The Role of innovation in the services, manufacturing and mining industries: evidence from Australia

Purpose: Enhancing measurement of innovation related expenditure in non manufacturing industries. Originality: Expanding an econometric model to measure technological innovation on a business level. Key literature / theoretical perspective: This paper calls attention to the ways innovation has traditionally been measured in various industries and different business sizes. To date, technological innovation measurements generally apply to the manufacturing industry and/or businesses with a strong Research and Development (R&D) component, which are typically large businesses. Design/methodology/approach: In order to measure innovation in other industries and in order to extend the innovation measurement in Small and Medium Enterprises (SME), we propose an enhanced version of the used Crepon, Duguet and Mairesse (CDM) structural economic model. We used the Australian Businesses Innovation Survey (IABS) 2003, which comprises a weighted sample of more than 4500 businesses. Findings: Innovation Related Expenditure makes a positive and significant contribution to technological innovation. We argue that our modified version of the CDM model provides a more accurate picture of innovation efforts in non-manufacturing industries and SMEs that do not have a strong R&D focus. Practical and Social implications: Our findings may enable policy makers to better allocate funding and resources to enhance productivity in industries and businesses not traditionally associated with innovation.