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Pandemic and business pressures dampen innovation

Australian small businesses have had to reduce their spend on innovation to cope with the core activities of staying afloat during the past two years according to the Australian Bureau of Statistics.

Pandemic and business pressures dampen innovation
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The ABS survey on business innovation found that only half of all businesses (52 per cent) reported being innovation-active and of the innovation-active businesses, 36 per cent collaborated and/or had a fee-for-service arrangement for innovation while 24 per cent of innovation-active businesses collaborated for innovation.

Anecdotal information collected from businesses indicated that many businesses shifted their resources away from innovative activities to core operations because of the impact on business operating conditions due to the COVID-19 pandemic; this was particularly evident in businesses with zero to four employees and five to 19 employees.

An innovation-active business is one that introduced any type of innovation such as a new good, service or process, and/or had innovation that was still in development (as at 30 June 2021) or abandoned during the reference period in the two years ended 30 June 2021. 

An innovating business is one that introduced any type of innovation during the reference period.

The said the data reflects a compositional change to the in-scope business population including an increase in the proportion of small businesses that make up the business population. In 2020-21, the proportion of the in-scope business population with zero to four persons employed increased by 3 percentage points from 2019-20 (65 per cent to 68 per cent). Businesses in this cohort were the least likely to innovate, therefore the increased share of these businesses in the population has had a dampening impact on the core innovation estimates. 

The survey found that for the two years ended 30 June 2021 only 22 per cent of businesses reported introducing a goods and/or services innovation and 40 per cent of businesses introduced a process innovation.

In addition, 14 per cent of businesses reported abandoning innovation, compared to 9 per cent of businesses in the one-year innovation collection reference period ended 30 June 2019.

More than 70 per cent of businesses with 200 or more employees reported any innovation activity, compared to 61 per cent of businesses in this cohort for the one-year reference period ended on 30 June 2019. 

More businesses (46 per cent) reported barriers to innovation, compared to 39 per cent of businesses in the one-year period ended 30 June 2019.

Businesses that reported innovation activity were asked if they collaborated with others to develop or introduce new goods, services or processes in the two years ended 30 June 2021.

Innovation-active businesses were also asked whether they entered into any fee-for-service arrangements to develop or introduce new goods, services or processes.

More than a third of innovation-active businesses (36 per cent) either collaborated and/or entered into a fee-for-service arrangement for the purpose of innovation.

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