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Absorptive capacity is a business's ability to identify, acquire, transform and exploit knowledge that is external to the business. Measures such as research and development expenditure, number of researchers in the business and survey methods are used to measure absorptive capacity.

Original work undertaken primarily to acquire new knowledge with a specific application in view. It is undertaken either to determine possible uses for the findings of basic research or to determine new ways of achieving some specific and predetermined objectives.

Business demography statistics describe the characteristics and demography of the business population. A number of business populations are considered for the scope of business demography. These are the population of active enterprises, population of enterprise births, population of enterprise survivals up to five years, and population of enterprise deaths. For each of these populations, variables on number of enterprises, number of employees, and number of persons employed are reported.

Business expenditure on R&D (BERD) represents the component of gross expenditure on R&D (GERD) incurred by units belonging to the Business enterprise sector. It is the measure of intramural R&D expenditures within the Business enterprise sector during a specific reference period.

Cloud computing is a type of computing that relies on shared computing resources rather than having local servers or personal devices to support applications. The services are delivered and used over the Internet and are paid for by the cloud customer on an as-needed or pay-per-use business model.

The Oslo Manual 2018 defines collaboration as requiring co-ordinated activity across different parties to address a jointly defined problem, with all partners contributing. It requires the explicit definition of common objectives and it may include agreement over the distribution of inputs, risks and potential benefits. Collaboration can create new knowledge, but it does not need to result in an innovation. These interactions can consist of informal contacts and information flows, or more formal collaboration on innovation projects. Collaboration relies on openness and knowledge sharing but also some level of focus and accountability on the part of the business organisations.

Competitive advantage is the leverage that a business or country has over its competitors. It is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices through differentiation. Competitive advantage can be attributed to a variety of factors including cost structure, branding, the quality of product offerings, the distribution network, intellectual property and/or customer service.

Ability of a firm or a nation to offer products and services that meet the quality standards of the local and world markets at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them. Competitiveness is gained through a set of institutions, policies and factors that determine the level of productivity of a firm or a country.

Digital innovation, or digital transformation, is the novel use of digital technology to increase the competitiveness of businesses and contribute to society's total productivity. It is the process of leveraging digital advancements to reimagine how business is done.

Entrepreneurship is the capacity and willingness to develop, organise and manage a new business venture along with risks in order to make a profit. Entrepreneurial spirit is characterised by innovation and risk-taking. Despite definitional differences it is generally agreed that entrepreneurship is both a driving force of and a challenge for young start-ups that lack funds, human capital and relevant experience.

Systematic work, using existing knowledge gained from research or practical experience, which is directed to: producing new materials, products, devices, policies, behaviours or outlooks; to installing new processes, systems and services; or to improving substantially those already produced or installed.

The efficacy of an innovation system often hinges upon the quality of framework conditions, namely the capacity to ensure an innovation-friendly environment. This is shaped not only by R&D but also by the interplay of factors which enable knowledge to be converted into new products, processes and organisational forms which in turn enhances economic development and growth. Framework conditions encompass the quality and reach of governance in a country, an effective banking and financial system, an honest and functioning judiciary, and working educational and health systems.

Full-time equivalent (FTE) is a measure of the total level of staff resources used by firms. The FTE of a full-time staff member is equal to 1.0. The calculation of FTE for part-time staff is based on the proportion of time worked, compared to that worked by full-time staff performing similar duties. While FTE includes full-time and part-time workers, it does not include contractors.

Government budget allocations for R&D (GBARD) encompass all spending allocations met from sources of government revenue foreseen within the budget. Spending allocations by extra-budgetary government entities are only within the scope to the extent that their funds are allocated through the budgetary process. R&D financing by public corporations based on funds raised within the market and outside the budgetary process, is outside the scope of GBARD statistics.

Government expenditure on R&D (GOVERD) represents the component of gross expenditure on R&D (GERD) incurred by units belonging to the Government sector. It is the measure of expenditures on intramural R&D within the Government sector during a specific reference period.

Gross Domestic Product (GDP) is the total market value of goods and services produced in Australia within a given period after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital. GDP, as here defined, is at market prices. It is equivalent to gross national expenditure plus exports of goods and services less imports of goods and services.

