The promotion of ‘innovation’ in forestry: a role for government or others?

Abstract

The forest sector is perceived as being traditionally conservative and reluctant to adopt changes, even when these can be beneficial. This is a natural consequence of an industry that tends to operate over relatively long time periods. However, to compete successfully in a rapidly globalizing world, the forest sector will need to be much more innovative than it has been to date. Government policies could play an important role in encouraging innovation in the forest sector yet, despite many initiatives, they have had variable success in doing so. It is likely that transformative innovations will occur that involve different actors to those dominating the sector today, and there is already evidence of such innovations taking place. Transformative innovation may not, however, be in the short-term interest of governments that have used the forest sector to encourage rural development. Other innovations may be stimulated as the crises facing the forest sectors in individual countries deepen. However, it is uncertain whether these will ensure that forests fulfil their potential in enabling the development of a global bioeconomy. To do so, effective partnerships between all the interested parties are needed: government, industry, academia, and non-governmental organizations.

Keywords:

• forest sector
• incremental innovation
• transformative innovation
• policy
• research and development (R&D)

Introduction

In promotional materials about forestry produced by governments, the forest industry, universities and research institutes, it is common to find the term ‘innovation’ being used, and there is sometimes the suggestion that the global forest sector (defined here as including the six main groups of performers described by Schaan and Anderson (2002), namely harvesting, primary manufacturers, forest management, services, manufacturing suppliers and ‘context’, and which covers all aspects of the production of wood-based materials, from activities in the forest to the marketing and sale of forest products) is undergoing a period of innovation. Yet in many parts of the world, the forest sector seems to be in significant difficulty, if not crisis. In Canada, and particularly in British Columbia, the forest sector has been undergoing a major recession, caused primarily by the strengthening of the Canadian dollar against the US dollar and a significant drop in new housing starts in the USA, the market that Canadian forestry companies have relied on for the majority of their sales. In Europe, many forest companies are struggling to make forestry a profitable business. Increasing pressure to provide a range of goods and services other than timber is not being accompanied by adequate compensation schemes to forest owners, and considerable innovation is clearly required if goods such as non-timber forest products are to be marketed successfully (e.g. Kilchling et al. 2008). In Australia, continued pressure to stop the logging of native forests has created problems for many companies. Rising transport costs have affected the profitability of export logs from New Zealand and Chile, and are constraining all producers reliant on overseas markets. Major fires combined with management challenges have compromised the potential of the South African plantation industry. In China, a logging ban on natural forests, combined with the rising tariff on Russian logs, is causing a shortfall in timber supply. A more extensive list of regionally-specific problems could be produced, but for the purposes of this article, it is sufficient to say that significant problems exist for the sector in many parts of the world. If these problems are to be resolved and the global forest sector is to flourish, then significant innovation is necessary. This paper examines the role that government and other actors could play in enabling such innovation.

When attempting to address the problems faced by the forest sector, it is perhaps surprising that a common response by both government departments and the forest industry has been to claim that major new innovations are being introduced and adopted. There are certainly many examples of successful innovation in both small- and large-scale forestry (see for example Küchli 1997; Durst et al. 2005; Keeney 2005). However, a range of factors is hindering innovation in the forest sector. Institutional and other barriers to innovation may on occasion explain the relatively slow adoption of innovations in the forest sector (Rosenberg et al. 1990; Innes 2003). For example, while existing policies may be beneficial for certain forestry practices in certain regions, they may be too inflexible to enable the adoption of innovative approaches in new areas (e.g. Viswanathan and Shivakoti 2008). Very often, there is little space in new policies for innovation, with many government forestry departments being risk-averse and unwilling to develop policies that can further innovation (Vosick et al. 2007), although there are some notable exceptions, such as Costa Rica (Snider et al. 2003). Alternatively, attempts by governments to further innovation nationally may not be directed at forestry, or the coordination between innovations in forestry and national innovation promotional schemes may be poor (Teder et al. 2007).

