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The inventive alternative

It may be more profitable to commercialise Australia'snew nano-technology overseas than at home

claims Joshua Gans.

Last week we were greeted with the exciting news that Australian scientists

had pioneered another breakthrough in biotechnology. Dr Bruce Cornell and

his team at the CSIRO have produced a dream machine for medical

diagnosis. Their nano-technology allows potentially for an instantaneous

and highly reliable diagnosis of virtually all known viruses. If all works outas predicted, today's practices of pathology will become as outdated asleeches were in the face of modern medical science.

While the commercial possibilities of such an invention are reasonablyclear, the path to realising those possibilities is less so. As with all

Australian inventions, this one was no different in one respect.Accompanying the announcement were calls from various quarters to keep

production of the new devices within Australia and by Australians.

Everyone, from Dr Cornell to Peter McGauran, the Minister for Science,

and a dozen other analysts, seemed to agree that Australia would not receiveeconomic benefits from this technology without keeping its production in

the family. Self-production was lauded as the only route to high commercialreturns.

But looking at economic realities it is far from obvious that such a directionwould be the best one available. It is true that such inventions should be

exploited so as to yield the greatest return for their Australian backers. One

doesn't have to be patriotic to understand that. But keeping

commercialisation within Australia may not be the only route to high

returns. The alternative is to license the patent to overseas manufacturers.This option potentially provides all the returns associated with self-

production and more, while removing many of the uncertainties of product

development.

To see this, consider what might happen if the self-production route was

followed. It was admitted that the Australian scientists were not alone in

their pursuit of a breakthrough in medical diagnosis -- hence, the secrecy

surrounding the project. It may not be long until another team, especially

given that they know such devices are possible, makes their ownbreakthrough. And there are no guarantees the patent held by the Australian

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Joshua Gans is associate professor in Economics, Melbourne BusinessSchool, University of Melbourne and an Academic Associate, London

Economics.

This article originally appeared in theAustralian Financial Review,

Thursday 12th June, 1997, p.19. To read more about the nanomachine see

the web page ofAMBRI. See a letter replying to the article by BruceConnell, the director of the Cooperative Research Centre for Molecular

Engineering and Technology, and Keith Daniel, CEO, AMBRI Pty Ltdentitled "Stop this backwater mentality,"Australian Financial Review,

Tuesday 17th June, 1997, p.18. My reply -- "It's all about producing ideas,

not objects" -- to their letter was published in theAustralian Financial

Review, Thursday 19th June, 1997, p.20.

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