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EXPLANATORY NOTES


INTRODUCTION

1 This release presents summary data for a selection of topics as collected by the 2005-06 Business Characteristics Survey (BCS). Data included are additional to those outputs from the BCS released previously in Summary of IT Use and Innovation in Australian Business, 2005-06 (cat. no.8166.0) and Business Use of Information Technology, 2005-06 (cat. no. 8129.0).

2 The BCS is an annual survey and it is the survey vehicle for the ABS' Integrated Business Characteristics Strategy (IBCS). The strategy integrates the collection and quality assurance of data required for input into both the ABS' Business Longitudinal Database (BLD) and the production of point in time estimates for: business use of Information Technology (BUIT); business innovation in Australia; and, a broad range of other non-financial business characteristics.

3 A key part of the IBCS is the production of annual BUIT and business innovation indicators, with a more detailed set of items for each of these topics collected every second year (i.e. in alternating years). Previously, these IT and innovation indicators were produced from the separate annual Business Use of IT and biennial Innovation surveys, respectively.

4 The 2005-06 BCS is the first fully integrated collection and had a focus on BUIT. The 2006-07 BCS will collect detailed innovation information.

5 The 2005-06 BCS was dispatched in March 2007. First outputs from this survey were released approximately 18 months after the reference period, with this timing the result of a phased-in approach taken to the introduction of this new collection. By the 2008-09 reference year, the survey is expected to be dispatched immediately after the end of the reference period and the release of key indicators is expected to take place approximately 6 months after this.

6 As a result of implementing the IBCS, there has been some impact on comparability of the BUIT and business innovation data sourced from the BCS with that obtained from the previous separate collections. Some of this is as a result of integration including changes to scope and the composition of the sample. Additionally, more fundamental changes such as expanded and changed measures of innovation have had a significant impact on comparability of those data.

STATISTICAL UNITS USED

7 Statistical units are those entities from which statistics are collected, or about which statistics are compiled. In ABS economic statistics, the statistical unit is generally the business. The ABS Business Register (ABSBR) is used to record information about statistical units and is used to create the frames for most ABS economic collections.

8 The ABS uses an economic statistics units model on the ABSBR to describe the characteristics of businesses, and the structural relationships between related businesses. Within large, complex and diverse business groups, the units model is used also to define reporting units that can provide data to the ABS at suitable levels of detail.

9 This units model allocates businesses to one of two sub-populations:

Most businesses and organisations in Australia need to obtain an Australian Business Number (ABN). They are then included on the whole-of-government register of businesses, the Australian Business Register (ABR), which is maintained by the Australian Taxation Office (ATO). 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 (ATOMP), and the ABN unit is used as the statistical unit for all ABS economic collections.
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 the business. These businesses constitute the ABS maintained population (ABSMP). This population consists typically of large, complex and diverse businesses. For businesses in the ABSMP, statistical units comprise the Enterprise Group, the Enterprise and the Type of Activity Unit (TAU). The range of activities across the Enterprise Group can be very diverse. The TAU represents a grouping of one or more business entities within the Enterprise that cover all of the operations within an industry sub-division and for which a basic set of financial data, production and employment can be reported.

11 The current economic statistics units model was introduced into the ABS in mid 2002, to better use the information available as a result of The New Tax System (TNTS), for more information please refer to Information Paper: Improvements in ABS Economic Statistics [Arising from the New Tax System], (cat. no. 1372.0).

SCOPE AND COVERAGE

12 The businesses that contribute to the statistics in this publication are classified:

by institutional sector, in accordance with the Standard Institutional Sector Classification of Australia (SISCA), which is detailed in Standard Economic Sector Classifications of Australia (SESCA) (cat. no. 1218.0)
by industry, in accordance with the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition (cat. no. 1292.0).

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 Sub-division 97 Private households employing staff
ANZSIC Class 7340 Financial asset investors
ANZSIC Class 7412 Superannuation funds
ANZSIC Class 9610 Religious organisations

15 The frame for the Business Characteristics Survey is a subset of the ABS Business Register and includes employing business only. These are defined as those business 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 frame is updated quarterly to take account of new businesses, businesses which 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 Australian Business Number (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.

