Business Innovation1.4 International Comparison
1.4.1 Global Innovation Index
The Global Innovation Index (GII) is a high-profile international index summarising factors affecting innovation outcomes and is often cited in cross-country comparisons. The GII score on which countries are ranked combines seven pillars. Each pillar is a combination of three sub-pillars which are weighted averages of different indicators. Australia ranked 25th out of 132 economies on the GII in 2021[32] and as such is classified to be among the innovating leaders — countries with mature innovation systems that perform well on innovation relative to GDP. The GII and other summary indices should be interpreted with caution, due to inherent limitations including the absence of a theoretical foundation to guide the selection of indicators, data availability and low sampling for surveys that provide qualitative data. These limitations may impact Australia's results.
1.4.2 Global Innovation Index, Innovation input sub-index
The GII innovation input sub-index comprises five pillars that capture elements of the national economy generally regarded as innovation enablers — such as institutions, infrastructure, or human capital and research. Australia has ranked well on the GII innovation input sub-index since 2011, moving between 10th and 15th among 126 to 143 economies, depending on the year. In 2021, Australia ranked 15th out of 132 economies, performing at the OECD average. Australia was strongest in the market sophistication (9th) and institutions pillars (10th).[33]
1.4.3 Global Innovation Index, Innovation output sub-index
The GII innovation output sub-index provides information about outputs that are the result of innovative activities occurring in the economy. It comprises two output pillars, namely knowledge and technology and creative, both of which are weighted by GDP. In 2021, Australia ranked 33rd out of 132 economies. This is relatively low compared to Australia's GII innovation input ranking of 15th. Australia’s 2021 performance was weakest in knowledge and technology outputs, which measures knowledge creation, knowledge impact and knowledge diffusion. This suggests that Australia produces less innovation outputs relative to its level of innovation investment.[34]
1.4.4 Innovation-active businesses that are R&D active
All businesses engaged in R&D are innovation active but not all innovation-active businesses engage in R&D. R&D is a specific type of innovation activity and it can be costly, requiring specialised expertise and equipment. In the business enterprise sector, R&D activity is industry-specific – important to some industries (e.g. Manufacturing) but not to others (e.g. Accommodation and food). The overlap between innovation and R&D activity provides a proxy measure of the extent to which high-value technological innovation may be occurring. Australia has a relatively low proportion of businesses in this category compared to other OECD countries (24.1 per cent in 2016–17 compared to 47.2 per cent for the latest available OECD average, respectively).[35] The data only capture businesses pursuing product and/or process innovation, so the estimates partly reflect Australia’s service-oriented industry structure and the diminishing share of manufacturing in output and employment. In 2016–17, Large businesses had the lowest share of R&D expenditure (21.9 per cent) and Manufacturing businesses continue to have the highest (26.1 per cent).[36]
1.4.5 IMD World Competitiveness Ranking
The IMD World Competitiveness Rankings benchmarks economic wellbeing and competitiveness in accordance with criteria obtained through statistical and survey data each year. Australia ranked 16th among OECD countries in 2021, a decline from 3rd in 2010.[37] Australia’s competitiveness landscape excelled in benchmark criteria such as efficiency in business legislation and health infrastructure, but cited weaknesses in management practices and international trade, particularly in export sophistication.[38] While the report suggests Australia’s ranking was supported by limiting the economic impact of COVID-19, driving changes such as the digital economy and social outcomes are the key indicators of strong institutional and social frameworks.
1.4.6 IMD World Digital Competitiveness Ranking
Branching from the IMD World Competitiveness Ranking in 2013, the IMD World Digital Competitiveness Ranking tracks the digital transformation of economies. In particular, the COVID-19 pandemic tested the capacities of economies to use digital technologies and technological infrastructure. Following a decline from 8th place in 2015, Australia ranked 15th among OECD countries in 2021, citing weaknesses such as business agility and collaboration.[39] Across sub-factors, Australia was slightly weaker in digital readiness, which measures an economy’s capability to sustain its digital competitiveness over time.[40]
Footnotes
[32] Cornell University, INSEAD, and WIPO (2021) Global Innovation Index 2021: Tracking Innovation through the COVID-19 Crisis
[33] Cornell University, INSEAD, and WIPO (2021) Global Innovation Index 2021: Tracking Innovation through the COVID-19 Crisis
[34] Cornell University, INSEAD, and WIPO (2021) Global Innovation Index 2021: Tracking Innovation through the COVID-19 Crisis
[35] ABS, Research and Experimental Development, Businesses, Australia, Cat. No. 8104.0
[36] OECD (2019) Innovation indicators, OECD Publishing
[37] IMD International (2021) IMD World Competitiveness Online, International Institute for Management Development
[38] CEDA (2021) World Competitiveness Yearbook 2021, Committee for Economic Development of Australia
[39] IMD International (2021) World Digital Competitiveness Rankings, International Institute for Management Development
[40] CEDA (2021) World Competitiveness Yearbook 2021, Committee for Economic Development of Australia