary skilled employment in ‘speciality occupations’1 significantly influenced the rate of patenting by ethnic Indians and Chinese in the US. However, unlike Hunt & Gauthier-Loiselle (2009), this research could only find weak ‘crowding-in’ effects on encouraging patenting by non-immigrants (Kerr & Lincoln 2008). Despite only making up 12 per cent of the working population, migrants made up as much as 47 per cent of those holding doctorates in science and engineering in the US in 2000. The authors state therefore that ‘the link between immigration policy and new innovation may appear tenuous at first, but immigrant scientists and engineers are central to US technology formation and commercialisation’ (Kerr & Lincoln 2008, p.1).

Chellaraj, Maskus & Mattoo (2004) found a similar positive externality associated with international student enrolments. They reported that increases in the enrolment of foreign graduate students in American universities led to statistically significant increases in future patenting2 and that this effect was even greater than the impact of skilled migrants on patenting (pp.21-22). Increases in enrolments of domestic graduate students did not have a similar impact on patenting (p.22), but this may be due to international students’ over-representation in science and engineering fields (p.28).

Stuen et al. (2010) found that foreign graduate students made a greater contribution to scientific publications and citations than their US-born counterparts with a 10 per cent reduction in the proportion of the foreign share of doctoral students leading to a 5-6 per cent decrease in science and engineering output by US universities.

Based on these studies, however, it seems that it is the composition of the migrant and international student intake; in particular, the large numbers of scientists and engineers, rather than the fact that they are foreign-born per se, that makes the greatest impact on the domestic innovation system. Although Kerr & Lincoln (2008) were unable to demonstrate strong ‘crowding-in’ effects of migrant innovators on US-born patenting, it does seem plausible that the very creation of a pool of overseas-born scientific innovators would have advantages for the creation of a wider and deeper scientific infrastructure within the national innovation system. The ‘crowding-out’ of locally-born innovators seems unlikely.

In this regard, it is also worth noting the concept of the ‘creative class’ as developed by Richard Florida (2002). The presence of large numbers of knowledge workers in creative fields in a given country or region may stimulate the migration there of similarly minded professionals thereby further driving innovation and economic growth through accumulations of human capital. Zucker and Darby (2007) argue that it is particularly the case that many leading scientists choose to migrate to countries that possess a critical mass of knowledge infrastructure, including the presence of like-minded innovators. This also applies to innovative clusters within domestic economies that act as magnets for creative talent regardless of whether they are locally-born, international graduate students, temporary skilled entrants or permanent skilled migrants.

Hart (2007) adds a further layer of analysis to how migration contributes to innovation. He transposes a national innovation system analysis of inputs and outputs to examining the migration of skilled workers. Migration, as an input to the national innovation system, may not just be a factor of the collective skills of the migration intake relative to the local workforce. Migrants are more than just human capital input or carriers of knowledge capital. Their contributions are mediated by the institutional, organisational, regulatory, cultural and policy context by which they settle in the receiving country. Hart postulates, for instance, that migrants who arrive as students are more attuned to existing national institutions, and are therefore, presumably more likely to contribute to innovation output (Hart 2007, p.49). Similarly, the settlement policies of the receiving country (eg. assimilation, melting pot, multiculturalism, ethnic enclaves, guest workers) may also influence output. Hart intimates that a settlement regime between the extremes of total assimilation and ethnic enclaves would produce optimal results for innovation due to the potential to blend the technological and/or cultural advantages of the sending and receiving country (pp.50-51).

The implication of Hart’s approach is that migration policies that minimise migrants’ impediments to innovation—such as language and adjustments costs associated with unfamiliar institutional structures—and maximise the exploitation of the technological and/or organisational advantages that migrants possess over local workers are most likely to contribute to innovation. This is a novel way of looking at the long-debated issue of migrants’ contribution to national prosperity within the context of Australian policy-making.

In respect of the relationship between cultural diversity and innovation, Niebuhr (2006) found that German regions with a more culturally diverse workforce, based on nationality, had higher levels of innovation activity. Following on from Hart’s approach, she suggests that institutional arrangements that augment the workforce participation rates and education levels of this diverse workforce are more likely to lead to optimal benefits for innovation (pp.13-14). Diversity of knowledge and capabilities through the divergent cultural background of workers is thought to facilitate greater R&D, productivity and innovation due to skill and production complementarities (pp.1-3).

