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Executive summary Innovation agents: VET skills and innovation in Australian industries and firms This study examined the role of vocational education and training (VET) and occupations in innovative industries and firms. Innovative industries are those that have implemented technologically new or significantly improved products or processes. Those categorised as intensive have contributed to the national expenditure on innovation after putting particular effort into research and development. The three over-arching aims were:
Innovation-intensive products and services are increasingly playing a substantial role in world trade and thus, competitive success in innovation-based products and services is a significant and influential factor in long-term national prosperity. For this reason it is important that the linkages and communication between innovation-intensive firms and vocational education and training are well defined and efficient. The methodology for the study involved a literature review, quantitative analysis and case studies. The following summarises the key results using the framework of the specific research questions underpinning this study. Which industries are most significant in undertaking innovation in Australia?From the composite index of innovation a clear hierarchy emerges, with the industries clustered into three distinct groups. These groups are:
It is interesting to note that the high-innovation group comprises two traditional goods producers as well as the most recently developed and fastest growing service industries. It reveals that the more popular notions of what constitutes technologically dynamic industries require change. In 2001 these four industries accounted for 33.5% of gross domestic product (GDP) and 26.3% of employment. The fact that the share of gross domestic product significantly exceeds the share of employment indicates the comparatively high productivity of these industries. The broader literature on innovation and the case studies identified an interrelated set of factors which are strongly associated with high-innovation intensity. The factors include:
The eight case study firms, individually and collectively, demonstrated most, or all of these characteristics. What is the role and significance of VET provision in Australian innovation?Surveys of innovation-intensive industries by the Australian Bureau of Statistics (ABS) found that firms identified persons in VET occupations as among the principal sources of ideas for technological innovation. Skilled production, trade and technician occupations are essential for the generation, design, installation, adaptation and maintenance of new technologies. The case studies demonstrated that innovation-intensive firms regard VET as a critical transmission mechanism in the diffusion of knowledge and development of practical skills for a very broad range of occupations. ABS data also show that innovation-intensive industries have higher expenditure on structured training as a share of gross wages and salaries, and provide notably higher hours of training per employee. The case study firms spent two to four times more on training as a share of gross wages and salaries than other firms. A common element across all case studies was that training was seen as an essential element in the maintenance and growth of their business, and flowed automatically from their decisions regarding the pursuit of product and process improvements. This reflects the bases of competition within the industries and markets into which they sell their goods and services. An important finding is that most of the factors which were identified in the literature review as strongly stimulating innovation were also identified in the case studies as strongly stimulating training. This is not a surprising result. The fundamental purpose of vocational training is, after all, the transmission of economically useful knowledge. Industries which experience comparatively rapid changes in the knowledge base of their processes and products require more intensive training to transmit this knowledge. What is the occupational profile of innovative industries and which occupations within innovative industries rely on VET providers?The high innovation-intensive industry group as a whole has a disproportionately large share of managers/professionals and trades and advanced clerical occupations. (There are a disproportionate number of managers/professionals and advanced clerical occupations in communication services and property and business services and a disproportionate number of trades in manufacturing, and mining.) All other occupational groups are under-represented in the group. However, within the four industries comprising the high innovation-intensive category—manufacturing, mining, communication services, and property and business services—there is very considerable diversity in their occupational structures. Indeed, the degree of variation in the occupational structure across these four innovation-intensive industries is as great as that across all industries. In other words, taken collectively, there are significant differences in the occupational structure between the high-innovation intensity group and the other two innovation groups. However, taken as separate industries, these differences become much less distinct. The fact that the association between occupational structure and innovation intensity of industries depends on the level of analysis undertaken suggests that the association is not robust. Another important and related finding is that the variation in educational attainment within the innovation-intensive industries is as great if not greater than that across all industries. This is primarily due to the large variation in occupational structures across the four innovation-intensive industries. These results suggest that the principal occupational groups play a different role, and are of differing significance in the innovation process within each of the high innovation-intensive industries. For example, in manufacturing industry, only 11% of employees have graduate or postgraduate degrees, compared with 33.6% for property and business services. These results also suggest that, by itself, educational attainment—in particular, a high proportion