SURVEY METHODOLOGY

16 The sample design for this survey is complex as it serves dual purposes, which includes collection of characteristics data for the ABS Business Longitudinal Database and production of point in time estimates for a range of non-financial business characteristics. While there are scope differences between the BLD and point in time estimates, the intention is to maximise the number of businesses selected for which the data collected can contribute to both purposes. More information about the BLD is contained in the Discussion paper: The first iteration of the Business Longitudinal Database, 2004-05 (cat. no. 8164.0). The explanation given in the following paragraphs has been simplified to provide a summary explanation of the design of the sample used to produce the estimates included in this release. If you require further information on the survey methodology for the BCS, please email your query to innovation.technology@abs.gov.au.

17 Collection of data included in this release was undertaken based on a random sample of approximately 8,800 businesses using a mail out questionnaire. The sample was stratified by industry and an employment based size indicator. All businesses on the ABS Business Register identified as having 200 or more employees were included in the sample.

18 Apart from the scope differences, the main change in the sample design of the 2005-06 BCS compared to the most recent BUIT and Innovation surveys is the loss of state or territory as a stratification variable. The loss of state or territory stratification has impacted on the quality of state or territory estimates and, consequently, state or territory outputs made available in future related 2005-06 BCS releases will be restricted to a small range of BUIT and Innovation data items.

19 In an effort to reduce load on individual businesses, standard practice in most ABS business surveys is to rotate out one third of sampled businesses each year. This normally results in around 66% of sampled businesses being common between cycles and balances the impact on outputs resulting from new businesses being included with the load placed on businesses. In previous BUIT surveys, higher rates of rotation have impacted on the comparability of estimates for some output classifications. As the 2005-06 BCS was the first integrated collection and incorporated a new sample design, it was not possible to control the rate of sample rotation.

20 To minimise this potential effect, efforts were made to maximise the overlap of businesses selected in the 2005-06 BCS sample with those included in previous BUIT and Innovation surveys. However, to meet all of the requirements for the dual purpose of the BCS (i.e. both longitudinal and point in time), only relatively low levels of overlap were ultimately possible. There were also resource and provider load constraints impacting on this. Approximately 16% of businesses included in the sampled component of the 2004-05 BUIT survey are common to the sampled component of the 2005-06 BCS and approximately 28% of businesses in the sampled component of the 2005 Innovation survey are common to the sampled component of the 2005-06 BCS. The common sample rate for subsequent BCS cycles will be higher.

REFERENCE PERIOD

21 The reference period for most of the characteristics items included in the 2005-06 Business Characteristics Survey is the year ended 30 June 2006. Financial data relates to the most recent financial year ended on or before 30 September 2006.

DEFINING "INNOVATION"

22 The development, introduction or implementation of new or significantly improved goods, services, processes or methods is generally considered to be innovation. Innovation is often seen as a continuous process. Therefore, it can be difficult to measure and aspects of the process can also be intangible. An international framework, the 'Oslo Manual, Guidelines for Collecting and Interpreting Innovation Data', has been developed jointly by the Statistical Office of the European Communities (Eurostat) and the Organisation for Economic Co-operation and Development (OECD) to aid in measuring the process of innovation. This manual, updated in 2005, forms the basis of concepts used to measure innovation in the 2005-06 BCS.

IMPACT ON MEASURES OF INNOVATION ARISING FROM THE IMPLEMENTATION OF THE IBCS

23 In recent years, the ABS has conducted two Innovation Surveys, one for the calendar years 2001 to 2003 and another for the calendar years 2004 and 2005. There were some changes to the concepts measured between these two surveys. The collection of innovation statistics as part of the BCS has resulted in further changes to the range of innovation concepts being measured. Conceptually the scope of innovation measures have been expanded to better align to the framework provided in the 'Oslo Manual, Guidelines for Collecting and Interpreting Innovation Data' (Third Edition, 2005). In addition, the scope of innovation statistics has been expanded to include businesses with 0-4 persons employed and those classified to the Health and community services and Personal and other services industry divisions.

24 One of the major changes to the collection of innovation statistics made as part of BCS implementation were the questions included on the 2005-06 BCS used to produce the innovation activity measures. These are more detailed in nature than the broader indicator questions used in previous innovation surveys. The 2005-06 BCS also extended innovation type to include marketing methods. Furthermore, indicators for status of activity that had either been abandoned or was still in development were collected separately and expanded to include type of innovation. The 2005 Innovation Survey collected a single indicator (i.e. whether any innovation had either been abandoned or was still in development).

