Australian Innovation System Report 2012 reveals few surprises

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The Federal Government has released the third in the series of annual reports on the performance of Australia’s National Innovation System.

It discusses trends in innovation in Australia and benchmarks Australia’s innovation performance against other Organisation for Economic Co-operation and Development (OECD) countries.

The theme of this year’s report is productivity. The report states that the adoption or modification of an already existing technology is innovation if it is new to that business.

It may not be pushing the boundaries of what is possible for Australia and the world but it can, in aggregate, lift productivity.

This report argues that long term productivity growth is driven by innovation with innovative businesses nearly twice as likely to report an increase in productivity compared with the previous year when averaged across all business sizes.

Like compound interest, the productivity pay-off from business-level innovation and collaboration translates to the entire economy.

Productivity is not the only benefit generated by innovative businesses. Innovation-active businesses are significantly more engaged in the digital economy earning over $144 billion in internet commerce in 2010-11 collectively, more than three times that of non-innovators.

Innovation encourages a more connected and skilled economy with greater market diversity and consumer choice. Compared to businesses that don’t innovate, innovative Australian businesses are also:

  • 42% more likely to report increased profitability;
  • Three times more likely to export and eighteen times more likely to increase the number of export markets targeted;
  • Four times more likely to increase the range of goods or services offered;
  • More than twice as likely to increase employment;
  • More than three times more likely to increase training for employees; and
  • More than three times more likely to increase social contributions such as community enhancement projects

The innovation performance of Australian businesses is poor by international standards. This is especially stark for large Australian businesses who rank almost last in the OECD on innovation.

Small to medium-sized enterprises (SMEs) face higher barriers to innovation and accordingly innovate and collaborate less often.

The evidence presented in the report gives a picture of Australia as a fast-follower country. Australia is not one of the leading countries in terms of competitiveness or high proportions of new-to-the-world innovations.

Although investments in innovation (estimated as investments in intangible capital) is growing rapidly, Australia still tends to invest considerably more in adopting and modifying the innovations of others rather than investing in more novel forms of innovation.

Limited access to either skilled people or additional funds remain the two most common perceived external barriers to innovation.

Lack of skilled people has been the highest single reported barrier to innovation in Australian businesses in recent years. 

The data shown in this report suggests that Australian business management capability and innovation culture is poor by international standards and may be a factor in the current productivity slowdown. 

Despite the significant benefits of collaboration, Australian businesses of all sizes remain poor collaborators by international standards.

Collaboration of all types is poor, including research-industry collaboration and international collaboration.

Download the full report.