Ozgen et al. (2010) examined 12 countries across Europe and made a similar finding that an increase in the foreign-born share of the population, an increase in the skill level of migrants and an increase in the region’s diversity were all associated with increased patenting activity. Stuen et al. (2010, p.29-32) also concluded that diversity of national origin among researchers (rather than being foreign per se) and the complementarities that this creates was the crucial ingredient to their finding about the contribution of increased numbers of foreign graduate students to innovation output in US universities. Florida (2002, pp.226-227) also picks up on the idea of diversity as a key factor in attracting ‘creative class’ workers3.

Finally, Partridge (2008) examines the link between immigration and innovation in Canada, a country whose migration program has many similarities to Australia. She positions the relationship in the context of endogenous growth theory where innovation and technological change are central to the generation of economic growth (Romer 1990). Consistent with the American and European research, Partridge found that a 10 per cent increase in skilled migrants with language proficiency in a given Canadian province led to a 7.2 to 7.3 per cent increase in patent flow in that province (Partridge 2008, p.128). Partridge also found that increased innovation activity resulting from skilled migration led to increased trade and that skilled migration therefore had a very important role to play in provincial innovation and competiveness strategies (pp.153-155). As with Niebuhr (2006), complementary skill sets with domestic workers were also believed to have an impact on innovation in the Canadian analysis (p.105).

It should be noted, however, that there is one as yet unpublished study in this series that is an outlier on the link between immigration and innovation. Maré et al. (2010) found that in New Zealand the introduction of new goods and services is positively correlated with aspects of workforce composition such as the proportion of migrants and the highly skilled, but once regression measures were used to control for other factors like firm size and R&D expenditure, there was no statistically significant relationship between a higher proportion of migrants in the local workforce and innovation outcomes (p.26). The authors do not, however, discount the possibility that these findings, at variance with those in North America and Europe, are due to the particular characteristics of New Zealand, such as its smaller and less dense population and the importance of land-based innovation outside urban areas where migrants tend not to congregate (pp.26-27).

The policy implications of skilled migration for innovation, trade and competiveness identified by Partridge (2008) have found particular favour in the articulated national policy position of Ireland­—a country associated more with emigration than immigration. In 2006, the Irish National Economic and Social Council (NESC) noted the profound effect migration can have by ‘(stimulating) innovation through skills, creativity and diversity’. In addition, migrants taking lower skill jobs can free up workers for higher skilled work (NESC 2006, p.5). The NESC postulates that migration may mirror the effects of free trade by opening the domestic labour market to foreign competition (p.6). This has implications for the development of new products and processes.

The above discussion of the international literature on the positive relationship between migration and innovation across the Unites States, Canada, Germany, Ireland, and Europe more generally, supports a more systematic identification of this issue within an innovation policy framework. Moreover, increased rates of innovation have been identified with permanent and temporary skilled migration as well as with the enrolment of international graduate students.

The academic literature also identifies a number of important issues relevant to how human capital movement might stimulate innovation and R&D activity. Among these issues are: (a) the concept of ‘crowding-out’ or ‘crowding-in’ of domestic innovation (Hunt & Gauthier-Loiselle 2009 and Kerr & Lincoln 2008); (b) scale effects of immigration to build scientific infrastructure; (c) the role of the ‘creative class’ of knowledge workers driving a modern economy (Florida 2002); (d) entrepreneurship; (e) the crucial role of diversity (Niebuhr 2006; Ozgen et al. 2010; Stuen et al. 2010); (f) the impact of trade, networks and collaboration (Partridge 2008); (g) the demand and supply effects of foreign direct investment on skilled workers and the internationalisation of innovation (Narula & Zanfei 2005); (h) complementarities (Niebuhr 2006; Ozgen et al. 2010; Stuen et al. 2010; Partridge 2008); and finally, (i) Hart’s (2007) important analysis of immigration within a national systems of innovation framework. Each of these would be worthy of further discussion.

In essence, with the exception of the New Zealand study (Maré et al. 2010), the international academic literature supports skilled immigration and diversity as contributors to national innovation systems, but the degree of the contribution may be tempered by the skill composition of the intake and the ability of domestic structures to maximise the output of migrants through encouraging their participation in the workforce, exploiting complementarities with local workers and facilitating their ability to communicate their ideas effectively through language proficiency.

Australian literature on immigration and innovation


The Treasury Red Book (Australian Treasury 2010) states that ‘a skilled workforce, along with openness to trade and investment and competitive markets, (are) the key requirement to drive innovation and the adoption of new technologies’ (p.12). Further, it states that ‘migration can provide Australia with the opportunity for both economic and cultural growth’ (p.23). The Department of Immigration and Citizenship (DIAC) also noted in a 2009 discussion paper that ‘migrants contribute disproportionately to innovation and entrepreneurship and to the opening up of new trade markets’ (DIAC 2009a, p.18).

