The Productivity Commission and the Australian Bureau of Statistics (ABS) have released a joint research paper into the state of competition, innovation and productivity in Australian businesses.


The paper investigates two important relationships relating to firm behaviour and performance using econometric methods. First, the relationship between product market competition and innovation is examined, and then the association between innovation and productivity is separately investigated.


“For every measure of competition considered except one, the results of the modelling are consistent with an anti-Schumpeterian relationship between competition and innovation – that is, firms appear more likely to innovate if they face stronger competition,” the report found.


The key findings of the paper are as follows:


  • The models also indicate that a greater market share and larger firm size (as measured by the number of employees) are positively associated with innovation.
  • Statistically significant associations are also found between certain competition related variables and the presence of a larger number of different types of innovation being completed and a higher degree of novelty of those innovations.
  • A large degree of dependence is found between the probabilities of different innovation types being completed by a firm.
  • The modelling also indicates a positive and statistically significant association between each of four types of innovation (goods and services, organisational process, operational process, and marketing) and higher productivity reported by the firm


The full report can be found here