Innovation in Australian Business methodology

The Business Characteristics Survey (BCS) is an annual survey and is the vehicle for estimates of business innovation, business use of information technology, and a broad range of other non-financial business characteristics.

The BCS has recently gone through a redevelopment process; changes have been made to both the survey content and sample design.

The BCS now comprises of two question modules to be collected in alternate years:

• a subject specific Innovation module; and
• an omnibus style collection with a strong focus on Digital Activities. 

The 2020-21 BCS Innovation module is the first iteration of the survey since the redevelopment.  

The reference period for most of the innovation items included in the 2020-21 BCS is during the two years ended 30 June 2021 or as at 30 June 2021.

The BCS draws on the conceptual definitions and guidelines included in the 'Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data' (Fourth Edition, 2018). This manual provides a framework for the collection of innovation statistics and specifies the definitions of innovating businesses and innovation-active businesses that are used by the ABS. The BCS draws on this manual for some of the questions used in the BCS and in the presentation of outputs from the survey.

Key indicators of innovation include measures of business innovation (innovating, innovation-active); types of innovation (goods or services, processes); and status of innovation (introduced, still in development, abandoned). Definitions for each of these measures of business innovation are provided in the Glossary.

Estimates of the number of businesses operating in Australia can be derived from several sources within the ABS. They may relate to a particular point in time or may be presented as an average annual figure. However, these estimates will not always show the same results. Variations will occur because of differing data sources, differing scope and coverage definitions between surveys, as well as variations due to sampling and non-sampling error. More information about business counts can be found in the Information Paper: A Statistical View of Counts of Businesses in Australia, Jun 2005.

The BCS is not designed to provide high quality estimates of numbers of businesses for any of the output classifications (for example, employment size or industry) and the number of businesses in this publication are only included to provide contextual information for the user. The estimate of the total number of businesses may not be equal to the sum of each employment size range due to rounding of business counts to the nearest thousand. A more robust source of counts of Australian businesses is available from Counts of Australian Businesses, including Entries and Exits, Jul 2017 to Jun 2021.

For output purposes, businesses are classified to employment size ranges based on actual data reported in the survey. Since 2018-19, outputs for some data items in the 0-19 employment size range (small businesses) are made available. In 2020-21, outputs are made available for an additional size range of 0-199 for the first time.

For industry output, the classification is drawn from information held about the business on the ABSBR.

For state output, the classification is drawn from the main state of operation of the business.

Estimates of proportions have been calculated using unrounded figures but are shown in the tables rounded to one tenth of a percentage point. Where figures have been rounded, discrepancies may occur between the sum of the component items and the total. Figures presented in the commentary have been rounded to the whole percentage.

ABS publications draw extensively on information provided freely by individuals, businesses, governments, and other organisations. Their continued cooperation is very much appreciated: without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.

The Economics Unit Model is used by the ABS to determine the structure of Australian businesses and other organisations. The model consists of:         

            The Enterprise Group (EG)

            Legal Entities (LEs)

            Type of Activity Units (TAUs)

            Location Units

Businesses contributing to the estimates in this publication are sourced from the ABS Business Register (ABSBR) and are selected at either the Australian Business Number (ABN) unit or the Type of Activity Unit (TAU) level, as described below.

In the BCS, the statistical unit used to represent most businesses, and for which statistics are reported, is the ABN unit. The ABN unit is the business unit which has registered for an ABN, and thus appears on the Australian Tax Office (ATO) administered Australian Business Register (ABR). These units are suitable for ABS statistical needs when the business is simple in structure and are generally referred to as the non-profiled population. In these instances, one ABN equates to one statistical unit.

For more significant and diverse businesses where the ABN unit is not suitable for ABS statistical needs, the ABS maintains its own unit's structure through direct contact with the business, and the statistical unit used is the TAU. A TAU comprises one or more business entities, sub-entities, or branches of a business entity within an Enterprise Group that can report production and employment activities. When a minimum set of data items is available, a TAU is created which covers all the operations within an industry subdivision (and the TAU is classified to the relevant subdivision of the Australian and New Zealand Standard Industrial Classification (ANZSIC)). These units are generally referred to as the profiled population.

