Overview & Comments

The Australian Business Foundation sought to assess and report on the following issues:

• analyse the extent to which investments in high value added, knowledge intensive industries can generate higher economic growth and sustainable employment opportunities, both directly and indirectly;
• assess Australia's potential for creating more and better jobs from a greater investment in knowledge intensive activities;
• examine why Australia may fall short of our potential in these areas, given our skill endowments and market characteristics; and
• derive some implications which could assist policy makers.

The study provides an input into the development of a policy environment which can maximise the creation of sustainable jobs in more modern, high value added industries. Such a policy approach is required to meet community concerns about jobless growth and rising levels of unemployment fuelled by the tendency in the more mature parts of industry for productivity growth to outrun output growth leading to higher output but few jobs.

This study draws out from a reasonably broad based survey of companies operating in high growth and knowledge intensive industries, a better understanding of the potential these industries have to grow and provide high quality sustainable jobs.

The research concentrates on high growth firms and knowledge intensive industries, and examines their performance with respect to growth in output, exports and jobs. It also sought to identify the factors underlying competitive advantages; potential for future growth and sustainable job creation; and the elements in the policy environment which nurture growth in these industries. The industries we have concentrated on are:

• information technology (including software) and telecommunications;
• pharmaceuticals;
• medical and scientific instruments;
• machine tools and tooling;
• automotive (including design); and
• shipbuilding (specialist vessels).

These industries are all relatively knowledge-intensive and have primarily grown through export growth and provide high quality jobs. In general these industries employ highly skilled people not just in their product development, engineering and design, but also increasingly in production. They account for over half of total business expenditure on research and development (R&D) and over one third of exports of elaborately transformed manufactures (ETMs).

The Winning Companies

Within these industries we have focused our attention on a group of companies which demonstrated 'winning companies.' They share a set of common characteristics:

• they operate in fields characterised by high returns and growth;
• they have demonstrated a high capacity for innovation;
• they rely on technology and 'brainpower' as a source of competitiveness; and
• they have shown that they can succeed in global and regional markets.

The companies we surveyed have a very distinctive view of the basis of their competitive advantages. The emphasis is on delivering greater value to customers than their competitors rather than producing standardised products at low prices. They gave top rating to the following four factors:

• technology;
• R&D;
• quality; and
• workforce skills.

Low costs were important, but were not seen as being a key source of sustainable competitive advantage. The winning companies have adopted a high focus niche market approach. They have sought leadership through concentrating their efforts on mastering a small number of products, services and processes.

Winning Companies - key characteristics

High focus - niche strategy

1. Innovation - rapid product development
2. People are the key resources
3. Close relationships with leading edge customers
4. Strategic alliances for technology, manufacturing and marketing
5. Close linkages to the science and technology base
6. Capturing the value chain
7. Mandates for MNCs subsidiaries
8. Growth through exports
9. Exploiting opportunities in Asia

On the basis of our survey and interviews with the winning companies, we consider that a set of policies is needed to nurture the winning companies and the high growth and knowledge intensive industries of which they are such an important part in order that they can achieve their full potential as contributors to economic growth and job creation. Some elements of such a policy framework are already present but others are either inadequate to the task or are not present.

The measures needed include:

• A Vision for the Development of High Growth and Knowledge Intensive Industries
• Support for R&D and Innovation
• Support for Investment
• Support for Exports

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