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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 (43.9 per cent) of all Australian businesses identified as Innovation-active businesses in 2018–19, which is a 0.6 percentage point decrease compared to 2016–17, the previous year when innovation statistics were in focus. This means that these businesses undertook any innovative activity irrespective of whether the innovation was introduced, still in development or abandoned during the reference period.[11] The data for this indicator are collected through the Characteristics of Australian Business survey which alternates from year to year based on its focus on either innovation or business use of information technology, resulting in two slightly different versions of the same data series, both of which are displayed in the chart. It is recommended the same version be used when looking at the estimates over time.

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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 2018–19, 43.9 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, one third (36.9 per cent) had introduced or implemented their innovation, 24.0 per cent were still developing their innovation and 9.3 per cent had abandoned some innovative ideas. These proportions have remained relatively stable since 2012–13, however recent data also shows a rise in Innovation which is still in development and Innovation which has been abandoned.[12]

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1.1.3 Innovation activity by business size

Innovation activity increases significantly with business size. In 2018–19, 60.7 per cent of large businesses (200 or more employees) were innovation active, compared to just 36.7 per cent of micro businesses (0–4 employees). In recent years, there has been continued decline in the share of large innovation-active businesses from a high of 74.3 per cent in 2012–13 to just 60.7 per cent in 2018–19, which is now very similar to the share of innovation activity within medium businesses (20–199 employees).[13]

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1.1.4 Innovation activity by industry

Innovation activity also varies by industry. In 2018–19, the Wholesale trade industry had the largest share of innovation-active business (60.9 per cent), followed by Manufacturing (59.5 per cent) and Information media and telecommunications (56 per cent). These three industries also had the largest shares in 2008–09. In the last 10 years within each industry, the share of innovation-active businesses has increased, with the largest gains made in the Health care and social assistance and Electricity, gas, water and waste industries.[14]

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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. Just over half of all medium (20–199 employees) and large (200 or more employees) businesses introduced innovations in 2018–19 compared to only one third of micro businesses (0–4 employees). The 2018–19 survey captures all innovation under two types, namely goods and services and process innovation, down from four types of innovation (goods and services, operational processes, organisational/managerial processes, and marketing methods) in previous years. Changes are due to updates to the international innovation standards and concepts, captured in the Oslo Manual 2018.[15] The ABS noted in its release that these conceptual changes need to be taken into consideration when comparing innovation data from previous cycles, particularly within innovation types. In 2018–19, more businesses introduced Process innovations than Goods and services innovations.[16]

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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.[17]

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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 access to additional funds and a Lack of skilled persons. 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.[18] 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.[19]

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