The situation is further complicated when private firms wish to undertake innovation. They may lack the expertise and/or funding, or there may be policies in place that hinder the rapid and effective uptake of innovation (Duduman and Bouriaud 2007). The nature of property rights also has a significant impact on the potential for innovation (Bouriaud 2007; Liu et al. 2007), and it is apparent that larger (>500 ha) property owners are often more likely to adopt innovations than smaller landholders (Rametsteiner and Weiss 2004) or lessees. Smaller stakeholders will, however, adopt forestry innovations if the conditions are right and there are clear economic benefits in doing so (e.g. Evans 1988; Smith et al. 1996; Song et al. 2004). A similar pattern is evident at an industrial scale: larger companies in the U.S. forest products industry are more likely to adopt a process innovation, but smaller companies may neutralize this competitive advantage by being more adoptive of product innovation and business system innovation (Wagner and Hansen 2005).

The situation becomes much more complex when land title is held by the government, with forestry operations being conducted by licensees or concession holders. With unsecure or clearly limited tenure rights, there is much less incentive to introduce any practice that may lead to increased costs, whatever the environmental, social, or cultural benefits. When decisions ultimately rest with government departments, there may be strong disincentives to introduce innovations given the complexity of the decision-making process for public lands. Much will depend on the nature of the licensees: government business enterprises licensed to operate on public land vary considerably in their approach, with organizations such as Forestry Tasmania, VicForests and Forests NSW in Australia being relatively innovative and others, such as B.C. Timber Sales in Canada, being less so. Private property owners who wish to innovate are often less constrained, although this depends on the nature of the laws defining private property rights in the jurisdiction.

The forest sector has the potential to be a champion of environmentally-friendly, ‘green’ products, thereby significantly contributing to the solution of global environmental problems such as rising carbon dioxide concentrations and associated climate change. However, it has consistently failed to adopt such a role, allowing others, such as the mining industries, to claim that they are more ‘sustainable’ than forestry. One reason for this failure has been the unwillingness of many in the sector to take the risks that are inevitably associated with innovation. This article represents an attempt to understand this failure, drawing on examples of both successes and failures in the sector.

The nature of innovation

The word innovation, like sustainability, has become a standard item in the lexicon of forestry marketing, yet it means something very specific. In this article, the definition of Drucker (1985) is followed: ‘innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service’. This tool generally involves a process that begins with an idea, goes through a research and development (R&D) phase and then finally is adopted. An idea then is not an innovation if it is developed only to a prototype stage; for it to be considered as an innovation it must be adopted. Drucker (1985) emphasizes this point, arguing that new services, products and ways of doing things are all innovations, but only if they meet an existing demand (which may be latent). If there is no demand for an item, then it cannot be considered to be an innovation. This applies as much in the forest sector as in others, as has been shown for forest sector innovations in China (Su and Nie 2007; Wang et al. 2007, 2008). A contemporary example of demand driving innovation is provided by bioenergy. For example, demand for a reduced reliance on imported fossil fuels in Enköping, Sweden, created a political and business commitment to bioenergy. With the help of effective partnerships between business and research, the town has created a cluster of companies that have led the way in a number of important developments in bioenergy generation (McCormick and Kåberger 2005). Although this example stands out, even in Sweden there have been delays in the uptake of bioenergy innovations such as wood pellets, a problem attributed to the failure to coordinate between pellet and equipment suppliers in the early phases, high costs, technology lock-in, a lack of adequate information, and dissatisfaction amongst early adopters (Krushna et al. 2007).

In the business literature, a distinction is frequently made between incremental or sustaining innovations and transformative innovations (e.g. Christensen 1997; Christensen and Raynor 2003; Christensen et al. 2004). Incremental innovation involves a series of small changes that will gradually result in a change in a practice or product. In the corporate forest sector, this is by far the most common form of innovation, and it generally involves refining procedures with a view to reducing costs (Spilsbury and Kaimowitz 2002). There is not a lot of innovation in a wooden plank, but there can be incremental innovations in the manner in which it is produced. Incremental innovation is also the dominant form of innovation in situations where there is a lack of inventive capacity or a reluctance to take significant risks, such as is the case with the furniture industry in China (Cao and Hansen 2006). As a result, it is frequently the form of innovation favoured by governments.

