Here's why innovation in small business will be one of Australia's biggest economic drivers

A new report from the NSW Innovation and Productivity Council (IPC) released this week reveals that 255,000 of the state’s small businesses are standout performers when it comes to jobs and profitability, but need to focus on more innovation to help them grow.

The Business Size Report by the NSW IPC looked a 2015 data on business characteristics, including the BLADE (Business Longitudinal Analysis Data Environment) stats to draw their conclusions.

While 904,000 businesses in the state operate without employees. the report looked at the other 271,000 companies employing workers to see what they needed and they operated when it came to technology and innovation.

IPC chair Neville Stevens said the report offers new insight into the sizes, economic contributions and characteristics of NSW businesses that employ workers

“For the first time we’ve been able to conduct an in-depth analysis of firm-level data held by the Australian Bureau of Statistics (ABS), which offers us a unique and clearer perspective,” he said.

“As well as measuring NSW businesses’ economic contributions we’ve also been able to track the important innovation and productivity characteristics of Australian businesses.

“These included a business’s tendency to use data analytics and key performance indicators, its development of a business strategy, its adoption of a digital capability, and its desire to collaborate and innovate.

“By comparing the prevalence of such characteristics for each business size group we get a sense of their capabilities and possible areas for growth.”

Startup Daily has detailed 31 key facts drawn from the report here.

NSW jobs minister Stuart Ayres said the report demonstrated the importance of small business in job creation.

“Small businesses with 1-19 full-time employees account for 94% of all employing businesses in NSW, created 28% of all jobs and took 37% of all profits, despite contributing only 9% of turnover,” he said.

“The report also shows if small businesses want to grow and be more resilient they need to adopt some of the habits of their larger cousins, particularly when it comes to innovation.”

NSW Chief Economist Stephen Walters said nationally, only 36% of micro businesses with 1 to 4 full-time equivalent employees were innovating and just over half (57%) of other small businesses with 5 to 19 full-time equivalent employees.

“This report is a wake up call for many small businesses, particularly micro businesses that make up 77% of all of employing businesses in NSW, that further growth can be achieved through innovation,” he said.

The Business Size Report is part of the NSW Innovation and Productivity Council’s research series and is available here.