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CHARACTERISTICS AND PERFORMANCE OF SMALL AND MEDIUM-SIZED BUSINESSES IN AUSTRALIA
Only 5.4% of businesses report as having some kind of foreign ownership. Graphs 3 and 4 show the relationship between value added and labour productivity with foreign ownership of these businesses. When the size of the business increases, foreign owned businesses add more value and are more productive compared to 100% locally owned businesses.
Importers and exporters
In the sample, 13% of businesses were exporters and 13.6% were importers. Businesses that export or import appear to perform better than non-exporting or non-importing businesses. According to graphs 5 and 6, those businesses involved in exporting and importing add more value than non-exporters or non-importers. Exporters are adding value at a slightly higher rate than non-exporters when the size of the business increases.
Most businesses use information technology, with 74.8% of businesses using the internet and 41.5% of them having a web presence for their business. It appears that businesses who use the internet at their business are more productive than businesses without the internet. Graph 7 shows those businesses with internet add value at an increasing rate when the size of the business increases. Similarly those businesses with internet facilities are more productive than those businesses without the internet.
Around 20% of businesses in the sample are involved in some type of innovation activity, with 18.5% of those businesses involved in goods and services innovation, 22.9% involved in operation process innovation, 19.7% involved in managerial process innovation and 15.4% with marketing related innovation. Graph 8 shows there is very little difference between innovators and non-innovators, and this is the same even when considering the different types of innovation.
HOW BUSINESS CHARACTERISTICS RELATE TO VALUE ADDED
A regression analysis was conducted to determine how business characteristics relate to value added. It was found that the age of a business, size of business, whether foreign owned, exporters, importers and use of internet all had a positive association with value added. On the other hand, home-based businesses and those with marketing related innovation had a negative effect on value added.
The results indicate that small and medium sized businesses add more value to their business the longer they have been in operation. This suggests they become better at their core business over time or they may develop economies of scale and add more value to the business through accumulation of know-how.
Businesses with some sort of foreign ownership appear to be adding more value compared to locally owned businesses. Those involved in exporting or importing appear to be adding more value to their business compared to non-exporters or non-importers, suggesting they need to be more efficient to compete with other countries.
Two business focus factors found to be significantly associated with value added performance measures were financial measures and operational measures. Financial measures play a key role when assessing performance. Having a good understanding of expected profits, sales, business growth and return on investment are considered as financial measures. Similarly operational measures such as asset utilisation, on-time delivery are important factors to perform better in a business. However, the other two business focus factors of cost and quality measures are not significantly related to value added.
HOW BUSINESS CHARACTERISTICS RELATE TO LABOUR PRODUCTIVITY
A regression analysis was conducted to determine how business characteristics relate to labour productivity. It was found that the age of a business, size of business, whether foreign owned, exporters, importers, use of internet, financial measures, operational measures and focusing on export markets all had a positive association with labour productivity. On the other hand, home-based businesses had a negative correlation with labour productivity.
The same factors that influenced value had a similar effect on labour productivity. Likewise, business focus factors that were significantly associated with labour productivity performance measures were financial measures and operational measures. However, cost and quality measures variables are not significantly related to labour productivity but may show a different picture over time.
Results from this analysis of BLD data indicate that both value added and labour productivity are positively and significantly associated with age of business under current ownership, foreign ownership, exporting, importing, use of internet, assessing financial measures and assessing operational measures of firm for small and medium sized businesses.
This study was conducted as a cross-sectional analysis, and as more data becomes available from the BLD then a panel or longitudinal analysis would be more revealing as other studies have shown that business characteristics such as innovation activity and employment training can have a lagged impact on current business performance.
Information on the ABS Business Longitudinal Database can be found at:
Business Longitudinal Database, Expanded CURF, Australia, Technical Manual, 2004-05, 2005-06 and 2006-07 (cat. no. 8168.0.55.002)
Microdata: Business Longitudinal Database, Expanded CURF, Australia, 2004-05, 2005-06 and 2006-07 (cat. no. 8168.0.55.001)
For further information on the analysis in this article and the variables used please contact Tala Talgaswatta on Canberra (02) 6252 5376 or email <firstname.lastname@example.org>
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