Transformative innovation involves the replacement of entire product lines with new products. A transformative innovation generally starts as a product that is competing against non consumption: its potential consumers are those that are not already using an existing product. As such, existing industries may be faced with a dilemma: do they continue to service existing customers with an increasingly out-dated product, or do they switch to the new product, bringing in new customers but risking the loss of their old customer base? Experience suggests that the new product is best produced by new companies entering the market with good capital and no inertia or technology lock-in, resulting in the eventual replacement of companies unable to adapt (Christensen 1997). Such a transformation may not be in the short-term interest of governments, especially those seeking to prop up sources of employment in rural areas. In the forest sector, this trend is apparent in a number of areas. In British Columbia, Canada, pulp mills are being closed for several reasons, one of which being that changes in paper-making technologies have reduced the demand for long-fibred bleached softwood kraft pulp, a major British Columbian product. In Europe, it is some of the emerging economies such as Croatia (e.g. Grbac and Ojurovic 2006) and Serbia (e.g. Živkovic 2006) that are challenging the status quo: with nothing to lose, they are able to seek and implement the optimal solutions.

Within the forest sector, the biggest transformative innovations over the last 30 years have occurred in forest products (Skog et al. 1995), although it seems likely that the rise of payments for ecosystem services will see transformative innovation in forest management in many parts of the world. The most obvious transformative innovation has been in the form of engineered wood products such as plywood, fibreboard, and laminated products. Companies developing these products were able to open new markets not previously available to the traditional forest products industry (e.g. made-to-order beams with very large spans). The technological development was the deconstruction of wood and its reconstitution in a form that was more suited to the requirements of the market place (such as single beams 50 m in length), resulting in rapid market acceptance. The engineered wood products have also a number of properties that have enabled them to replace more traditional solid wood products. Engineered wood products are, however, now a mature innovation, and further development has largely reverted to gradual improvement of the product (incremental innovation). The lack of transformative innovation in the forest sector is confirmed by the results of a survey of sawmilling companies in North America, which suggested that most respondents considered that the majority of their innovations were in their processes rather than in their products (e.g. Crespell et al. 2006; Hansen 2006).

A constraint on transformative innovation is that it often results in the replacement of a traditional industry with a new one, hence it may be in the short-term interest of an existing organization to block such innovation. Given that the traditional sector may have considerable influence over forest policy development and research funding trends, the opportunity to prevent potential transformative innovations is considerable. Although this has never been proved, there is considerable circumstantial evidence for the existence of such a problem in jurisdictions such as Canada (and it is perhaps significant that in 2007, the Canadian forest sector was reported by PriceWaterhouse Coopers (2008) to have the lowest rate of return on capital employed of any forest sector in the world).

According to Drucker (1985), innovation involves ‘hard, purposeful work that requires diligence, persistence and commitment’; it needs to be focused on the strengths of the group and it needs to be close to and focused on the market (i.e. market-driven). These are interesting conditions, and run counter to the view held by some academic researchers that research that is closely focused on industry or addressing market needs is, in some way, inferior to other forms of research. This relates to a general mistrust of the scientific value of applied research in some circles and long-term debates over the relative merits of different research paradigms (e.g. Rist 1977; Denisi 1994). However, in forestry, the need for connections between researchers and industry has been long recognized (e.g. Moeller and Shafer 1981), and it is those companies that are most market-oriented that tend to be the most innovative (Crespell et al. 2006).

Can innovation in the forest sector be facilitated?

In many countries, governments have attempted to encourage innovation in the forest sector, recognizing that it is badly needed. Such policies have taken the form of financial incentives, grant programmes, tax credits for R&D, and the creation of joint ventures between government and industry. However, to be truly successful, such policies need to consider the range of factors that affect innovation. Kivimaa (2007) has examined the factors that lead to environmental innovations in the Nordic pulp, paper, and packaging industries. She concluded that environmental policies, market factors and technological push all played a part in generating environmental innovation. These factors seem to be consistent across many other studies, confirming Drucker's (1985) thesis about the need for innovation to be driven by markets.

If innovation is driven by market need, then the most effective way that government can encourage innovation in the forest sector is by generating policies that encourage companies to seek and adopt forestry innovations. In some cases, discussed below, such policies have been inadvertent, in that forest policies have created crises that force the forest sector to seek new solutions. The Australian examples (below) provide good evidence to support such a claim. Conversely, crises induced by external factors do not seem to have the same effect on forest policy generation (see, for example Nelson's (2007) discussion of the government responses to the Mountain Pine Beetle epidemic in British Columbia, Canada). In such cases, the crisis may be seen as unavoidable, and there may be less pressure on government to provide a response.

