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Skills and Capability5.2 Innovation Capability

5.2.1 R&D personnel by sector

Researchers and other research and development personnel constitute a vital input to R&D performance. In Australia, the number of R&D personnel in the business and higher education sectors have increased dramatically since the turn of the century, whereas the R&D personnel in the government sector has recorded a slight fall. Business sector R&D personnel increased almost two and a half fold from around 28,400 in 2000 to around 70,500 in 2015. The rise in the number of R&D personnel in the higher education sector was more modest, but still considerable (from 46,300 in 2000 to 78,000 in 2014). However, the number of R&D personnel in government fell in the same period from 18,200 to 14,700. Based on the OECD definition, R&D personnel include all persons employed directly in R&D activities, and comprises researchers, technicians and support staff. R&D personnel are represented in full-time equivalent units defined as the ratio of working hours actually spent on R&D during a specific reference period divided by the total number of hours worked in the same period by an individual or a group. The business enterprise and higher education sectors are the main employers of R&D personnel.[134][135]

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5.2.2 Innovative firms operating in international markets as a percentage of total firms in international markets

Evidence from Australian microdata suggests that innovative firms are 4 to 8 per cent more likely to be exporters compared to firms that do not innovate, while exporters are 7 to 10 per cent more likely to be innovators.[136] Microdata evidence further suggests that more than one-third of Australian exporters are concentrated in just four industries: Mining, Manufacturing, Wholesale Trade and Information Media and Telecommunications.[137] In 2014-15, more than two-thirds (69.7 per cent) of Australian firms operating in international markets were innovative. Only Germany and Norway showed higher proportions on this measure --- estimated at 72.1 per cent and 71.0 per cent, respectively. These estimates compare to the latest available OECD average of 54.4 per cent.[138]

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5.2.3 Australian exports with a revealed comparative advantage (RCA) index above two

RCA is an important measure of export competitiveness. It measures a country's relative advantage in a certain class of products as evidenced by export flows. For values above one, a higher RCA index value implies a stronger export competitive advantage.[139] Between 1993 and 2016, the number of products with an RCA index above two dropped by 117 (from 336 to 219), while their export value increased by $119 billion or 387 per cent. In other words, Australia has become more specialised in exporting fewer product classes at a considerably higher value. This shift has been driven by a very limited number of mineral commodities for which Australia exhibits a super-competitive position in the world. In the export of iron ore, for instance, Australia has an RCA index of around 53 --- meaning we are 53 times more competitive at producing and exporting iron ore than the world average. However, an excessive concentration of exports in a handful of mineral commodities is risky, as the prices of those commodities are set by global markets. Australia's lack of export diversity could therefore weigh on growth prospects in the future.[140]

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5.2.4 Selected sources of ideas for innovation

The sources of ideas for innovation indicate where Australian businesses access their innovation capabilities. Survey evidence suggests that ideas for innovation mostly originate from within the business or related company, with around half of them reporting their own business or another business owned by the same company as the main source of ideas. Large businesses are more likely than SMEs to generate these type of ideas, as they have access to a larger pool of talent and human resources. At the other end of the spectrum are external sources of ideas, such as from universities or other higher education institutions. Although they are much less likely to be identified as the source of ideas, they can provide specialised advice or technical expertise to implement them. Less than 3 per cent of innovation-active businesses reported their ideas or information for innovation originating from these sources and these are most common in the mining, scientific and health care industries (data not shown).[141]

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