Gross domestic expenditure on R&D (GERD) is total intramural expenditure on R&D performed in the national territory during a specific reference period. GERD represents the total expenditure devoted to R&D by the business, government, higher education and private non-profit sectors during a specific reference period.

Government Expenditure in R&D (GOVERD) represents the component of GERD incurred by units belonging to the Government sector. It is the measure of expenditures on intramural R&D within the Government sector during a specific reference period.

Higher education expenditure on R&D (HERD) represents the component of gross expenditure on R&D (GERD) incurred by units belonging to the higher education sector. It is the measure of intramural R&D expenditures within the higher education sector during a specific period.

High-growth firms (HGFs) are defined by OECD as those with more than 20 per cent annualised growth over a three-year period, with at least 10 employees, where growth can be measured by the number of employees or by turnover.

Human capital is defined by OECD as the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being.

Industry sector describes firms that operate in the same segment of the economy or share a similar business type. Industries have been defined in accordance with the International Standard Industrial Classification of All Economic Activities (ISIC), Rev.3. For national data, industries are defined according to the 2006 Australian and New Zealand Standard Industrial Classification (ANZSIC).

Information and Communication Technology (ICT) is the infrastructure and components that enable modern computing. Although there is no single, universal definition of ICT, the term is generally accepted to mean all devices, networking components, applications and systems that combined allow people and organisations (i.e., businesses, non-profit agencies, governments) to interact in the digital world.

In this report innovation is defined as the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations. The latest version of Oslo Manual (Oslo Manual 2018) defined innovation as follows: a new or improved product or process (or combination thereof) that differs significantly from the unit’s previous products or processes and that has been made available to potential users (product) or brought into use by the unit (process).

Business innovation activities include all developmental, financial and commercial activities undertaken by a firm that are intended to result in an innovation for the firm. They include:

  • Research and experimental development activities
  • Engineering, design and other creative work activities
  • Marketing and brand equity activities
  • Intellectual property related activities
  • Employee training activities
  • Software development and database activities
  • Activities related to the acquisition or lease of tangible assets
  • Innovation management activities

Innovation activities can result in an innovation, be ongoing, postponed or abandoned.

Innovation capability is the ability of a firm to support the development of new products, services, processes and systems.

An innovation-active business is one that has undertaken any innovative activity, irrespective of whether the innovation was introduced, still in development or abandoned during the reference period.

An innovation system is defined as an open network of organisations interacting with each other and operating within framework conditions that regulate their activities and interactions. Three components of the innovation system: networks innovation activities and framework conditions, collectively function to produce and diffuse innovations that have, in aggregate, economic, social and/or environmental value.

An innovative firm is one that has implemented an innovation during the period under review.

Intangible capital is an asset that is not physical in nature and does not appear on the accounting balance sheet. Intangible capital includes assets such as data, software, designs, new organisational processes, management quality, R&D, patented technology, reputation (brand equity) and business-specific skills.

Clear intellectual property rights are vital for improving incentives to innovate in some industries, particularly in high-technology sectors where R&D plays a central role in innovation. Laws and regulations are part of the framework in which businesses operate. Common methods used for protection of intellectual property include Patents, Registered designs, Trademarks, and copyrights. Other methods include confidentiality agreements and trade secrecy, secrecy that is not covered by legal agreements, complexity of product design, and lead time advantage over competitors. IP rights can be licenced, optioned or assigned to third parties.

The knowledge economy is a system of production and consumption that is based on intellectual capital. It is an economy in which growth is dependent on the quantity, quality, and accessibility of data and information, which can be used in various fields to generate economic value.

Management capability refers of the capacity of organisations and their managers to effectively plan, organise productive activity, lead staff, and control the actions of the organisations in order to achieve its goals.

A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

Nascent entrepreneurs are people who are engaged in creating new ventures by committing time and resources. #### New-to-market innovation New to the market innovation includes innovations that are: New to the world; New to Australia but not new to the world; and New to the industry within Australia, but not new to Australia or the world.

All innovations must contain a degree of novelty. Three concepts of the degree of novelty of innovations are: new to the business, new to the market and new to the world. New to the business innovation is an innovation that has already been implemented by other businesses. A new to the market innovation is when the business is the first to introduce the innovation on its market (and market is defined as the business and its competitors and can include a geographic region or product line). A New to the world innovation is an innovation that is new to the world when the business is the first to introduce the innovation for all markets and industries, domestic and international. New to the world therefore implies a greater degree of novelty.