The Cutler report into Australia’s national innovation system, Venturous Australia (2008) identifies high quality human capital as being central to driving innovation (p.45). Cutler also specifically highlights the role of skilled migration in tapping into global talent pools and international knowledge networks (pp.59-60). Recommendation 5.2 states that ‘innovation policy should be aligned with immigration policies’ (p.60).

Cutler recommends that ‘human capital’ should carry at least as much weight in assessing an applicant’s suitability to migrate to Australia as ‘economic capital’ (2008, p.60). In addition, Cutler made a recommendation for the establishment of an International Innovation Advisory Panel to tap into the knowledge networks of overseas Australians in order to internationalise the national innovation system (p.153-154, Recommendation 12.1).

The Productivity Commission’s report into the economic impact of migration (2006) makes some limited reference to the link to productivity through innovation. Under the heading Trade and technology transfer, it recognises that migrants can increase exports through their knowledge of international markets, facilitate the adoption of new technologies and impart new skills and more productive work practices on the existing workforce—all of which have a role in boosting productivity (pp.45-46).

The Victorian Government recognised the interaction between immigration and the sourcing of global talent to meet its innovation needs in Global Skills for Victoria: Victoria’s Skilled Migration Strategy 2008-11 (Victorian Government 2007). According to then Premier John Brumby, by increasing the state’s share of skilled migrants, this strategy is designed to ‘help Victorian businesses and industries attract the talented and highly skilled workers they need to move towards an increasingly innovation-based knowledge economy’ (2007, p.2).

By contrast, the New South Wales Statement on Innovation (NSW 2006) does not mention migration despite its first stated goal of improving human capital. However, the paper on which it was based does refer to the need to attract more elite students from overseas to New South Wales universities in order to facilitate innovation (West 2006, p.21).

The sudden international research interest in exploring the links between immigration and innovation is unfortunately not reflected in the Australian academic literature. Chapman and Withers (2002) adopt a human capital accumulation approach to their examination of immigration in which they suggest that immigration enhances innovation by introducing fresh perspectives and ways of doing things as well as promoting trade and global integration (p.22). However, in contrast to the international research on the topic, they make no attempt to quantify or systematically analyse the benefits (or otherwise) of immigration to innovation.

Current Trends in Australian Migration—Contributing to Innovation


Despite the general lack of reference to immigration as a contributor in Australia’s national system of innovation, the Australian immigration program does contain many adaptive and competitive features that make it well-placed to source the global talent needed to drive innovation and productivity growth4. There are a number of important recent trends in Australian migration policy and settings that warrant attention with respect to their potential to impact on innovation.

An increasingly large and diverse flow


Australia’s immigration intake, whether measured in terms of the official Migration Program or Net Overseas Migration, has increased rapidly since the later years of the Howard Government. As recently as 1993-94, the Migration Program was only accommodating approximately 60,000 new migrants a year (Productivity Commission 2006, p.14). But last financial year (2009-10), it reached 168,623 (DIAC 2010a)—only slightly below the record level of 171,318 reached in 2008-09 (DIAC 2009b). The 2009-10 Program comprised 107,868 places in the skill stream, 60,254 places in the family stream and 501 special eligibility places (DIAC 2010a).

More meaningful still is Net Overseas Migration (NOM) which is finding increasing favour for use by policy-makers and is more relevant in determining the impact of migration on the labour market and innovation in the Australian economy. It includes all persons whose total stay in Australia covered 12 months out of any 16 month period—thereby also capturing such diverse groups as international students, temporary skilled workers (ie. 457 visa-holders) and working holiday-makers—in addition to the official Migration and Humanitarian Programs. It also includes the net flow of Australian and New Zealand residents into and out of Australia. NOM peaked at a massive 320,300 in the year ending March 2009, but has since declined to 241,400 for the year ending March 2010 (DIAC 2010b, p3).


An increasingly highly skilled and targeted program


Migration is likely to have optimal economic and productivity impact, as well as optimal potential to impact innovation, where it comprises higher quality human capital, is well-targeted to meet actual demand within the economy (eg employer- and regionally-matched), and offsets the skills lost through emigration.

The migration program has been edging toward a human capital approach over the last 15 years. As recently as 1995-96, only about 30 per cent of the program comprised skilled migrants as opposed to family stream migrants (Productivity Commission 2006, p.216). But last financial year, the skilled component reached 64 per cent of which the top three occupations were accountants, computing professionals and registered nurses (DIAC 2010a, p.3). The skill component will increase further to 67 per cent in 2010-11 (Evans 2010a).

