The Hunter Valley Research Foundation (HVRF) has monitored and evaluated business innovation in the Hunter Region since 2009, with its latest findings showing the proportion of Hunter firms introducing new products or services dropped from 37% in 2011 to just 26% in 2013.

This worrying sign of a reduction in the levels of innovation was also reflected in the data for Hunter businesses’ expectations for capital expenditure over the 12 months from December 2013.

Expectations were at their lowest level since early 2009. Both measures underline the growing pressures on regional businesses and the impact of uncertainty and reduced liquidity on their willingness and ability to invest in their future prosperity. This is concerning for the region’s economic future. HVRF researchers are currently working with Regional Development Australia Hunter (RDAH) to examine international innovation indicators and measures, in an effort to identify a benchmark against which to measure the Hunter’s performance.

The story revealed by the HVRF’s innovation research is also reflected nationally, with Australia’s rankings in the OECD on various measures of innovation relatively low compared to our rankings for current GDP (Gross Domestic Product) per capita.

The HVRF’s business innovation survey, conducted annually, is part of a growing global body of data that examines innovative capacity, mostly at the national level rather than regionally.

The European Commission’s (EC) recently released 2014 Innovation Scoreboard, for example, uses available published data and the results of the Eurostat Community Innovation Survey to determine 25 different indicators and several different dimensions in an attempt to capture the main drivers of innovation performance.

It found that Sweden was once more the best performing innovation system in the European Union (EU), followed by Denmark, Germany and Finland. Globally, the United States and South Korea both outperformed the EU in innovation measures by 17% and Japan by 13%. The EU continues to have a performance lead over Australia and Canada, which score at 62% and 79% of the EU level respectively.

While the HVRF researchers are engaging local firms to try and establish a benchmark against the nation and the world through surveys and interviews, there is a growing understanding that top level indicators, of the sort developed by the European Commission, can only reveal a very broad picture of what is happening in businesses. It is one thing, for instance, to identify issues relating to the Hunter’s knowledge base, as revealed by our lower than the national average school completion and higher education attainment rates, and another to translate that meaningfully into the business environment.

Top level analysis can help to guide government policy makers, who can prioritise programs to encourage greater educational attainment or increased research and development at our universities. But unless an individual business owner/operator is prepared and able to access skills and knowledge, to demonstrate the entrepreneurial spirit and strategic vision to invest in the future, even when their day to day operations are challenging, a public investment at the top level may not improve our businesses’ innovation activity and preparedness for economic change.

While HVRF work to develop benchmark measures to assist in policy development, they will also be seeking to work more closely with businesses in the region to identify what they are doing now and what they need to help them introduce an innovative culture. By getting below the headline findings and seeking to more fully understand Hunter businesses’ environments, the Foundation hopes to identify where the gaps are to a highly effective innovation system for the Region and what can be done to address them.