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EXPLANATORY NOTES


INTRODUCTION

1 This publication, Innovation in Australian Business, 2005, presents results from the 2005 Innovation Survey. This survey provides statistics on business innovation in Australia and key characteristics of innovating businesses. The availability of this information facilitates development of government policy and practices to improve Australia's international competitiveness by supporting and promoting innovation in Australian business.

2 This survey was conducted with some funding from the Department of Education, Science and Training and the Department of Industry, Tourism and Resources.

REFERENCE PERIOD

3 The main reference period for the Innovation Survey was the two year calendar period 2004 and 2005. Financial data relates to the most recent financial year ended on or before 30 September 2005.

SCOPE AND COVERAGE

4 The scope of the 2005 Innovation Survey was all businesses in Australia with employment recorded on the ABS Business Register of 5 or more employees, except those classified to:

• SISCA 3000 General Government
• SISCA 6000 Rest of the world
• ANZSIC Division A Agriculture, Forestry and Fishing
• ANZSIC Division M Government Administration and Defence
• ANZSIC Division N Education
• ANZSIC Division O Health and Community Services
• ANZSIC Division Q Personal and Other Services

STATISTICAL UNITS DEFINED ON THE ABS BUSINESS REGISTER

6 The ABS uses an economic statistics units model on the ABS Business Register to describe the characteristics of businesses, and the structural relationships between businesses. The units model is also used to break groups of related businesses into relatively homogenous components that can provide data to the ABS.

7 In mid 2002, to better use the information available as a result of The New Tax System (TNTS), the ABS changed its economic statistics units model. The new units model allocates businesses to two sub-populations. The vast majority of business are in what is called the ATO maintained population, while the remaining businesses are in the ABS maintained population. Together, these two sub-populations make up the ABS Business Register population.

ATO MAINTAINED POPULATION

8 Most businesses and organisations in Australia need to obtain an ABN, and are then included on the ATO Australian Business Register. Most of these businesses have simple structures; therefore the unit registered for an ABN will satisfy ABS statistical requirements. For these businesses, the ABS has aligned its statistical units structure with the ABN unit. The businesses with simple structures constitute the ATO Maintained Population, and the ABN unit is used as the statistical unit.

ABS MAINTAINED POPULATION

9 For the population of businesses where the ABN unit is not suitable for ABS statistical requirements, the ABS maintains its own units structure through direct contact with each business. These businesses constitute the ABS Maintained Population. This population consists typically of large, complex and diverse businesses. The new statistical units model described below covers such businesses.

• Enterprise Group: This is a unit covering all the operations in Australia of one or more legal entities under common ownership and/or control. It covers all the operations in Australia of legal entities which are related in terms of the current Corporations Law (as amended by the Corporations Legislation Amendment Act 1991) including legal entities such as companies, trusts, and partnerships. Majority ownership is not required for control to be exercised.
• Enterprise: The enterprise is an institutional unit comprising (i) a single legal entity or business entity, or (ii) more than one legal entity or business entity within the same Enterprise Group and in the same institutional sub-sector (i.e. they are all classified to a single Standard Institutional Sector Classification of Australia sub-sector).
• Type of Activity Unit (TAU): The TAU is comprised of one or more business entities, sub-entities or branches of a business entity within an Enterprise Group that can report production and employment data for similar economic activities. When a minimum set of data items are available, a TAU is created which covers all the operations within an industry sub-division (and the TAU is classified to the relevant sub-division of the ANZSIC). Where a business cannot supply adequate data for each industry, a TAU is formed which contains activity in more than one industry sub-division. Where a TAU has significant activity in more than one industry, the ABS will 'split' the TAU to maintain industry homogeneity.

DEFINING INNOVATION

11 The 2005 Innovation Survey draws on the conceptual definitions and guidelines included in the 'Oslo Manual, Guidelines for Collecting and Interpreting Innovation Data' (Third Edition, 2005). 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. For the 2005 Innovation Survey, the status of innovation was extended to include innovative activity that was abandoned during the reference period or was incomplete at the end of the reference period.

12 The 'Oslo Manual, Guidelines for Collecting and Interpreting Innovation Data' (Third Edition, 2005) extends the type of innovative activity to include marketing methods. There was insufficient time before the conduct of the 2005 Innovation Survey to incorporate the collection of this type of innovation; this will be included in the future.

COMPARABILITY OF BUSINESS COUNTS

13 Estimates of the number of businesses operating in Australia can be derived from a number of 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 (cat. no. 8162.0).

14 The Innovation Survey was not designed to provide high quality estimates of numbers of businesses for any of the output classifications (for example, state or territory or industry) and the number of businesses in this publication are only included to provide contextual information for the user. A more robust source of counts of Australian businesses is available from Australian Bureau of Statistics Business Register, Counts of Businesses (cat. no. 8161.9.55.001).

RESEARCH AND EXPERIMENTAL DEVELOPMENT (R&D)

15 The proportions of businesses reporting expenditure on R&D presented in this publication are based on answers to basic indicator questions in the 2005 Innovation Survey questionnaire. Users should not compare the estimates included for these items with results from the ABS Survey of Research and Experimental Development - Business. The R&D survey uses the concepts in the publication Proposed Standard Practice for Surveys of Research and Experimental Development ('Frascati Manual'), 2002 OECD, Paris, 2003 to compile R&D statistics; and has different scope, processes and procedures to the 2005 Innovation Survey.

