The MIC Program was the first systematic attempt of the Commonwealth Government to intervene in the supply of venture capital to emerging technology-based industry. The program has now been terminated, and this paper evaluates its political, commercial and industrial development successes and failures. This evaluation has implications for the implementation of government programs assisting in the development of new technology industries.
L. Gunn, ‘Why is implementation so difficult?’, Management Services in Government, 33, November, 1978.
Hood C.. 1976. . The Limits of Administration . , London : : Wiley. .
Elmore R.. 1978. . ‘Organizational models of social program implementation’. . Public Policy . , Vol. 26((2))
Pressman J. and Wildavsky A.. 1973. . Implementation: How Great Expectations in Washington are Dashed in Oakland . , Berkeley : : University of California Press. .
Warhurst J.. 1986. . “‘Industry assistance issues: state and federal governments’. ”. In The Politics of Development in Australia . , Edited by: Head B.. Sydney : : Allen and Unwin. .
Department of Industry, Technology and Commerce, MIC Program Extended to 1991, Press Release, 29 May 1988.
Department of Science and Technology, The Management and Investment Companies Program, Canberra Publishing Co., Canberra, 1984, p. 1.
Bureau of Industry Economics (BIE), Review of Venture Capital in Australia and the MIC Program: Program Evaluation Report 4, Australian Government Publishing Service (AGPS), Canberra, 1987, p. 24.
Emy H.. 1976. . Public Policy: Problems and Paradoxes . , p. 29 South Melbourne : : Macmillan. .
For example, A. Raiche, ‘CSIRO — who has the long term view’, Search, 21, 1, 1990 and D. Widdup, ‘Politics is people’, Search, 21, 1, 1990. This whole edition of Search focuses on S&T policy and Australia's political parties.
Although the scientific community has some interest in developing these new industries, they have been mainly concerned with securing resources of R&D. See, N. Ryan, ‘Financing innovation: a federal/state perspective’, in Australian Science and Technology Council (ASTEC) (ed.), Science, Technology and Australian Federalism: Getting the Best from the System, ASTEC, Canberra, 1991.
For example, see R. Rothwell and W. Zegveld, Reindustrialisation and Technology, Longman, Harlow, 1985, ch. 3.
The industry policy text commonly associated with this view is P. Hall, Governing the Economy, Polity Press, Cambridge, 1986.
MICLB, Annual Report 1989-90, AGPS, Canberra, 1990, p. 3.
Markets are not homogeneous, and differ widely in structure and requirements.
Porter M.. 1985. . Competitive Advantage: Creating and Sustaining Superior Performance . , p. 270 New York : : Free Press. .
Brander J.. 1987. . “‘Rationales for strategic trade and industrial policy’. ”. In Strategic Trade Policy and the New International Economics . , Edited by: Krugman P.. p. 15 Massachusetts : : Institute of Technology Press. .
P. Krugman, ‘Introduction: new thinking about trade policy’, in P. Krugman (ed.), 1987, op. cit.
F. Chesnais, ‘Science, technology and competitiveness’, STI Review, 1, OECD, Paris, 1986, p. 111.
H. Ergas, Why Do Some Countries Innovate More Then Others?, Centre for European Economic Studies, Brussels, 1984.
Bygrave W.. 1988. . ‘The structure of the investment networks of venture capital firms’. . Journal of Business Venturing . , Vol. 3((2)): 137
Sandberg W. and Hoffer C.. 1987. . ‘Improving new venture performance: the role of strategy, industry structure, and the entrepreneur’. . Journal of Business Venturing . , Vol. 2:
M. Fraser, We're Not Waiting For the World: Policy Speech, authorised by T. Eggleton, 15 February 1983, p. 8; and Australian Labor Party, Platform Resolutions and Rules 1988, R. Hogg, Barton, 1988, p. 150.
Espie Committee — Australian Academy of Technological Sciences, Developing High Technology Enterprises for Australia, Australian Academy of Technological Sciences, Parkville, 1983.
Ryan N.. 1989. . ‘The MIC program and the politics of science policy’. . Prometheus . , Vol. 7((1)) June;
P. Keating, Taxation Deductions for Capital Prescribed to Licensed Management and Investment Companies, Press Release No. 71, 16 May 1984; and P. Keating, Venture Capital Market: Clawback Provisions to Apply to Tax Incentives for High Risk/High Technology Investment, Press Release No. 9, 23 January 1984.