Government policies can play an important role in connecting innovation adopters (the markets) with the R&D community. For commercial organizations, these links may be most effective at the pre-market stage (Burley 1999). The links can be promoted passively or actively. An example of a passive network is provided by the European Commission's Enterprise Europe Network ¹ . This is a network of businesses where partners can be found for all stages of the development of an innovation. An individual or company with a potential product can search for a partner willing to take that product to market, or a company with a need for an innovative product can advertise for a R&D partner to develop a solution. Companies can also use the network to search for venture capital or to create economies of scale (Albert 2007).

Several countries have implemented forestry funding programmes that are deliberately bringing researchers and end-users together. For example, in Canada, the National Centres of Excellence programme included a Sustainable Forest Management Network (Adamowicz et al. 2002). This network brought government, industry and researchers together for 14 years, although it did not do so sufficiently successfully to ensure its long-term future after government funding ceased. In Australia, a number of Cooperative Research Centres dealing with forestry and forest products have played a similar role, but have also been rather transient. Networks may also be established amongst forest researchers, with the multiple networks of the International Union of Forest Research Organizations being the prime example, although these rarely involve end-users. Smaller, more specialized, networks may be quite effective (e.g. Angelstam et al. 2004a,b), especially if they succeed in bringing end-users and researchers together. On the whole, however, the success of many such schemes is difficult to evaluate, as adoption of new technologies is not solely dictated by their availability. Several examples are described below.

The forest-based sector technology platform

One of the most significant institutional attempts to promote innovation is the European-based Forest-Based Sector Technology Platform. This non-governmental initiative is a consortium made up of many partners but with the significant support of the European Confederation of Woodworking Industries, the Confederation of European Forest Owners, the Confederation of European Paper Industries and the European State Forest Association. The Platform is based on the realization that innovation is essential for the future competitiveness and economic growth of the European forest sector and that there is a need for private–public partnerships aimed at more rapid effective development of sectoral R&D programmes. In addition, there is a focus on cross-cutting themes such as bioenergy and biorefining. The Platform describes its vision thus:

	The European forest-based sector plays a key role in a sustainable society.
	It comprises a competitive, knowledge-based industry that fosters the extended use of renewable resources.
	It strives to ensure its societal contribution in the context of a bio-based, customer-driven and globally competitive European economy.

(Forest-Based Sector Technology Platform 2009)

The Platform has moved away from a focus on reducing costs (which however remains a focus in countries such as Canada, according to Wright (2002)), and claims that it is seeking to meet the multifunctional demands on forest resources and their sustainable management, to enhance the availability and use of forest biomass for products and energy and to develop intelligent and efficient manufacturing processes, including reduced energy consumption. In addition, it describes itself as seeking to develop innovative products for changing markets and customer needs, to establish a more efficient innovation system, including a better-structured research community with higher efficiency, to deepen the sector's scientific basis, including taking advantage of emerging sciences, to establish education and training schemes that meet high requirements and to improve communication with the public and policy makers (Konijnendijk 2008).

These objectives are interesting in that they recognize the true nature of innovation, linking R&D clearly to market demand. They recognize the importance of an effective research community, the importance of education and training and the critical role that communication plays, especially in the implementation of research. However, the objectives do not seem to adequately recognize the diverse aims of forest owners in Europe, particularly small-scale owners who may not have economic returns as their primary reason for owning an area of forest (Niskanen et al. 2007; Weiss et al. 2007), and some of the newly emerging economies may experience difficulties with some of the methods and goals of the Platform as they have been oriented towards the mature economies of western and northern Europe (Kalinowski 2007). Several lessons can be learned from the Platform, including the necessity for industrial commitment, for strong political will and support (provided by the European Union), the value of pooling expertise and effort, the emphasis on research, education and communication and the decision to adopt an inclusive approach that brought critical groups into the discussion, rather than excluding them.