ANZSIC is used to classify the industry in which the TAU or ABN has productive activity. Further information on this classification can be found in Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (Revision 2.0).

The Standard Institutional Sector Classification of Australia (SISCA) provides a framework for dividing the Australian economy into institutional sectors. Further information on this classification can be found in Standard Economic Sector Classifications of Australia (SESCA), 2008 (Version 1.1).

The scope of the estimates in this publication consists of all employing business entities in the Australian economy, except for:

SISCA 3000 General government

SISCA 6000 Rest of the world

ANZSIC06 Division O Public administration and safety

ANZSIC06 Division P Education and training

ANZSIC06 Groups 624 (Financial asset investing) and 633 (Superannuation funds)

ANZSIC06 Groups 954 (Religious services) and 955 (Civic, professional and other interest group services)

ANZSIC06 Subdivision 96 Private households employing staff.

The frame for the BCS is a subset of the ABSBR and includes employing businesses only. These are defined as those businesses which register for the ATO's Pay As You Go Withholding (PAYGW) scheme. It is not unusual for some of these 'employing businesses' to have zero employment at various times during the reporting period. The BCS frame is updated to take account of new businesses, businesses that have ceased employing, changes in employment levels, changes in industry and other general business changes. Businesses which have ceased employing are identified when the ATO cancels their ABN and/or PAYGW registration. In addition, businesses with less than 50 employees, which did not remit under the PAYGW scheme in each of the previous five quarters, are removed from the frame. The estimates in this publication include an allowance for the time it takes a newly registered business to be included in the survey frame.

Collection of data included in this release was undertaken based on a random sample of approximately 7,000 businesses via online forms or mail-out questionnaires. The sample was stratified by industry, employment size and for the first time, a state-based indicator. All businesses on the ABSBR identified as having 1,000 or more employees were included in the sample.

As a result of separating the BCS into separate modules for innovation and digital activity, the majority of the 2020-21 Innovation module content was redeveloped.

Some questions relating to general business characteristics and innovation were retained for the 2020-21 reference period.

There were 18 new questions added to the Innovation section of the questionnaire.

When interpreting the results of a survey, it is important to consider factors that may affect the reliability of the estimates. Estimates in this publication are subject to both non-sampling and sampling errors.

Non-sampling errors may arise because of errors in the reporting, recording, or processing of the data and can occur even if there is a complete enumeration of the population. These errors can be introduced through inadequacies in the questionnaire, treatment of non-response, inaccurate reporting by respondents, errors in the application of survey procedures, incorrect recording of answers, and errors in data capture and processing.

The extent to which non-sampling error affects the results of the survey is difficult to measure. Every effort is made to reduce non-sampling error by careful design and testing of the questionnaire, efficient operating procedures and systems, and the use of appropriate methodology.

Some of the items collected in the BCS are dynamic in nature and the concepts measured are subject to evolution and refinement over time; it is not possible to measure the impact of these changes on data quality.

The approach to quality assurance for the BCS aims to make the best use of ABS resources to meet user prioritised requirements - both in terms of data quality and timing of release. The approach specifies the level and degree to which each data item is quality assured, noting that only some of the total output from the BCS can be quality assured to the highest standards. Different priorities are assigned to groups of data items, with highest priority being assigned to key point in time data on innovation.

The 2020-21 BCS had a response rate of 84%.

The difference between estimates obtained from a sample of businesses, and the estimates that would have been produced if the information had been obtained from all businesses, is called sampling error. The expected magnitude of the sampling error associated with any estimate can be estimated from the sample results. One measure of sampling error is given by the standard error (SE), which indicates the degree to which an estimate may vary from the value that would have been obtained from a full enumeration (the 'true' figure). There are about two chances in three that a sample estimate differs from the true value by less than one standard error, and about nineteen chances in twenty that the difference will be less than two standard errors.

