What does Australia’s performance in Innovation look like?

The Australia Innovation System Report is compiled annually by the Office of the Chief Economist and explores quantitative and qualitative data gathered on innovators and their activities in Australia. Activities with direct relation to innovation are also examined, such as research and development, skills development and capital investment.

The Report provides some very interesting statistics on businesses that innovate, making it all the more important that businesses maximise their access to government innovation funding such as the R&D Tax Incentive.

According to the 2014 study, across all business sizes and sectors, innovative businesses are:

    • 31% more likely to increase income and 46% more likely to report increased profitability
    • Twice as likely to export and five times more likely to increase the number of export markets targeted
    • Twice as likely to report increased productivity, employment and training
    • 3 times more likely to increase investment in ICT
    • 3 times more likely to increase the range of goods and services offered

In terms of Australia’s performance in innovation, the 2014 Report gave us both good and bad news. The good news is that Australia’s SMEs perform extremely well in the innovation stakes by OECD standards. Furthermore, manufacturing, information services, media and telecommunications, wholesale trade and professional, scientific and technical services perform well above the national average.

It seems however that the good news stops there. Despite their good performance, the vast majority of SMEs do not undertake export activities. As a result, we see only domestic implications, with little impact on Australia’s presence on the global stage.

Those companies that do export, with larger roles globally, unfortunately did not fare as well as their small-medium counterparts. It seems that large Australian businesses are ‘not innovation leaders by international standards’. Furthermore, it seems that Australian businesses of all sizes have a lot of improving to do when it comes to introducing innovations that are ‘new to market’. Unfortunately, on a global scale our performance is rather dismal, affecting the diversity of our export capabilities and general competitive potential. In fact, the report found that Australia has one of the least diverse export profiles amongst OECD countries.

In fact, the report indicated an overall decline in ‘new to market’ product innovation in Australia over the last decade, stating quite frankly that ‘Australia is primarily a nation of adopters and modifiers operating behind the innovation frontier’. With a positive association between business sales and ‘new to market’ innovation, as well as evidence that those successful in ‘new to market’ initiatives are up to eight times more likely to export than those that are unsuccessful, this news is of distinct concern.

Clearly, Australian industry needs to up its game in the innovation stakes. If finances are the issue, programs such as the aforementioned R&D Tax Incentive assist businesses in accessing cash rebates and tax offsets to fund innovative activities. However, the report points to a shortage of required skills and a deficiency of innovation and collaboration in management culture.

If Australia is to move away from a resource-based economy towards one that is increasingly knowledge-based, these issues need to be addressed swiftly and explicitly.

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Feb 10, 2015.