25 Innovation statistics collected by the BCS are in respect of a single, financial year reference period. This differs from the 2003 and 2005 Innovation Surveys which were based on three year (i.e. 2001, 2002 and 2003)) and two year (i.e. 2004 and 2005) calendar years, respectively, for characteristic type data. It should be noted that migration of innovation items to the BCS vehicle will still enable estimates for some innovation items to be compiled for multiple reference years, e.g. two year periods. These data will be released following the 2006-07 BCS.

26 As indicated in paragraph 20 of these Explanatory Notes, the BCS had a much smaller number of businesses selected in both the 2005 Innovation Survey and 2005-06 BCS samples than what would have typically occurred between cycles if the Innovation survey had remained separate. Quality assurance aimed at validating any changes in responses to innovation questions for businesses common to both the 2005 Innovation Survey and the 2005-06 BCS was applied.

27 Users should be aware that all of the changes noted above have had a significant impact on the comparability of innovation estimates included in this release and those included in Innovation in Australian Business (cat. no. 8158.0) and comparisons should not be made.

BUSINESS COUNTS IN THIS RELEASE AND COMPARABILITY WITH OTHERS PUBLISHED BY THE ABS

28 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).

29 The Business Characteristics Survey 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. A more robust source of counts of Australian businesses is available from Counts of Australian Businesses, including Entries and Exits, Jun 2003 to Jun 2007 (cat. no. 8165.0).

OUTPUT CLASSIFICATIONS

30 For output purposes, businesses are classified to employment size ranges based on actual data reported in the survey. For other output groups (industry, capital city/other areas) the classification is drawn from information held about the business on the ABS Business Register.

UPCOMING RELATED RELEASES

31 Upcoming ABS data releases from the 2005-06 Business Characteristics Survey and a brief description of these are listed below:

Business Use of Information Technology, Australia, 2005-06 (cat no 8129.0) datacubes. These datacubes will include detailed (including some cross classified) industry and employment size data by topic. Any state or territory data which can be released will be included in these datacubes.
Selected Characteristics of Australian Business, 2005-06 (cat. no. 8167.0) datacubes. These datacubes will include detailed (including some cross classified) industry and employment size data by topic. State or territory data will be included for some Innovation items. It is possible that there may be additional outputs relating to business characteristics (with some cross classification of characteristics variables) released as data cubes. For example, government financial assistance by innovator status.

Counts of Australian Businesses, including Entries and Exits, Jun 2003 to Jun 2007 (cat. no. 8165.0)

Summary of IT Use and Innovation in Australian Business, 2005-06 (cat. no. 8166.0)
Innovation in Australian Business, 2005 (cat. no. 8158.0)
Patterns of Innovation in Australian Businesses, 2005 (cat. no. 8163.0)
Research and Experimental Development, Business, Australia, 2005-06 (cat. no. 8104.0)
Innovation in Australian Business, 2003, Expanded Confidentialised Unit Record File (cat. no. 8158.0.055.001)

Business Use of Information Technology, 2005-06 (cat. no.8129.0)
Summary of IT Use and Innovation in Australian Business, 2005-06 (cat. no. 8166.0)
Patterns of Internet Access in Australia, 2006 (cat. no. 8146.0.55.001)
Household Use of Information Technology, Australia, 2006-07 (cat. no. 8146.0)
Information and Communication Technology, Australia, 2004-2005 (cat.no. 8126.0)
Internet Activity, Australia, March 2007 (cat. no. 8153.0)
Use of Information Technology on Farms, Australia, 2004-05 (cat. no. 8150.0)

Discussion Paper: The first iteration of the Business Longitudinal Database, 2004-05 (cat. no. 8164.0)
Innovation and Technology Update (Newsletter), June 2007 (cat. no. 8101.0)

ROUNDING

37 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 percentage point.

COMMENTS

38 The ABS welcomes comments and suggestions from users regarding business characteristics including ICT and innovation statistics. These comments should be addressed to the Director, Innovation and Technology Business Statistics Centre, Australian Bureau of Statistics, GPO Box K881, Perth, WA, 6842, or email innovation.technology@abs.gov.au.