The Finnish forest cluster

The Finnish Forest Cluster arose out of the 2006 Forest Sector Future Review (National Forest Council 2006). This identified a number of critical factors associated with the competitiveness and performance of the Finnish forest sector, including the need for the efficient use of timber harvesting opportunities, the maintenance of an adequate transport network, a competitive price for energy and the development of new wood-based products and services. The review identified two very specific aims, namely that the use of domestic wood should be raised by increased funding for silviculture and forest improvement and that there should be a 10 million m³ rise in the annual allowable cut in Finland by 2015 (raising it to 70 million m³). It was strongly supported by the Finnish government, with one of the first steps being the promulgation of the Act on the Financing of Sustainable Forestry. Since then a special company (Forestcluster Ltd – Metsäklusteri Oy) has been established to network top-level research and innovation in the cluster (Forestcluster Ltd. 2008).

The situation in Finland is helped by a strong tradition in industry-supported forest research. For example, Metso Paper has 12 specialized technology centres, 500 research and technology development (RTD) specialists and has developed a number of customer-specific innovations such as the OptiConcept. A paper-making process, OptiConcept is described by Metso Paper (2008) as increasing quality and production speed, optimizing productivity and improving accessibility by using the world's most advanced papermaking technology. The emphasis on R&D in part reflects the importance of the forest sector to the Finnish economy. In 2005, the total value of products from the cluster was US$ 50.5 billion and the value of exports was US $ 19 billion (30% of Finland's total). R&D investments by the cluster that year totalled US$ 441 million. This can be partly explained by the attachment to wood as a product: domestic wood consumption in 2005 (total population: 5.3 million people) was 60 million m³. In contrast, Canada, with a population of 32 million, has a domestic wood consumption (softwood lumber only) of about 26 million m³ (Forestcluster Ltd. 2008).

The Finnish Forest Cluster recognizes some important points. It has identified that skilled people and a well-functioning education system are key factors for the success of Finland's forest cluster, now and in the future. It notes that education faces the same challenges as the entire cluster: modernising and responding to changes in the operating environment and that universities and research organisations play a significant role in the cluster's cooperation. There is recognition that significant investment may be required especially for the development of new areas of products, that strong partnerships are necessary, that industrial R&D is very important and that universities, and education in general, play a critical role.

Scottish forest industries cluster

In Scotland, a similar cluster to that in Finland has been established. However, its operation seems very different. It was developed as a partnership between the Confederation of Forest Industries and Scottish Enterprise (a non-departmental public body of the Scottish Executive) and aims to develop strong links, from growers through processors to the end users. From the outset, it had weaker links with the chemicals and equipment sectors and with R&D. As such, it was more reflective of the views and attitudes of the traditional forest sector, and this is reflected in its stated vision to double the growth rate of industry sales from 1.5% to 3% per annum.

In December 2001, an evaluation indicated that a priority was to strengthen links between industry and the research community. However, little attention seems to have been paid to this recommendation, and a further evaluation in March 2003 indicated the same priority (Scottish Forest Industries Cluster 2003). By October 2006, one university (Napier) was represented in the leadership team. There is little evidence that this cluster has been successful in promoting innovation in the Scottish forest sector.

Forest R&D in Brazil

According to the Brazilian Pulp and Paper Association, there are 220 pulp and paper companies dealing with forest plantations and plantation wood in Brazil. These companies manage 1.7 million ha of plantations, 75% of which comprise Eucalyptus species. Exports are growing rapidly and in 2005 reached US$ 3.4 billion, a growth of 17% compared to 2004 ² . A number of factors combine to make the Brazilian plantation forests successful, including favourable climatic conditions, low production costs, a constant reduction of cost per produced unit, constant modernization, the use of high-technology and increasingly large investments in forest, pulp and paper research.

Research initially focused on improved breeding and genetics. However, the Brazilian forest research community is now responding to changing market requirements and globalization, with research shifting to forest sustainability, environmental concerns, and certification processes. The industry is looking forward and anticipating changing patterns of demand and the expectations associated with particular products. It is looking at the full production process, the efficient, long-term management of resources, and new technologies such as high-resolution remote sensing, precision silviculture, and process-based modelling. Crucially, there has been a realization that companies focusing only on operational costs may not survive in a highly competitive sector.

The focus on R&D in Brazil extends beyond the plantation industry. For example, the development of furniture industry clusters has been studied and the factors leading to the development of successful regional centres such as Rio Negrinho, Bento Gonçalves and Arapongas, have been analyzed (da Camara and Serconi 2006). Known for some time as an effective way to promote innovation (Porter and Stern 2001), such economic and geographic clusters are of increasing interest in forestry (see for example Rojas 2007), but the autonomy that they involve is sometimes counter to prevailing policies associated with centralized control in the forest sector.

