Innovation slumps as economic pressures bite
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The news: Less than half of Australian businesses self-reported that they were undertaking innovation-related activities in the last two financial years.
The numbers: In the two years to 2022-23, 46% of businesses were innovating. This was down from 52% in the two years before when there was a spike in activity as businesses shifted their operations to manage the pandemic.
Businesses said the main barrier to innovating was economic pressures, with 19% pointing to a lack of funds. A shortage of skilled workers within the labour market was a barrier for 16% of businesses while a further 14% said it was a lack of skills within their specific firm.
Those that did innovate were likely to spend a small sum to do so, with about a third spending nothing and 74% spending under $25,000. Unsurprisingly, very small "micro" businesses with four or fewer staff were more likely to say they spent very little to innovate.
The context: Innovation was more critical for income to small businesses than large businesses. About 8% of micro businesses were getting 75% or more of their total income from improved or new goods or services, compared to less than 1% of big businesses with 200 or more staff. Some of the innovation activities driving income without a large spend involved marketing and social media activity to attract new sales.
The ABS also collected data on the environmental benefits of business innovation, such as recycling, reduced energy use and longer product life. This was the first time this data was gathered. About a third of innovating firms said this was a benefit gleaned from their activities.
What they said: "Businesses are now shifting their focus away from process innovation, to concentrating on their goods and services innovation. They’re now adjusting to the current economic conditions as cost-of-living pressures hit households and businesses," said ABS head of business statistics Robert Ewing.
“This shows that businesses continue to find ways to innovate that don’t require substantial expenditure, which is especially important for very small businesses.”
The source: Australian Bureau of Statistics
