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Business Innovation1.1 Innovation Activity

1.1.1 Innovation activity overall

The proportion of businesses undertaking innovation is a key measure of performance in the innovation system. Based on survey data published by the Australian Bureau of Statistics (ABS), about half (50.7 per cent) of all Australian businesses identified as Innovation-active businesses in 2019–20, which is a 0.9 percentage point increase compared to 2017–18 (the most recent comparable estimate). Innovation-active businesses are those that undertook any innovative activity, irrespective of whether the innovation was introduced, still in development or abandoned, during the reference period.[8] The data for this indicator are collected through the Characteristics of Australian Business survey, which alternates from year to year between focusing on innovation versus business use of information technology. This results in two slightly different versions of the same data series, both of which are displayed in the chart. When making comparisons over time, it is recommended that estimates from the same version be used.

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1.1.2 Innovation activity by innovation stage

Survey data published by the Australian Bureau of Statistics (ABS) cover three stages of innovation (introduced, still in development, and abandoned). In 2019–20, 50.7 per cent of Australian businesses were innovation-active, which means they were involved in at least one of these stages of innovation over the last 12 months. As a share of all businesses, two in five (42.6 per cent) had introduced or implemented their innovation, 27.9 per cent were still developing their innovation and 10.4 per cent had abandoned some innovative ideas. These proportions have remained relatively stable since 2011–12, however recent data also shows a rise in Innovation which is still in development and Innovation which has been abandoned.[9]

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1.1.3 Innovation activity by business size

Innovation activity increases significantly with business size. In 2019–20, 68.0 per cent of large businesses (200 or more employees) were innovation active, compared to just 45.8 per cent of micro businesses (0–4 employees). In recent years, there has been a gradual decline in the share of large innovation-active businesses from a high of 79.5 per cent in 2013–14 to 68.0 per cent in the latest period. As a group, small and medium sized businesses have maintained relatively stable proportions of businesses with innovation activity.[10]

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1.1.4 Innovation activity by industry

Innovation activity varies considerably by industry. In 2019–20, the Professional, scientific and technical services industry had the highest share of innovation-active business (61.6 per cent), followed by Information media and telecommunications (61.3), Wholesale trade (60.6 per cent) and Retail trade (59.2 per cent). A decade earlier in 2009–10, Wholesale trade reported the highest share of innovation-active businesses, followed by Arts and recreation services. In the last 10 years, the share of innovation-active businesses increased across the board, except in Mining and Construction where it declined. The largest relative increases occurred in the Transport, postal and warehousing industry.[11]

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1.1.5 Businesses that introduced innovations by innovation type

Innovating businesses are those that introduced at least one type of innovation during the reference period and are a subset of innovation-active businesses. The introduction of innovations is somewhat correlated with business size. Just over half of all medium (20–199 employees) and large (200 or more employees) businesses introduced innovations in 2019–20 compared to roughly one third of micro businesses (0–4 employees). Similar to the 2018–19 survey, the 2019–20 survey distinguishes between two types of innovation: goods and services innovation, and process innovation. This aligns with the new international innovation standards and concepts, described in the latest Oslo Manual 2018.[12] In 2019–20, more businesses introduced Process innovations than Goods and services innovations.[13]

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1.1.6 Novelty of introduced innovations

Australian businesses tend to specialise in modifying innovations introduced by other businesses also operating in the domestic market. Roughly three quarters of all innovation in goods and services and almost 90 per cent of all process innovation introduced by Australian businesses is New to the business only. Large businesses are generally more likely than SMEs to introduce innovation that is New to the industry. In 2018–19, only 9.2 per cent of goods and services innovation was New to Australia and 9.1 per cent was New to the world. The ability of so many Australian innovating businesses to successfully execute this relatively simple ‘adopt and adapt’ strategy is arguably a strength of Australia’s innovation system. However, excessive focus on domestic modification may adversely affect Australia’s international competitiveness, since innovations with higher degrees of novelty areas generally more valuable, both domestically and internationally.[14]

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1.1.7 Barriers to business innovation

Recent survey data reflects business perceptions regarding the barriers that are most likely to derail their innovation activities or dissuade them from innovating. The most commonly reported barriers across both innovators and non-innovators include a Lack of skilled persons, followed by Uncertain demand for new products and Lack of access to additional funds. Although there is no clear evidence that access to business finance is a widespread problem in Australia, a 2015 inquiry into business lending found that innovative businesses are more likely to face difficulties than non-innovators.[15] Businesses reported that barriers related to Government regulations and compliance were not particularly significant, while Adherence to standards and Lack of access to knowledge or technology were reported the least.[16]

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