The following is an example of the use of standard error on the estimated proportion of innovation-active businesses. If the estimated proportion of innovation-active businesses was 51.9% and the standard error of this estimate was 1.0. There would be approximately two chances in three that a full enumeration would have given a figure in the range of 50.9% and 52.9%, and nineteen chances in twenty that it would be in the range of 49.9% to 53.9%.

In this publication, indications of sampling variability are measured by relative standard errors (RSEs). The relative standard error is a useful measure in that it provides an immediate indication of the percentage errors likely to have occurred due to sampling, and thus avoids the need to refer to the size of the estimate. Relative standard errors are shown in the Relative Standard Error table in this section. RSEs for all data included in this release (including data cube content) are available upon request.

To annotate proportion estimates, a value of 50% has been used in the calculation of RSE rather than the estimated proportion from the survey data. This avoids inconsistencies between the way very low and very high proportions are annotated. Relative standard errors for estimates in this publication have been calculated using the actual standard error and the survey estimate (referred to as x) in the following manner: RSE%(x) = (SE(x)*100)/50.

Using the previous example, the standard error for the estimated proportion of innovation-active businesses was 1.0%. Multiplied by 100 and then divided by 50 gives an RSE calculated on this basis of 2.0%. It is these figures that appear in the table appended to this chapter.

Estimates may have corresponding RSE range values annotated. Depending on the level of RSE, data should be used with caution. Estimates with RSEs between 10% and 25% are subject to sampling variability too high for some purposes. Estimates with RSEs between 25% and 50% are subject to sampling variability too high for most practical purposes and estimates with an RSE greater than 50% indicate that the sampling variability causes the estimates to be considered too unreliable for general use.

Estimates with an annotated RSE of between 10% and 25% should be used with caution as the estimate from full enumeration could lie more than a decile away. For example, a proportion estimate of 30% with this RSE annotation, means the full enumeration value could lie beyond the range 20% to 40%. Estimates with an annotated RSE of between 25% and 50% could lie more than a quartile away and is subject to sampling variability too high for most practical purposes. A proportion estimate of 30% annotated with this RSE annotation, means the full enumeration value could lie beyond the range 5% to 55%. Proportion estimates annotated with RSE greater than 50% have a sampling error that causes the estimates to be considered too unreliable for general use.

Collaboration

Active joint participation with other organisations which involves some sharing of technical or commercial risk. Straight fee-for-service arrangements are not deemed to be collaborative and are therefore excluded.

Commercialisation

Process of introducing a new product or production method into commerce—making it available on the market. 

Fee-for-service (FFS)

An amount paid to a service provider for specific work or services completed at the businesses request.

Financial reference period

Financial year ended 30 June 2021. Businesses with a different financial year were asked to report for a 12-month period between 1 October 2020 and 30 September 2021.

Innovation

An innovation is the introduction of a new or significantly improved good or service; operational process; organisational/managerial process; or marketing method.

Innovative activity

Innovative activity includes any work that was intended to, or did, result in the introduction of an innovation.

Measures of business innovation

Measures of business innovation included in this release:

Innovating businesses - businesses that introduced any type of innovation during the reference period.

Innovation-active businesses - businesses that had undertaken any innovative activity during the reference period including introduction of any type of innovation; and/or the development or introduction either still in progress or abandoned.

Non innovation-active businesses - businesses that, during the reference period, did not undertake any innovative activity.

Status of innovation

Three statuses of innovation are included in this release:

Introduced - the business successfully introduced an innovation during the reference period (although the innovation does not need to have been commercially successful).

Still in development - the business was in the process of developing or introducing an innovation during the reference period but work on the innovation was still in progress at the end of the period.

Abandoned - the business abandoned the development and/or introduction of an innovation during the reference period (i.e., work on the innovation ceased without full introduction occurring).

Types of innovation

Two types of innovation are included in this release:

Goods or services - any good or service or combination of these which is new to a business (or significantly improved). Its characteristics or intended uses differ significantly from those previously produced/offered. This includes significant changes to aesthetic design or packaging.

Process - any new or improved business process for one or more business functions that differs significantly from the firm’s previous business processes and that has been brought into use in the firm.