Organisation for Economic Co-operation and Development (OECD) is a group of countries working towards common problems of increasing economic growth, welfare and social problems. The list is comprised of Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States.

The Frascati Manual provides guidelines for collecting and reporting data on Research and Experimental Development.

The Oslo Manual provides guidelines for collecting and interpreting innovation data.

An organisational innovation is the implementation of a new organisational method in the business's business practices, workplace organisation or external relations.

A patent is a form of intellectual property which gives its owner the right to exclude others from making, using, selling, and importing an invention for a limited period of time. It can be granted for any device, substance, method or process that is new, inventive and useful. A patent is a legally enforceable right to commercially exploit the invention for the life of the patent.

Private non-profit expenditure on R&D (PNPERD) represents the component of GERD incurred by units belonging to the Private non-profit sector. It is the measure of intramural R&D expenditures within the Private non-profit sector during a specific reference period.

A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.

A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user-friendliness or other functional characteristics.

Productivity is the ratio of outputs to inputs. It can be measured at the level of the firm, industry or the whole economy. There are a number of ways to measure productivity. Labour productivity is where the only input being considered is labour costs. Multifactor productivity uses labour and capital costs and total factor productivity uses capital, labour, energy, material and services costs as inputs. Productivity growth occurs when growth in industry outputs exceeds growth in inputs.

Experimental and theoretical work undertaken to acquire new knowledge without looking for long term benefits other than the advancement of knowledge

Research and experimental development (R&D) comprises creative work undertaken on a systematic basis to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications. The term R&D covers three activities: basic research, applied research and experimental development. Basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view. Applied research is also original investigation undertaken to acquire new knowledge but directed primarily towards a specific practical aim or objective. Experimental development is systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed.

At a country level, R&D intensity is defined as R&D expenditure expressed as a percentage of GDP on a national scale, or R&D expenditure expressed as a percentage of sales at the firm level. At a firm level, R&D intensity is defined as R&D expenditure expressed as a percentage of firm turnover.

Researchers are defined as professionals engaged in the conception or creation of new knowledge, products, processes, methods and systems, as well as in the management of these projects.

Revealed comparative advantage (RCA) is an index calculated using exports, providing a measure of relative specialisation of a country's export activities in an industry. The RCA is calculated as the proportion of a country's exports in a product or industry divided by the proportion of world exports in that product or industry. If the RCA is greater than one, a comparative advantage is ‘revealed.’ If the RCA is less than one, the country has a comparative disadvantage in that industry.

Social media is computer-based technology that facilitates the sharing of ideas, thoughts, and information through the building of virtual networks and communities. By design, social media is internet-based and gives users quick electronic communication of content.

Spillovers refer to unrequited flow of benefits to third parties. In the case of knowledge-based activities like research R&D, spillovers (or externalities) are produced when the knowledge generating activities of one business enhances the knowledge and capabilities of unrelated firms, and subsequently leading the production of better or cheaper goods and services, increased sales, productivity or other benefits.

Start-up is the early stage in the life cycle of an enterprise where the entrepreneur moves from the idea stage to securing financing, laying down the basis structure of the business, and initiating operations or trading.

The amount by which the value of an article is increased at each stage of its production, exclusive of initial costs. In national accounts, value added is often obtained by deducting intermediate consumption from gross output.

Experimental and theoretical work undertaken to acquire new knowledge directed into specified broad areas in the expectation of practical discoveries. It provides the broad base of knowledge necessary for the solution of recognised practical problems

Venture capital (VC) is defined as high-risk private equity capital for typically new, innovative or fast growing unlisted companies. A venture capital investment is usually a short to medium-term investment with the intended return often in the form of capital gains (rather than regular income streams). Early stage VC is often invested in development, testing or pilot production. At this stage the investee company may not be fully operational and may not yet be generating revenue. Expansion VC is invested at a stage when developed products are in the market and the investee company has significant revenue growth and may be approaching, or at, profitable operating levels.

Vocational education and training (VET) is a form of tertiary education that provides accredited training in job related and technical skills. It covers a large number of qualifications across industry sectors.