of an industry's workforce with university qualifications—is not a strong predictor of innovation intensity. For example, of all industries, the health and community services industry has the highest share of persons with university qualifications at 40.4%, although it is classified to the low-innovation group.1 This finding is consistent with the literature on innovation which finds that a very broad range of factors, both internal and external to a firm and industry, determine the intensity of its investments in innovation-related activities.How do innovation-intensive industries recruit, maintain and update their skills? What problems, if any, do innovation-intensive industries have in recruiting, maintaining and updating skills provided by the VET sector?The study found innovation-intensive firms use a wide range of training providers. These include TAFE institutes, private providers, equipment and other vendor suppliers, professional associations and in-house providers. Amongst higher-level VET occupations, such as technical officers or forensic investigators with diplomas and advanced diplomas, conferences, journals and professional associations, were an important means of keeping up to date with advances in their fields. Nevertheless, a key role was identified for TAFE in that six of the eight case study firms used TAFE to supply entry-level qualifications. Across the cases studies there was a universal requirement for entry-level VET training to result in formal qualifications. This requirement was due to enterprise bargaining agreements providing for training to lead to the acquisition of recognised, transferable qualifications. It was also due to the widespread adoption of formal quality assurance methods which typically require that employees can document their competency to perform the range of work they undertake. In addition, larger firms operate formal human resource management policies in which formal qualifications are used as criteria in recruitment and promotion. From the case studies, a typology was developed describing and explaining the differences in training sources, methods and curricula. Five different models were identified in terms of the methods and sources used to recruit, maintain and update vocational skills. The picture which emerges from this typology is a highly adaptive training system.What are the strengths and weaknesses of VET provision within Australia's innovation-intensive industries?The case studies revealed, overall, a high level of satisfaction with the public and private VET system. Staff interviewed for the case studies all commented very positively on training provided by TAFE, especially in relation to its emphasis on the acquisition of practical skills. The firms especially valued training with a practical and applied orientation. This form of training was valued because it reduced the amount of on-the-job training required for employees to become productive. Firms also commented positively on the linking of off-the-job training with on-the-job work experience, allowing students to apply their knowledge. An obvious, although still key, finding was the importance of consultation. It is concluded that the satisfaction expressed by firms regarding TAFE training was due to the high level of consultation between the firms and TAFE. It must be recognised, however, that a crucial basis for the generally high level of satisfaction and high level of consultation is the large size of the case study firms. The scale of training sought by the firms made it economically feasible for TAFE and other providers to customise course content, assessment and delivery. The scale of training also made it feasible for the VET providers to invest in the development of their own staff which enabled them to keep abreast of the latest technologies and pedagogies in their fields. A considerable amount of post-entry-level training was provided, mostly in the form of short courses, typically with a duration not exceeding 2-3 days. The case studies and survey data indicate that a wide variety of training providers were used for this post-entry-level training. In approximate order of importance, they included equipment and other input suppliers, in-house training, private providers and TAFE. A high level of satisfaction was expressed by the case study interviewees regarding the quality, cost and flexibility of the training supplied by all of hese providers. Firms sought flexibility in training arrangements for this post-entry-level training, especially the capacity for on-the-job delivery and customisation of training to conform to firm-specific operating procedures and equipment. All of the case study firms emphasised the need for employees to develop behavioural skills such as effective team work and to develop problem-solving and communication skills, including improved literacy, numeracy and information technology skills. The demand for these behavioural and communication skills resulted from:
There is unmet demand for training in these behavioural skills, especially related to team work and problem-solving. Finally, while larger innovation-intensive firms have the financial capacity and willingness to invest in structured training, other sectors have significantly reduced their VET investments. This has contributed significantly to skill shortages in occupations which are critical, for example, to success in export markets and competing against imports in manufactured products. This is a concern given that, to be competitive, innovation-intensive sectors depend on efficient and technically flexible suppliers of components and services from all sectors. Without the presence of these clusters of high-quality and technically agile smaller suppliers, the survival of larger innovation-intensive firms is at risk. A variety of measures are suggested to address these skill shortages. There is a volume 2, which contains the data tables for the construction of the composite index of innovations, the case study interview schedules and the case studies, and can be downloaded in pdf format from www.ncver.edu.au/publications/1451.html. _______________________________________1 Aggregation of health and community services obscures the relatively high-innovation intensity of the health industry.
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