INNOVATION ACTIVITY OF BUSINESSES
The development, introduction or implementation of new or significantly improved goods, services or processes is generally considered to be innovation. Innovation is a key driver of economic growth.
The 2005 Innovation Survey, conducted by the ABS, collected information about three types of innovative activity undertaken by businesses in Australia:
- new or significantly improved good or service - any good or service or combination of these which is new to a business and its characteristics or intended uses differ significantly from those previously produced
- new or significantly improved operational process - a significant change for a business in its methods of producing or delivering goods or services
- new or significantly improved organisational/managerial process - a significant change to the strategies, structures or routines of a business which aim to improve performance.
Based on the combination of type and status of innovative activity, two statistical measures of business innovation have been produced:
- Innovating businesses - businesses that introduced or implemented an innovation during the survey reference period
- Innovation-active businesses - businesses that had undertaken any innovative activity, including introduction or implementation of an innovation, and/or businesses with an incomplete and/or abandoned innovative activity.
During the two years ended December 2005, innovating businesses in Australia represented 33.5% of all businesses; innovation which was incomplete at end-December 2005, or had been abandoned during the two-year period, was undertaken by 12.2% of all businesses; and 34.9% of businesses were innovation-active in the period (table 26.7).
The proportion of innovating businesses increased with business size. This is most noticeable in the difference between innovating businesses that employ 5-19 people (28.4%) and the results for businesses that employ 20-99 people, and 100 or more people (46.6% and 51.5% respectively) (table 26.8). This pattern is followed for each type of innovation with the exception of businesses that employ 20-99 people, which recorded the highest proportion of businesses that introduced new goods or services.
26.8 BUSINESSES INVOLVED IN INNOVATION(a), Selected characteristics(b) |
|  |
| | Businesses which: | |
| | were innovating | started but did not yet complete or abandoned any innovative activity | were innovation-active | |
| | % | % | % | |
| |
| Employment size | | | | |
| 5-19 persons | 28.4 | 10.1 | 29.8 | |
| 20-99 persons | 46.6 | 17.2 | 47.9 | |
| 100 or more persons | 51.5 | 21.4 | 54.8 | |
| State | | | | |
| New South Wales | 31.0 | 11.3 | 32.6 | |
| Victoria | 34.3 | 13.8 | 36.3 | |
| Queensland | 33.6 | 7.9 | 34.2 | |
| South Australia | ^40.1 | ^21.6 | ^41.4 | |
| Western Australia | 37.1 | 14.2 | 38.4 | |
| Tasmania | ^30.1 | 10.4 | ^31.7 | |
| Northern Territory | ^32.4 | 6.1 | ^33.0 | |
| Australia Capital Territory | ^28.4 | 9.5 | ^28.5 | |
| Industry(c) | | | | |
| Mining | 31.4 | 14.9 | 34.5 | |
| Manufacturing | 41.7 | 16.5 | 43.1 | |
| Electricity, gas and water supply | 48.8 | 26.6 | 52.1 | |
| Construction | 30.8 | 10.0 | 31.0 | |
| Wholesale trade | 43.4 | 17.2 | 46.8 | |
| Retail trade | 27.5 | 7.5 | 28.2 | |
| Accommodation, cafes and restaurants | 35.6 | 9.6 | 35.7 | |
| Transport and storage | 34.0 | 10.9 | 34.3 | |
| Communication services | 35.5 | 18.2 | 36.3 | |
| Finance and insurance | 37.9 | 15.1 | 39.5 | |
| Property and business services | 30.3 | 13.4 | 32.7 | |
| Cultural and recreational services | 32.9 | 12.6 | 34.4 | |
| Total businesses | 33.5 | 12.2 | 34.9 | |
| |
| ^ estimate has a relative standard error of 10% to less than 25% and should be used with caution |
| (a) During the two-year period 2004-2005. |
| (b) Proportions are of businesses in each category. |
| (c) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. |
| Source: Innovation in Australian Business (8158.0). |
Most states and territories reported proportions of innovating businesses between 30% and 35%. The exceptions were South Australia (40.1%), Western Australia (37.1%) and the Australian Capital Territory (28.4%). Across all states and territories, introduction of new organisational/managerial processes was the predominant type of innovation introduced. Businesses in South Australia reported the highest proportion for this type of innovation (32.4%). For the other two types of innovation (new goods or services, and new operational processes), businesses in Western Australia (25.8%) and South Australia (26.6%) had the highest proportions respectively.
Innovating businesses in the Electricity, gas and water supply industry represented 48.8% of all businesses. Of businesses in the Manufacturing and Wholesale trade industries, 41.7% and 43.4% were innovating. Businesses in the Retail trade industry recorded the lowest level of innovation (27.5%). The Communications services industry had the highest proportion of businesses that introduced new goods or services (28.5%).
Other characteristics of innovative activity by businesses during 2004 and 2005 include:
- businesses operating under current ownership for less than nine years had a higher propensity to innovate than businesses under current ownership for nine years or more; the highest proportion was among innovating businesses that had been under current ownership for one to four years (38%)
- of wholly Australian-owned businesses, 33.6% innovated during the two-year period; 58.5% of businesses with greater than 50% foreign ownership undertook innovation
- the most commonly reported barrier to innovation, for both innovating and non-innovating businesses, related to costs (58.4% of innovating businesses, 36.5% of non-innovating businesses)
- other barriers to innovation included market-related barriers (36.7% of innovating businesses, 27.0% of non-innovating businesses) and a lack of skilled staff (27.2% of innovating businesses, 20.6% of non-innovating businesses)
- profit-related drivers were the most frequently cited reasons driving innovation, reported by 94.2% of innovating businesses; market-related drivers were reported by 88.9% of innovating businesses, with legal-related drivers being reported by 53.1% of innovating businesses
- 26.0% of innovating businesses indicated they were involved in some form of collaboration (such as joint marketing/distribution, manufacturing, or research and development) or joint venture, compared with 6.4% of non-innovating businesses
- the most reported source of ideas or information for innovative activity was 'internal sources' (75.8%), that is from within the business or the wider enterprise group to which the business belongs; market sources of ideas or information were reported by 69.6% of innovating businesses
- just under three-quarters (73.0%) of innovating businesses reported they had no formal methods to protect their intellectual property; copyright or trademark protection were the most common formal method reported by innovating businesses (20.3%) followed by patents (7.3%)
- introduction of goods or services that were 'new to the world' was reported by 7.7% of innovating businesses, less than 1% of innovating businesses reported introducing new operational or organisational/managerial processes that were 'new to the world'; new goods or services 'new to Australia' were introduced by 15.2% of innovating businesses while 74.0% of innovators introduced new goods and services 'new to the business'.
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