Innovation has been the main driver of economic growth as it plays an increasingly central role in firm performance. Incentivising innovation by governments is essential to stimulate investment by companies, covering part of their R & D costs, and minimising their financial risks. There is, however, limited understanding of how innovation incentives are perceived by the companies. This paper examines the perceptions of technology firms, and the views of key actors about public incentive schemes for innovation in Australia and Brazil. The study finds that: (a) Direct incentives are perceived as critical for increasing innovation capabilities of firms; (b) Where tax incentive and infrastructure development schemes are the most preferred incentive programs among the firms; (c) However, despite the former two findings, effectiveness of existing incentive programs has been marginal in fostering innovation significantly in the studied countries. These findings imply that Australian and Brazilian governments should further focus on the design, promotion, and delivery methods of the innovation support mechanisms.

Introduction

Today’s most advanced economies are fundamentally knowledgebased (Baum et al., 2009; Carrillo et al., 2014; Dunning, 2000). As Burton (1999) indicates, under the knowledge capitalism the gap between rich and poor countries is rapidly expanding; where knowledgeintensity is also leading to a growing gap within our societies. Promoting innovation through research and development (R & D) is seen as a useful method to narrow this gap (Byun et al., 2017; Yun et al., 2016). Many scholars see innovation as the main driver to establish a competitive edge and generate economic growth (Cooke and Leydesdorff, 2006; Pancholi et al., 2014, 2015). The growing dependency of wealth creation on intangibles is making the global economy more fluid and volatile, and the capacity to access and combine new and existing knowledge effectively for innovation has become highly important for the competitiveness of firms, cities/regions, and nations (Huggins, 2011; Lonnqvist et al., 2014; Wolfe and Bramwell, 2008). Innovation provides a company with a relative advantage over the competition (Betz, 2003). Beyond an advantage, particularly in the global knowledge economy, for many firms innovation is the key to survival (Doran and Ryan, 2012). Since innovation leads to more innovation, firms that invest in R & D and build technological and organisational capabilities are likely to induce further innovation (Baumol, 2002). However, stated by Guan & Yam (2015, p.273), “investors are usually anxious to obtain quick and safe returns on their investments, and the high R & D costs and risks involved in research keep many investors away”. Therefore, government innovation support mechanisms—such as government regulations, grants, subsidies or other financial incentives—are critical for many firms to invest in innovation generating activities (Leiblein and Madsen, 2009; Scotchmer, 2004). The governments of OECD member countries fund about 30% of R & D expenditure by companies in their countries (Thomson and Jensen, 2013).