Tom Koltai tomk at unwired.com.au
Sat Mar 5 15:23:08 AEDT 2011

> -----Original Message-----
> From: link-bounces at mailman.anu.edu.au 
> [mailto:link-bounces at mailman.anu.edu.au] On Behalf Of John Hilvert
> Sent: Saturday, 5 March 2011 11:59 AM
> To: link at anu.edu.au
> Subject: [LINK] Bleeding obvious? - BUSINESS INNOVATION AND 
> http://www.ausstats.abs.gov.au/Ausstats/subscriber.nsf/0/7A27A
> F8B0739FF90CA257847000E6F98/$File/1351055033_mar%202011.pdf
> 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?
> "Summary:
> 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 
> more intensely develop more novel innovations, engage in 
> multiple types of innovation and are more likely to develop 
> these innovations internally.

Actually John they had me with the concept that an algorithm for
measuring ICT innovation appears to have been proofed.

Then I read the paper. I was wrong.
You were right.

There appears to be no new research result in this paper.
However, it does serve as new method for the ABS to measure growth and
consequently GDP.
In other words, anecdotal data:

"A company that installs ICT generally does better than those that

Is now empirical data based on 6,000 Australian small businesses.

Therefore if a politician were to ask... "Prove to me that computers
improve the bottom line...."
The ABS now have a methodology.
So, it's a politically friendly paper...
Think of it as future proofing (base lining) ABS data delivery methods
for small business stats.

The validity of the paper comes not from the wording which is rather ho
hum, but from the extensive regression analysis given to each hypothesis
in the appendix.

I am seriously impressed with the work these folks put into this and
although I strongly disagree with their Schumpeter "Large business can
afford to innovate better than small business"; I find myself agreeing
with many of their extremely conservative conclusions.

In my opinion they failed to adequately allow for time versus money in
the innovation and speed to market curve.

An example...

At Ausnet we built an Australia wide frame relay network in 12 weeks
When Telstra quoted us 18 months to deliver.
Innovation is in fact about taking calculated chances with the funds
that you have to hand.

That to me is innovation. Making a purse from a sows ear because you
didn't have the money to buy silk.

Today's young people don't have the understanding of Kalamazoo systems
or other non computerised commercial systems, therefore I think the
report has little "new" value. Yet it's value possibly lies in the
ability to justify ICT to persons that do not currently use computers. 

To me the exciting section of the report was that ...: [Page 49]
I.2 Frequency counts for dependent variable = Implemented innovations in
2006-07, according
to who developed
3 Implemented an innovation which was developed exclusively internally
(by the business or a related company)
1,762 27.4%

...27% of Australian small business are comfortable enough with ICT and
independent enough from consultants to depart from the manual and do
things their own way to suit their specific unique requirements.

That is a good thing....

It's almost like the literacy requirements of the last millennium.

Hopefully next year it will be a higher percentage.


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