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8158.0 - Innovation in Australian Business, 2006-07 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 22/08/2008   
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EXPLANATORY NOTES


EXPLANATORY NOTES

INTRODUCTION

1 This release presents key indicators on the incidence of innovation and related practices by Australian businesses, as collected by the 2006-07 Business Characteristics Survey (BCS).

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; a broad range of other non-financial business characteristics; and other data from administrative sources.

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. The 2006-07 BCS was the second iteration of the fully integrated collection and had a focus on Innovation. The 2007-08 BCS will collect detailed IT use information.


STATISTICAL UNITS USED

4 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.

5 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 also used to define reporting units that can provide data to the ABS at suitable levels of detail.

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

  • Businesses with a simple structure - 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.
  • Businesses with a complex structure - 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 subdivision and for which a basic set of financial production and employment data can be reported.

7 Together these two sub-populations (of ABN units and TAUs) make up the ABSBR population, from which the BCS sample is taken.

8 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

9 The businesses that contribute to the statistics in this publication are classified by:
10 The scope of the estimates in this publication consists of all employing business entities in the Australian economy, except for:
      SISCA 3000 General government
      SISCA 6000 Rest of the world
      ANZSIC06 Division A Agriculture, forestry and fishing
      ANZSIC06 Division O Public administration and safety
      ANZSIC06 Division P Education and training
      ANZSIC06 Groups 624 (Financial asset investing) and 633 (Superannuation funds)
      ANZSIC06 Groups 854 (Religious services) and 955 (Civic, professional and other interest group services)
      ANZSIC06 Subdivision 96 Private households employing staff

11 The 2006-07 BCS used the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition to define scope. This differs from the previous survey which used the 1993 edition of this classification. More information about the impact of this change is provided in Appendix 2: Changes to Industry Classification.

12 The frame for the Business Characteristics Survey is a subset of the ABS Business Register and includes employing businesses only. These are defined as those businesses 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

13 The sample design for this survey is complex due to serving dual purposes: collection of characteristics data for the ABS Business Longitudinal Database (BLD); 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 data collected can contribute to both purposes. More information about releases for the BLD is provided in Explanatory Notes 39 to 40. For more information about the survey design or methodology for the BCS, please email your query to innovation.technology@abs.gov.au.

14 Collection of data included in this release was undertaken based on a random sample of approximately 9,700 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. The 2006-07 BCS was dispatched in November 2007.

15 One of the changes to the design of the 2006-07 BCS sample compared to the last stand-alone BUIT and Innovation surveys is the removal of state or territory as a stratification variable. The loss of state or territory stratification has had an impact on the quality and breadth of state or territory estimates that are able to be released from the BCS.


REFERENCE PERIOD

16 The reference period for most of the business characteristics items included in the 2006-07 BCS is the year ended 30 June 2007. Financial data relates to the most recent financial year ended on or before 30 September 2007.


DEFINING "INNOVATION"

17 The 2006-07 BCS 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. The 2006-07 BCS draws on this manual for the questions used in the BCS and in presentation of outputs from the survey.

18 Key indicators of innovation include: measures of business innovation (innovating, innovation-active); types of innovation (goods or services, operational processes, organisational/managerial processes, marketing methods); and status of innovation (introduced or implemented, still in development, abandoned).

Measures of business innovation

19 Two measures of business innovation are included in this release:
      Innovating businesses - businesses which introduced or implemented any type of innovation during the reference period.
      Innovation-active businesses - businesses which had undertaken any innovative activity during the reference period including: introduction or implementation of any type of innovation and/or businesses with work on the development or introduction either still in progress or abandoned.

Types of innovation

20 Four types of innovation are included in this release:
      Goods or services - Any good or service or combination of these which is new to a business (or significantly improved). Its characteristics or intended uses differ significantly from those previously produced/offered.
      Operational processes - New or significantly improved methods of producing or delivering goods or services of a business (including significant change in techniques, equipment and/or software).
      Organisational/managerial processes - New or significantly improved strategies, structures or routines of a business which aim to improve performance.
      Marketing methods - New or significantly improved design, packaging or sales methods aimed to increase the appeal of goods or services of a business or to enter new markets.

Status of innovation

21 Three statuses of innovation are included in this release:
      Introduced or implemented - the business successfully introduced or implemented an innovation during the reference period (although the innovation does not need to have been commercially successful).
      Still in development - the business was in the process of developing, introducing or implementing an innovation during the reference period but work on the innovation was still in progress at the end of the period.
      Abandoned - the business abandoned the development and/or introduction of an innovation during the reference period (i.e. work on the innovation ceased without full introduction occurring).


INNOVATION CONTENT OF THE BCS

22 Basic indicators of innovation by type and status are collected annually in the BCS. These data are released every year as part of the two regular BCS releases Summary of IT use and Innovation in Australian Business (cat. no. 8166.0) and Selected Characteristics of Australian Business (cat. no. 8167.0).

23 Every second year more detailed information about business practices or factors that influence innovative activity are collected from businesses that have undertaken innovative activity. It is these data that form the majority of content for this release. Outputs for most of the topics are available for innovation-active businesses only, as these question are not asked of businesses that have not undertaken any innovative activity. For more information about ABS Innovation statistics, please refer to Appendix 1: Overview of ABS Innovation Statistics.


