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)
started but did not yet complete or abandoned any innovative activity
|Employment size |
|5-19 persons |
|20-99 persons |
|100 or more persons |
|New South Wales |
|South Australia |
|Western Australia |
|Northern Territory |
|Australia Capital Territory |
|Electricity, gas and water supply |
|Wholesale trade |
|Retail trade |
|Accommodation, cafes and restaurants |
|Transport and storage |
|Communication services |
|Finance and insurance |
|Property and business services |
|Cultural and recreational services |
|Total businesses |
|^ 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'.