Recent migrants to Australia have a much higher level of educational qualifications than the general population. For instance, based on a survey of some 4,000 migrants who arrived (for offshore) or were granted permanent residence visas (for onshore) in 2009 (DIAC 2010c), 69 per cent of the skilled stream sample held qualifications at the level of bachelor degree or above—compared to just 23 per cent of the general Australian population of working age. In fact, an extraordinary 30 per cent of the skilled stream sample held post-graduate qualifications (p.3). Over half of primary applicant skill stream migrants worked managers, administrators or professionals (p.5). They also had a much higher participation rate at 95 per cent (compared to 65 per cent for the general population) and earned more at a median $60,000 per annum (compared to $56,000 for the general population) (p.6). The survey also found that only 6 per cent of skilled migrants did not speak English well (p.3).

During 2010, the shift toward migration skills that augment the innovation agenda has been ramped up even further. Firstly, in July 2010, a new Skilled Occupation List (SOL), developed by Skills Australia, was introduced for application to independent skilled migrants. Rather than focusing on filling short term skills shortages, the new SOL is designed to provide Australia with the higher value skills needed to drive productivity in the medium to longer term (DIAC 2009a; Evans 2010b). Although about 30 of the 181 occupations on the list are vocational trades, lower skilled occupations in skills shortage like cooks and hairstylists are not included (DIAC 2010d). Short term labour market needs will be met instead through employer-sponsored temporary and permanent migration.

Secondly, on 11 November 2010, Immigration Minister Chris Bowen released a new points test for general skilled migration to apply from July 2011. Once again, the emphasis is clearly geared more toward a human capital approach that has the potential to lift innovation performance. In particular, greater weighing in the points test will now be given to higher level university qualifications, including those awarded overseas, more extensive skilled work experience (including overseas work experience), and to higher proficiency in English up to a superior IELTS (International English Language Testing System) Level 8 (Bowen 2010; DIAC 2010e; Speldewinde 2010). These new standards will augment the ability of migrants to contribute new ideas and knowledge to the Australian economy and help develop a research workforce. The recognition of overseas university qualifications is particularly significant in that regard5.

Recognising the global market for skills through temporary migration


The Business Long Stay (subclass 457) visa was introduced in 1996 and was designed to allow in skilled specialists to meet skills shortages as well as to allow Australian businesses to access new ideas, skills and technology, improve productivity and enhance Australia’s competiveness in international markets (Hugo 2001, p.302). It therefore clearly fulfils a role in the national innovation system, especially given that the positions filled are supposed to offset existing gaps in the skills and human capital of the Australian workforce.

Temporary skilled migration under the 457 scheme is approximately the same size as permanent skilled migration. It peaked at 110,000 in 2007-8 (DIAC 2008)6, but has since declined somewhat due to the effects of the global financial crisis and tighter rules introduced in 2009. The skill level is similarly high with over 90 per cent of grants to primary applicants for the 2009-10 financial year to 31 May 2010 going to managers, administrators, professional or associate professionals (DIAC 2010f, p.8). Reflecting the higher skill level, the average base salary was $86,500 and the average total remuneration package was as high as $99,200 (p.5-6).


Business skills to drive innovation


The Business Skills visa program was introduced in 2003 and has a number of objectives designed to augment innovation. For instance, it aims to ‘contribute to the growth of the Australian economy by, inter alia, introducing new or improved technology’ (DIAC 2010g). There were 6,789 business skills visa grants in 2009-10 (DIAC 2010a, p.11). The program is currently under review.

Onshore pathways


From 1999, the government started to encourage former overseas students to apply for permanent migration. This change in policy was particularly designed to meet the perceived shortfall in IT workers at the time (Hugo 2001, p.312-313). From 2001, overseas students were permitted to apply onshore for permanent residence without returning to their home countries, and by 2005-06, nearly half of the skilled independent category came from these onshore former student applicants (Birrell & Healy 2008, p.2). In addition to students, temporary skilled migrants on 457 visas also frequently use the onshore pathway to permanent residence. There is increasing interaction between temporary and permanent migration.

As noted by Hart (2007, p.49), migrants who apply onshore might be expected to have greater existing affinity with the local culture and peculiarities of language making them more adept at contributing to innovation.


Emigration and repatriation – the gap in migration policy


One of the key migration issues of relevance to the innovation agenda is the increasing circulation of human capital through emigration and subsequent return migration by Australians who repatriate with new skills and global ties.

