John Hilvert john.hilvert at gmail.com
Sat Mar 5 12:06:53 AEDT 2011


ABS usually puts out newsworthy reports. But I spent a good hour and half
looking for what was really newsworthy with this report - and decided it was
slight. Perhaps I'm being unfair to its co-authors, Jessica Todhunter and
Ruel Abello apart from its praise for a new way of quantifying intensity of
ICT use, I failed to see little that was "novel". Is this all we can learn
from the datasets of 6244 businesses. I wondered whether the paper's
definition of innovation - self reported (see Appendix A) was circular as
well. If it had concluded countter-intuitively there was no or even a
negative relationship between technology and innovation, I would have taken
more interest as it would have reflected my conclusions about Government IT.
But maybe that's _my_ blind spot?


This research investigates the hypothesis that there is a relationship
between the intensity of the use of information and communications
technology (ICT) by businesses, and innovation.  Innovation refers to
product, process, organisational and marketing innovations, as defined in
the OECD Guidelines for Collecting and Interpreting Innovation Data (2005).

To estimate the relationship between business ICT use and innovation
activity, this study makes use of firm level data from the ABS Business
Longitudinal Database (BLD).  We analyse data for 6,442 businesses from the
2005–06 and 2006–07 waves of the BLD.  The BLD has detailed information on
business demographics, innovation activity, ICT usage, market
characteristics and many other variables.

The authors have developed a novel approach to summarising the diverse types
of ICT usage into a single variable which can be used to categorise a firm’s
intensity of ICT use.  The ‘ICT intensity index’ is an ordered variable,
reflecting the business’ highest degree of ICT sophistication.  It takes
account of factors such as broadband internet connection, business web
presence, use of e-commerce and also the existence of automatic links
between internal business systems and customer or supplier systems.  As
there is no standard method of combining the many types of ICT
used by businesses in Australia, the authors propose the ICT intensity index
as a  convenient measure, which lends itself to straightforward and
meaningful interpretation.

The analysis shows a strong link between business’ use of ICT and innovative
activity.  Using a variety of ICT intensity specifications, businesses using
successively more sophisticated types of ICT are each found to be
significantly more likely to undertake some type of innovation.  This result
is further strengthened when we consider each  type of innovation
separately.  The existence of automatic links between internal  systems and
customer or supplier systems, in particular, is strongly associated with
innovative activity.  Furthermore, we show that businesses which use ICT
intensely develop more novel innovations, engage in multiple types of
innovation and are more likely to develop these innovations internally.

John Hilvert
Journalist at large

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