New research has revealed that Australian Mining Equipment, Technology and Service (METS) providers might be smaller in scale than their international rivals, but they make more money from new, cutting-edge products.
QUT researchers from the Australian Centre for Entrepreneurship Research conducted a large survey of Australian METS to build a more accurate profile of the innovation and internationalisation in the sector.
Lead researcher Dr Henri Burgers said the study revealed Aussie METS are active innovators.
"The METS sector is dominated by small and medium-sized enterprises - 88 per cent of the firms, which are predominantly Australian-owned - 79 per cent of the firms," Dr Burgers said.
"METS firms are active in innovation, with 90 per cent of the firms investing in R&D. This leads to immediate results with almost half the firms reporting that more than 20 per cent of their revenue comes from the sale of new products or services introduced in the past three years.
"Australian-owned firms in the METS-industry on average tend to invest more than twice as much of their revenue on R&D than foreign-owned firms. Australian-owned firms also generate on average more revenue from new products than foreign-based firms."
He said the research also uncovered some surprising facts about the composition of the sector. Contrary to some popular beliefs that the mining sector requires specialised METS-providers, the results indicated that METS-firms used one of three different strategies:
> 26 per cent of the firms use a niche strategy in which the entire firm's focus is on the mining industry.
> 40 per cent of the firms use a differentiation strategy in which they serve clients inside and outside the mining industry, but offer some form of customisation to their clients in the mining industry, ranging from customised products/services to entire organizational units dedicated to the mining industry.
> 34 per cent of firms use a standardisation strategy in which they provide the same products/services across different industries.
Each of these seemed viable strategies, as there are no discernible differences in the innovation, internationalisation and financial performance between these three groups of firms, he said.
However, Aussie firms reported finding it tough to crack international markets.
"METS firms struggle with internationalisation," Dr Burgers said.
"Only 15 per cent of the firms in our sample receive more than 50 per cent of their revenues from overseas markets.
"Given the innovativeness of the Australian METS-sector and the growing size of the mining sector outside Australia, a main challenge for government and policy makers is to support METS-firms in their internationalisation efforts."
This finding supports related QUT research by QUT Business School researchers Professor Rachel Parker and Dr Stephen Cox (see related release), who found that it was the nature of the mining industry and its procurement processes that created a ceiling to growth for Australian METS.
WHAT AUSSIE METS CAN DO TO IMPROVE THEIR BITE OF THE MARKET:
Dr Burgers said as the results showed that METS-firms with higher levels of innovation achieved significantly higher performance, the team turned their attention to finding out what firms could do to increase their innovation output. The found:
> Improve a firm's relational capabilities: "A doubling of such capabilities will increase innovation by 60 per cent. Relational capabilities can be increased by becoming more proactive about finding partnering opportunities, actively build relationships with partners based on trust and flexibility, and systematically coordinate the portfolio of partnerships to ensure knowledge is leveraged. The more business partners a firm had, the higher the level of innovation of that firm," Dr Burgers said.
> Increase a firm's capacity to absorb and use new knowledge: "Firms that double the level of their so-called absorptive capacity, will on average increase their level of innovation by 90 per cent. Firms can increase absorptive capacity by constantly scanning the industry for new knowledge, storing this new knowledge and communicating it throughout the organisation, and providing support to blend newly acquired with existing knowledge," Dr Burgers said.
> Capitalise on the expertise of external consultants: "Firms could further enhance their innovation by combining their absorptive capacity with actively learning about new technological and market knowledge from a wide variety of third parties, such as industry bodies, universities and government. Acquiring knowledge from these latter three sources also strongly supported the ability of a company to venture internationally."
QUT Business School will partner with Austmine in a new mining innovation partnership to be established in Brisbane. Austmine, Australia's leading association of Australian Mining Equipment, Technology and Services (METS), aims to ensure the industry's competitiveness into the future. Other key partners included Brisbane Marketing and CSIRO. Info: http://www.qut.edu.au/about/news/news?news-id=62226
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