This section has examined the factors that facilitate the emergence of innovative ideas in four cases; the Forest-Based Sector Technology Platform in Europe, Finland, Scotland and Brazil. It has identified some important variables that promote innovation, such as strong partnerships, better resourcing of R&D, a skilled labour force and political will. The next section will examine some of the factors that promote the effective implementation of innovative ideas in the forest sector.

Implementing innovation

As argued earlier, innovations, as defined by Drucker (1985) involve both the development of an idea and its application in practice. New ideas can always be introduced to the forest sector, but their implementation is not always assured, however beneficial they might seem to be. A repeated theme within the forestry innovation literature is the failure to take up new technologies as they become available. As a result, in some countries, such as Canada, the forest sector has a lower rate of innovation than the manufacturing sector as a whole (Schaan and Anderson 2002). There are many different reasons for this, including risk aversion, cost, a policy environment that discourages innovation, and a deficit in the training necessary to encourage the forestry community to engage in innovation. Many of the problems can be traced back to the demand, reinforcing Drucker's (1985) point that innovation must be led by a need from those who will utilize an innovation.

The most difficult step in the innovation process may actually involve ensuring that an innovation is implemented on the ground. This may require a comprehensive education and extension program (Pokorny and Johnson 2008), something that many forest scientists are unwilling to become involved with. Attempts to adopt a top–down approach to the introduction of innovations often meet with little success (Nath et al. 2005), so adequate extension amongst the target audience is a critical requirement for the implementation of innovation. In this respect, techniques such as Participatory Technology Development (PTD) can be of enormous value (Spilsbury and Kaimowitz 2002; Reed 2007). PTD is ‘a creative process of joint experimentation and research by farmers and development agents in discovering ways of improving farmers' livelihoods’ (van Veldhuizen et al. 2005), a definition that could equally well apply to foresters. Reed (2007) identifies the critical role of extension specialists and scientists in being able to facilitate PTD through the identification of innovators and their innovations, through the optimization and adaptation of innovations, and the dissemination of innovations to other smallholders who may benefit from them.

There is evidence of differential uptake of innovations within the forest sectors of particular countries. For example, Begus (2003) found that in Slovenia, silviculturalists were much less likely to accept an innovation than forest owners or those working with forest technology. He advocated the use of participatory techniques in the development and introduction of innovations, thereby creating more ‘ownership’ of the innovation. On the basis of input from a workshop that involved a range of forestry professionals, he argued that four steps were necessary: good definition of where the innovations would be applicable, education of foresters and machine operators, the use of appropriate machinery and working practices and changes in the legislation.

The difficulty of ensuring the uptake of innovations in forestry suggests that in some cases, significant innovation, especially if it is to be transformative, requires an industry or government to be shaken out of its complacency. As the next section will argue, this seems to have happened with the forest sector in Australia.

The need for a crisis: the case of Australia

The introduction of Regional Forest Agreements (RFAs) in Australia in the late-1990s resulted in significant reductions in the annual allowable cut in most of the areas affected by the agreements, creating a crisis for those industries dependent on native forests. A number of strategies were adopted.

In Western Australia, a company (Wesbeam Holdings Ltd.) identified that there was potential in the 20,000 ha of maritime pine (Pinus pinaster) plantations of the Gnangara (located just outside Perth), which were ageing because no market had been developed for the product (Treadgold 2005). Instead of felling the trees and using them for low-value building materials, the company established an Aus$85 million processing facility to convert the wood to laminated veneer lumber (LVL), a product that has a number of advantages, including greater strength and uniformity, a high strength-to-weight ratio and the ability to produce longer lengths. Of particular relevance, there is a strong demand for the product. The investment was made possible by a 25‐year agreement between the company and the government of Western Australia over the supply of timber.

Also in Western Australia, a sawmill at Pemberton was established to cut 500,000 sleepers from the karri forests (Eucalyptus diversicolor), but the RFA essentially closed down the karri forest industry. New owners of the mill (Auswest Timbers Pty Ltd.) invested Aus$ 3.5 million in kiln-drying and machining facilities, and now concentrate on making value-added products such as decking, floorboards, and furniture-grade timbers, with export markets in the United Kingdom, South Africa and Asia. They were thus able to adapt to the reduction in supply by the production of more valuable products (Mouhtouris 2005).