Parliamentary Debates (Hansard), The House of Representatives, AGPS, Canberra, 7 June 1984.
Income Tax ruling 2271.
CCH Australia Ltd, Australian Income Tax Rulings, CCH Australia, loose leaf service, p. 9704.
The effect of these macroeconomic policies on the development of an Australian venture capital industry has been reported in N. Ryan, ‘Policy issues for government in developing an Australian venture capital market’, Australian Journal of Public Administration, 50, 1, March, 1991.
However, this information has not been publicly available.
A more detailed discussion of these cycles can be found in J. Utterback, ‘Innovation and industrial evolution in manufacturing industries’, in B. Guile and H. Brooks (eds), Technology and Global Industry: Companies and Nations in the World Economy, National University Press, Washington, 1987.
Bygrave W., Fast N., Khoylian R., Vincent L. and Yue W.. 1989. . ‘Early rates of return of 131 venture capital funds started 1978-1984’. . Journal of Business Venturing . , Vol. 4:
This is an adaptation of the ‘Export propensity indicator’, developed by the BIE. This indicator represents the ratio of export sales to total sales. See, BIE, Trade Performance of Australian Manufacturing, AGPS, Canberra, 1989, ch. 3.
Australian Bureau of Statistics, Catalogue No. 8203.0.
See, BIE, 1987, op. cit., p. 94, for a discussion of this issue.
The amount of taxes reported here is less than the actual amount paid because data collections in these areas were not complete, and does not include former investee businesses which continued to operate outside the program after receiving initial support. These should be considered minimum figures. This was highlighted by C. Calver, Assistant Director of the Development Capital Section, Department of Industry Technology and Commerce (DITAC), Private correspondence to the author of this paper, 7th November 1991.
This is probably a conservative figure since most employees are skilled employees whose salaries or wages are likely to attract taxation rates in excess of 38 cents per dollar: the rate paid by taxpayers earning in excess of $20,000 per year, for most of the 1980s.
S. Crean, Science and Technology Budget Statement 1990-91, Budget Related Paper No. 7, AGPS, Canberra, p. 80.
The MICs and their employees are taxed similarly to all other corporations.
Tax imputation is a credit given to shareholders (companies or individuals) for taxation paid by a company. If the taxation paid is reduced by deductions such as the MIC tax concession, the credit bestowed on the shareholder is less. Thus, government will recover much of the tax concession given to corporate and institutional investors in MIC by reducing the imputed credit passed on to its shareholders.
Up until the end of June 1988, the MICLB approved a maximum amount of capital that an MIC may raise. It has been assumed that the tax revenue cost of these capital raisings were 50 cents for every dollar raised. It is unlikely to be this high since capital raised from taxpayers in lower tax brackets would represent a smaller cost to revenue. Indeed, in 1990-91 the average tax rate was about 42 cents in the dollar. See C. Calver, private correspondence, op. cit.
Also, related to the ability of businesses to trade is their ability to fund new employment positions. Whilst the skilled labour employed in these positions would probably be employed elsewhere, the positions they occupy could still be considered new jobs, or additional employment.
Ryan N.. 1990. . ‘Selectivity in Australian government support for innovation’. . Science and Public Policy . , Vol. 17((4)) August;
It is possible that investments were also made in conjunction with non-MIC sources of venture capital. The data on these investments are not available but would be expected to be small since MICs have been the main source of venture capital in Australia in recent years.
W. Bygrave, 1988, op. cit., p. 143.
This includes MIC, parallel MIC and non-MIC funds. A parallel MIC is a venture capital fund set up by the management team of some MICs to raise capital outside the program. These funds do not attract the 100 per cent tax concession and are not subject to MICLB control.
BIE, 1987, op. cit., p 60.
These predictions were based on a question in the BIE survey. The question asked investors to anticipate future investments. BIE, 1987, op. cit., p. 60.
However, it should be noted that central financial agencies have a very dry perspective on government involvement in these areas.
BIE, 1987, op. cit.
See N. Ryan, 1991, op. cit.
In the later stages of the program these restrictions were relaxed.