16 Estimates of expenditure on research and experimental development used in this publication are derived from data collected from businesses in the ABS R&D survey in respect of the year ended June 2005. For more information about these data, please refer to Research and Experimental Development, Businesses, 2004-05 (cat. no. 8104.0). Adjustments have been made for differences in scope between the 2005 Innovation Survey and the R&D survey. A split between expenditure by innovating businesses and non-innovating businesses cannot be provided.

REVISIONS TO 2003 ESTIMATES OF EXPENDITURE ON INNOVATION

17 For the 2003 Innovation Survey, there were problems with the collection of expenditure related to innovation. This was particularly noticeable in the number of innovating businesses who, although they did incur this type of expenditure, were unable to provide these estimates. There was also a relatively low response rate of 82%. The 2003 Innovation Survey was the first to be conducted for several years and there was insufficient information to determine similarity or difference between respondents and non-respondents. At the time, the imputation method utilised was the most suitable in the context of the available information.

18 Quality assurance of the 2005 Innovation Survey at the unit record level identified significant differences between the data reported for 2005 and that imputed for 2003 for both total businesses expenditure and that related to innovative activity. It was not possible to obtain revised estimates for 2003 from respondents. A decision was made to improve the quality of 2003 estimate by revising imputation for total business and innovation related expenditure to get more accurate estimates for 2003. This was done using information available from the 2005 survey and other areas of the ABS for the total business expenditure item. For some of the non-responding units in 2003, information about their innovator status was known. These revisions were confined to completely enumerated units in the 2003 Innovation Survey.

19 Revising imputation for 2003 has resulted in a revised estimate of $21,897.7m for expenditure on innovation by innovating businesses only. This estimate has a relative standard error (RSE) of $1,788.5m. The ABS considers a 95% confidence interval of $18,320.6m to $25,474.7m to be appropriate for this revised estimate. Users are urged to use caution when making comparisons or assessments of movement between the 2003 and 2005 estimates.

OUTPUT CLASSIFICATIONS

20 For output purposes, businesses are classified to employment and income ranges based on actual data reported in the survey. For other output groups (industry, State or Territory, Capital city, other areas) the classification is drawn from information held about the business on the ABS Business Register. The head office location of a business determined the State or Territory or region the business was classified to.

MORE DETAILED INNOVATION DATA

21 As indicated on page 2, this publication contains only summary data from the 2005 Innovation Survey. Data at least equivalent to that included in the 2003 issue of this publication will be released in spreadsheet format available free of charge from the ABS web site. These spreadsheets will include detailed (including some cross-classified) industry, state and employment data by topic as well as accompanying summary commentary. The following sets out the schedule for release of these detailed data:

• 7 December 2006 - Innovation indicators, financial indicators and selected innovation indicators based on European Union (EU) Community Innovation Survey scope.
• 19 January 2007 - Detailed data for Skills and capabilities, Collaboration and Barriers. International comparisons for Australia, the European Union and New Zealand.
• 16 February 2007 - Detailed data for Drivers, Source of ideas and Methods for acquiring knowledge and Intellectual Property.

RELATED PUBLICATIONS

23 In addition to the previous issue of this publication, other ABS publications relating to innovation in business in Australia are listed below:

• Patterns of Innovation in Australian Business, 2003, (cat. no. 8163.0)
• Innovation in Manufacturing, 1996-97, (cat. no. 8116.0)
• Innovation in Mining, 1996-97, (cat. no. 8121.0)
• Innovation in Australian Manufacturing, 1994 (cat. no. 8116.0)
• Innovation in Selected Industries, 1993-94, (cat. no. 8118.0)
• Research and Experimental Development, Business, Australia, 2004-05, (cat. no. 8104.0)

DATA AVAILABLE ON REQUEST

25 As well as the statistics included in this publication, the ABS may have relevant data available on request. The availability of more detailed data are subject to confidentiality and quality checks. Inquires should be made to the National Information and Referral Service on 1300 135 070.

ROUNDING

26 Estimates of proportions shown in the tables are rounded to one tenth of a percentage point.

27 Where figures have been rounded, discrepancies may occur between the sum of the component items and the total. In addition, percentages have been calculated using the unrounded figures.

CHANGES TO THE COLLECTION OF INNOVATION STATISTICS

28 The collection of all business characteristics data by the ABS has been reviewed and a new strategy has been adopted. These types of data have generally been collected through a number of surveys which included the Innovation Survey. Due to the differences in scope and content definition, data produced from the range of characteristics surveys were not directly comparable and minimally integrated. A new integrated Business Characteristics Survey (BCS) will be introduced from the 2005-06 reference year.

29 The BCS will collect an extensive range of characteristics data using integrated concepts and best practice methodology. It will provide greater flexibility in measurement of a range of business characteristics and more comprehensive integration of these types of data for analysis of interrelationships between business characteristics and economic outcomes, for example, productivity. While population and cross sectional estimates will continue to be available, a longitudinal dataset for these data will be created and updated annually. This micro level data will be available in the form of a confidentialised unit record file - the ABS Confidentialised Unit Record File: Business Longitudinal Database and in the associated analytical paper A Profile of Australian Businesses: Some initial findings from the Business Longitudinal Database.

30 Impacts on innovation statistics resulting from the introduction of the BCS, include:

• change to a single, financial year reference period
• annual key innovation activity measures (including the ability to compile estimates for multiple reference years, e.g. single, two or three year periods)
• predominantly biennial release characteristics of innovation outputs (some topics will be collected annually, e.g. barriers), these will have a single, financial year reference period