In New South Wales, Big River Timbers Pty Ltd. was forced to change its wood supply by the RFA, subsequently shifting from coachwood (Ceratopetalum apetalum), white birch (Schizomeria ovata) and yellow carabeen (Sloanea woollsii), the supply of which was mostly locked up in large new forest reserves, to flooded gum (Eucalyptus grandis), blue gum (Eucalyptus saligna), blackbutt (Eucalyptus pilularis), and spotted gum (Eucalyptus maculata). This required the development of new techniques for peeling, drying and laminating, an ongoing R&D process that has lasted more than 20 years. The company was helped by the development of a key new product called Formply, much in demand in the construction industry (Sullivan 2005).

The need for more research in Australian forestry has been recognized through the Cooperative Research Centre (CRC) programme. The CRC for Forestry was established in October 2005, and links 29 forest research organizations, companies, government agencies, and universities. US$ 44 million has been committed over 7 years from the partners, with an additional $20 million coming from the Australian government. The CRC for Forestry is building on previous forest sector CRCs, not all of which have been successful. Research is being undertaken to reflect evolving societal needs, with those needs not being driven by industry alone. They include managing and monitoring for growth and health, the development of high-value wood resources, improved harvesting and operations, and trees in the landscape.

In commodity markets, the emphasis is on reducing the cost of production of specific, relatively simple products. This is often best done through economies of scale, and so corporate efforts are focused on size. However, a critical lesson from the Australian forest sector is that a company does not have to be one of the biggest in its field to be innovative or profitable. Governments around the world, heavily influenced by the corporate forest sector, have, for the most part, yet to recognize this. Another lesson from Australia is that crises can generate innovation through adaptation, without necessarily involving research. There may, however, be a cultural phenomenon at play here. The Australian forest sector seems much less dependent on government support than those of other countries, and there is a ‘can do’ attitude that results in solutions being actively sought out. In many other countries, a dependency culture has developed, with the forest sector unwilling to invest its own money in R&D, and expectant of government support to tide them over lean periods.

Conclusions

The forest sectors of many countries are in a crisis. Large-scale structural changes are occurring, with new producers and new markets emerging. To survive, existing actors will have to innovate, yet innovation in the forest sector faces many challenges. Those individuals, industries and countries that are prepared to change and to adopt new practices, technologies and products will be the winners in a newly structured global forest sector. Despite all the evidence for the need for change amongst the traditional forest sector actors, innovation has been slow in many countries, and largely restricted to the incremental form of innovation. There are many reasons for this, including risk-averse policy environments, an unwillingness to undertake transformative innovations and a long-term focus on process innovation, particularly as it relates to cutting the cost of production of a limited range of commodity products. Engineered wood products provide an exception to this, although the pace of development even in this area appears to have slackened.

It seems likely that while incremental innovation is predominant in the sector, transformative innovation is required if, on a worldwide scale, the forest sector is to realize its full potential. Governments have a role to play in encouraging transformative innovation, but a major constraint is that such innovation requires a long-term approach that few governments are willing to adopt. Instead, the need to maintain the jobs associated with the traditional forest sector is likely to dominate any policy decisions related to the sector. It is likely that only after major job losses (i.e. a crisis has been created) that governments will have the political space and authority to promote transformative innovation.

Such changes cannot come only from government. A transformation is needed in the culture of the sector. A successful forest sector in the 21st century must be prepared to adapt to massive structural changes, both within countries and globally. The increasing importance of environmental issues, the growth of the Chinese and Indian economies, the rise in public participation in forest management decisions and activities, the evolution of completely new products, the growing importance of bioenergy and many other changes will result in a very different sector to what was present at the turn of the century. To cope with these changes, the forest sector will need a massive cultural change that will see the adoption of genuine innovation as a prerequisite for the continued success of the sector.

Notes

1. The website for the European Commission's Enterprise Europe Network may be found at: http://www.enterprise-europe-network.ec.europa.eu/index_en.htm

2. Available from: http://www.bracelpa.org.br/eng/estatisticas/index.html