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

24 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 made to the range of concepts measured between these two surveys. The collection of innovation statistics as part of the BCS has resulted in an expansion to the range of innovation concepts being measured. Conceptually the range and scope of innovation measures included in the BCS align more closely to the international framework provided in the 'Oslo Manual, Guidelines for Collecting and Interpreting Innovation Data' (Third Edition, 2005).

25 Changes to the collection of innovation statistics were made as part of BCS implementation. For example, questions used to produce the innovation activity measures are significantly different to those used in previous stand-alone Innovation Surveys. The questions are more detailed in nature than the broader indicator questions used in previous innovation surveys. Other changes include the addition to the scope of more industries and small employers (i.e. those with less than 5 employees). Detailed information about ABS innovation statistics can be found in Appendix 1: Overview of ABS Innovation Statistics.

26 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 experimental estimates for some innovation items to be compiled for multiple reference years, e.g. two year periods. This work is currently underway and the results will be made available in the two annual releases from the BCS: Summary of IT Use and Innovation in Australian Business (cat. no. 8166.0) and Selected Characteristics of Australian Business (cat. no. 8167.0).


INNOVATION RELATED FINANCIAL INDICATORS - QUALITY AND AVAILABILITY

27 As indicated in previous issues of this release, there are reporting issues associated with estimates of expenditure or income directly related to innovation. In each of the three surveys where collection of these data has been attempted, instrument testing and quality assurance during survey processing have both revealed that many businesses do not keep records that allow accurate estimates for these items to be provided. While the ABS has attempted to improve quality by asking for broader grouping of innovation expenditure and estimates of the proportion of total business expenditure that can be tied to innovation, there has not been an improvement in the quality of these data. Despite the best efforts of the ABS, there continue to be a large number of innovating businesses who, although they have indicated that they would have incurred some expenditure or earned some income related to their innovative activity, are unable to provide these estimates; therefore, a major proportion of these data require imputation.

28 Estimates of income from innovation and expenditure on innovation are not included in this release predominantly due to the relatively high proportion of the estimates that are the result of imputation. As part of quality assuring and producing estimates for potential release, it became evident that approximately 25% of expenditure related to innovation and 44% of income from sales of new goods or services would result from imputation processes. These levels of imputation are considered inordinately high and the resultant estimates are considered not to be fit for purpose.

Expenditure on Research and Experimental Development

29 As part of the conduct of the 2005 Innovation survey, a decision was made to source estimates of expenditure on Research and Experimental Development for the businesses included in the scope of Innovation statistics from the ABS survey Research and Experimental Development - Business (BERD). This was due to the better quality of BERD estimates that result from the dedicated survey. However, BERD estimates for 2006-07 are yet to be published and cannot be made available as part of this release; they will be available from the ABS web site as part of the BERD release on 14 October 2008.


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

30 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).

31 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. Users should also note that the estimates in this publication are only for the population of businesses in scope of the BCS. 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

32 For output purposes, businesses are classified to employment size ranges based on data reported for the last pay period in the reference year, i.e. the last pay period ended before 30 June 2007. It is possible for businesses classified on the ABS Business Register at the time of selection as employing, to report nil employees for the last pay period. For other output groups (industry, capital city/other areas) the classification is drawn from information held about the business on the ABS Business Register.


STATE/TERRITORY OUTPUTS

33 As indicated in paragraph 15 of these Explanatory Notes, the removal of state/territory as a stratification variable has had a major impact on the range and quality of data available at the state/territory level from the BCS. Users should be aware that estimates at state/territory level included in data cubes are subject to relatively high levels of sampling error and that they should be used with caution.


UPCOMING RELATED RELEASES

34 There is one further regular ABS data release from the 2006-07 Business Characteristics Survey:
      Selected Characteristics of Australian Business, 2006-07 (cat. no. 8167.0). This release will include summary characteristics data for a selection of topics including business cooperative arrangements, performance measures, barriers, government financial assistance, finance sought, markets and competition, innovation rates and IT usage. There may be additional outputs relating to business characteristics (with some cross classification of characteristics variables) released as data cubes. Some basic data for states/territories may be included. This release is scheduled for 19 September 2008.


MOST RECENT RELATED RELEASES

35 The most recent issue of ABS releases related to demography of Australian business is listed below:
36 The second publication listed above is sourced from a supplementary topic collected as part of the ABS Monthly Labour Force Survey and not from the BCS.

37 The most recent issues of other ABS releases related to innovation in business in Australia are listed below:
38 Recent ABS releases which provide additional information related to the Integrated Business Characteristics Strategy and the Business Longitudinal Database are listed below:

BUSINESS LONGITUDINAL DATABASE (BLD) - CONFIDENTIALISED UNIT RECORD FILE

39 The primary outputs from the BLD will be a suite of Confidentialised Unit Record Files (CURF's). The BLD design is comprised of panels (or waves) with each panel representing the entire population of in-scope small and medium businesses at the time of initialisation. Each panel is surveyed for five years. The first wave of the BLD (Panel 1) was initiated via a stand-alone survey conducted in respect of the 2004-05 reference year. The first CURF for the BLD will include, for at least some businesses, 6-7 years of financial data (from administrative sources) and 3-4 years of characteristics data (directly collected via the BCS). The CURF is due for release in the first half of 2009.


ABS WEBSITE

40 Other information relating to IT, innovation and characteristics of business, particularly updates about additional analytical work, can be found on the ABS website <www.abs.gov.au>, Innovation, Science and Technology Home Page.


ROUNDING

41 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

42 The ABS welcomes comments and suggestions from users regarding business characteristics including IT 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.


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