There is overwhelming evidence that innovation and knowledge intensity are key factors promoting growth in modern economies. Since the early 1990s, OECD analysts have focused increasingly on the growing knowledge intensity of modern economies and the strong links between knowledge intensity and economic growth. Innovation plays a critical role in the knowledge economy. There is growing awareness that innovation takes place in a system that involves information transfer and communication between a range of players that includes firms, regulatory agents, and research and training organisations. Innovation cannot be understood as something that occurs within isolated organisations. Instead, it must be seen as a process of interaction between a range of players. The institutions, norms, and patterns of behaviour that constitute the social environment of business are an important influence on innovation. This chapter seeks to develop an understanding of the social context of the innovation system and the performance of Australia's system of innovation in international perspective
