THE pace of innovation has stalled in Australia, official data shows, suggesting businesses have some way to go in modernising.
The percentage of businesses engaged in any form of innovative activity fell to 39.1 per cent in the 2010-11 financial year from 43.8 per cent in the corresponding period, despite politicians and bankers urging companies to boost efficiency.
A report, produced by the Bureau of Statistics, showed that just below 40 per cent of business reported engaging in ”some form of innovative activity” in 2010-11.
Smaller businesses lagged, however. Sixty-six per cent of large businesses reported acting to boost efficiency and lower their costs, while only 30 per cent of companies with four employees or fewer reported the same, the ABS said.
Ben Flavel, an innovation consultant at Melbourne-based NeoCogs, said most small businesses saw innovation ”as an expensive and time consuming distraction,” in part because they were so consumed with their day-to-day activities.
”From my experience this perception that you need vast resources to innovate limits idea development,” he said.
Nearly 50 per cent of companies with five to 19 employees reported undertaking innovative activity, compared to 62 per cent of those with between 20 and 199 staff.
Wholesale trade was the most innovative of the industries, with almost 58 per cent of those businesses reporting innovative behaviour. Only 27 per cent of construction companies reported any innovative activity in the financial year.
Christopher Hire, the director of innovation research group 2thinknow, said that innovation in Australia was hamstrung by a lack of government will for tax reform. Governments and businesses had also failed to invest in the infrastructure needed to support new types of ventures.
”A refocusing on new micro segments of innovation and reform of bureaucracy would assist Australia,” he said. ”Tax reform and an Australian Competition and Consumer Commission examination of monopoly retail could assist also.”
The need to modernise processes to increase productivity has been felt through much of Australia’s economy in recent years. Both the impact of the strong dollar and institutional inertia has left industries as diverse as retail and media struggling to readjust to the globalised economy.
The drive to increase efficiency has implications for the broader economy, too. Reserve Bank forecasts for economic growth incorporate improvements in productivity to achieve the expansion and fuel wage growth.
Mr Flavel said businesses needed a clear idea of what they really do in order to change. ”If we know ‘what we do’, we can keep asking ‘how else can we do what we do?’, which is like a tap for innovation,” he said.
The Reserve Bank governor, Glenn Stevens, recently urged politicians to follow the suggestions of the Productivity Commission in order to boost the the efficiencies and lower the cost in the economy.
”While ABS data indicate that small businesses are less likely to engage in innovative activity than larger businesses and account for a relatively small share of research and development expenditure, almost 90 per cent of the businesses engaging in innovative activity are small businesses,” the Reserve Bank said in May.
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