Businesses that use ICT intensely are more productive: Ai Group

The businesses that are outperforming others in productivity are those that heavily use ICT, according to analysis from the Australian Industry Group.

Ai Group’s Ready or Not? Technology Investment and Productivity in Australian businesses report, found financial, wholesale trade, information, telecommunications and media industries are the biggest users of ICT. These industries experienced productivity gains of 40 to 45 per cent since 2000, compared to the average for all industry sectors of 13 per cent.

“Increased business investment in ICT has contributed to productivity gains in recent decades, with more impact in Australia compared with other markets,” the report reads.

“By comparison to the high-productivity sectors, the average majority of Australian industries have experienced slow and sporadic labour productivity growth adding to a total of 10 to 20 per cent since 2000. The mining and utilities sectors are special cases and have seen large declines in labour productivity due to very large and lumpy capital investment, drought, natural disasters and other factors.”

The Ai Group also found about 35 per cent of businesses that actively engaged in innovation during 2010 to 2011 reported an increase in productivity from the previous year, compared with 8.4 per cent of non-innovation active businesses.

“There is a particularly strong correlation between ICT use and innovation… Investments in ICT can lead to greater business efficiencies which free up company time or funding for innovation. ICT investments may also lead to improved productivity and facilitate innovative behaviours, such as greater collaboration.”

However, the lack of access to additional funds is the biggest barrier to innovation, with only about 4 per cent of businesses receiving funding for innovation from Australian government organisations in 2010 to 2011. Ai Group also found small businesses are twice as likely to report this as an issue than larger businesses.

“Most of the government funding for RD is indirect support through RD tax incentives with low levels of direct support for RD relative to other OECD countries. Of the direct government funding for RD, 60 per cent is allocated through competitive funding.”

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