The Productivity Commission noted that emigrants from Australia tend to be highly educated and of prime working age (2006, p.70). According to Department of Immigration and Citizenship figures, permanent departures from Australia reached a record level of 81,000 in 2008-09, about half of whom were Australian-born (DIAC 2009c). This is more than double the number of just a decade ago. Obviously, however, these numbers are far less than permanent arrivals and it is interesting to note that permanent departures as a percentage of permanent arrivals unsurprisingly peaked in 2001-02 at 54 per cent when the Australian dollar was at its lowest.

The Productivity Commission found that there is a net inflow rather than a net outflow of highly skilled, and that there is, in effect, a ‘brain circulation’ rather than a ‘brain drain’ (2006, p.71). However, this brain circulation raises important policy questions for the innovation agenda that have barely been touched. There is very limited data on this diaspora of almost one million Australians. Moreover, there is almost no data on the so-called ‘repatriates’; that is, Australian citizens who return from living abroad. There is no specific policy to tap into the knowledge base that these highly skilled Australians gained whilst overseas or to assist them to readjust to the Australian workforce and innovation system. A starting point would be to conduct more quantitative and qualitative research on the human capital of this large and growing talent pool entering Australia each year.

This omission is in contrast to the position of many other countries. Shachar (2006, p.167-168) notes policies in countries as diverse as Israel, Ireland, China, India, Taiwan and South Korea to attract return migration and tap into the knowledge networks of their expatriate workers, especially scientists and those working in high-tech industries. Barrett (2001) found, that in the case of Ireland, returning expatriates have a positive impact on GDP, and that, at least in respect of men, earn more than those who never left. This seems to support the notion that, in general, residents who return to their home country after acquiring knowledge, skills and networks abroad contribute more to innovation and productivity than those who never left. Given the existence of this brain circulation in Australia, more research into the phenomenon is needed.


Conclusion


Until now, the benefits of migration have largely been seen in terms of the three ‘P’s of population, participation and productivity as well as the traditional focus on filling skills shortages. However, a case is being built internationally that migration and the international movement of the highly skilled also contributes to the national innovation system.

Although the official literature in Australia (with the exception of Cutler) generally overlooks the impact of migration on the innovation agenda, Australia’s increasingly skilled and targeted migration program, together with the knowledge and skills of returning expatriates, is almost certainly already contributing significant innovation and productivity gains.

There is therefore a clear need for Australian research in this area. In particular, research is required to examine whether the Australian context supports the correlation between increased immigration and diversity on the one hand and innovation output on the other that has been found to exist in North America and Europe. An alternative theory is that the immigrant-led innovation patterns in those highly industrialised economies with their denser markets and deeper innovation and scientific infrastructure are distinctive as the recent New Zealand study seems to suggest.

The recent appreciation of the Australian dollar coupled with changes to the migration regime during 2010 to attract the best and brightest through a new points test and skilled occupation list further highlight the need for more in-depth research and analysis of the competiveness advantages that Australia possesses vis-à-vis other countries in attracting overseas talent and how this can contribute to the national innovation system.


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1 Science, engineering and computer-related occupations account for about 60 per cent of successful applications for this visa type. In addition, Indians and Chinese made up 40 per cent and 10 per cent respectively of H1-B visa recipients in 2000-04. These visas can be issued for three years with renewal for another three years possible. The annual cap on H-1B visas was as high as 195,000 in the early 2000s (Kerr & Lincoln 2008, p.10-12)

2 A 10 percent increase in international graduate students would raise patent applications by 3.3 percent, university patent grants by 6.0 percent and non-university patent grants by 4.0 percent (Chellaraj, Maskus & Mattoo 2004)

3 He states that ‘a great city has two hallmarks: tolerance for strangers and intolerance for mediocrity. These are precisely the qualities that appeal to members of the creative class—and they also happen to be qualities conducive to innovation, risk-taking, and the formation of new businesses’ (2002, p.227).

4 An American commentator Shachar (2006, p.177), for instance, observes that ‘Australia, in short, has developed a carefully crafted selection system to bolster the national policy of seeking skilled migration as a mechanism for human capital accretion, innovation, and the fuelling of productivity and economic growth’.

5 For instance, a PhD awarded at a prestigious overseas university is currently not recognised in the points system, but from July 2011 would give the applicant 20 points toward an expected pass mark of 65 on top of points for age, work experience and English proficiency (DIAC 2010e)

6 This was more than the total of skilled permanent migration in that year.





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