Boosting dynamism: What Australia can learn from other nations
This paper focuses on the role governments can play in educating businesses about dynamic capabilities, in line with the Federal Government’s ambition of building a more productive, dynamic and resilient economy.

Boosting dynamism:
What Australia can learn from other nations

Building dynamic capabilities within Australian businesses could be a practical and effective way to boost our productivity growth.

Boosting dynamism:
What Australia can learn from other nations

Building dynamic capabilities within Australian businesses could be a practical and effective way to boost our productivity growth.

Productivity growth is the key driver of increasing living standards. Over the past 30 years, labour productivity has contributed around 70 per cent of the growth in Australia’s real gross national income.

Trend productivity growth rates have been declining for decades and average productivity growth over the decade to 2020 was the slowest in 60 years.

This comes against a backdrop of major technological, climate and demographic change.

Dynamic capabilities can help boost productivity growth

Research has found firms that can sense and seize opportunities, transforming their business when renewal is needed, are more resilient, productive and profitable.

Overseas government programs

When dynamic capabilities programs were implemented in New Zealand and Singapore, participating firms expanded into new businesses, products and markets, adopted improved ways of working, and  increased collaboration and transformation.

What's the role of government?

Embedding dynamic management capabilities education in existing programs would be a quick and cost-effective way of commencing dynamic capabilities education in Australia.

At the federal level, dynamic capabilities could form a key pillar of the new Industry Growth Program.

At the state level, governments should also look to embed dynamic capabilities education within their existing suite of business support programs.


International programs provide a template 

To gain a better understanding of what can be done to help Australian businesses to develop dynamic capabilities, we examined two overseas programs – one run by the New Zealand government that was specifically built using the dynamic capabilities framework, and one run by the Singapore government that has many parallels to dynamic capabilities.

The international case studies above demonstrate the potential benefits of government-provided dynamic-capabilities education. They offer a template that Australia could adopt as a practical step towards boosting productivity and innovation.

Such education should be embedded in existing government programs, however, rather than creating new ones. In Australia, as overseas, state and federal governments already offer many business-advisory services, which businesses often struggle to navigate. As such, creating yet another new program would likely be counterproductive. Instead, incorporating dynamic capabilities into existing programs would be the quickest and easiest way for governments to start educating businesses about these capabilities. 

As with all government services, good evaluation is critical. Taxpayers need to know they are getting value for money. Evaluation of any dynamic capabilities education is especially important, given this is an emerging area of research and there is still much to learn. Rigorous evaluation of any efforts to boost dynamic capabilities would also greatly improve our understanding of the links between dynamic capabilities, firm performance and productivity growth. 

BOOSTING DYNAMIC CAPABILITIES COULD IMPROVE INNOVATION AND PRODUCTIVITY GROWTH

Dynamic capabilities is an emerging area of research, but the evidence so far suggests that firms with stronger dynamic capabilities are more productive, innovative and profitable, increasing their ability to survive and thrive in uncertain environments. Boosting the dynamic capabilities of Australian businesses could therefore be a practical way to improve innovation and productivity growth.

OVERSEAS CASE STUDIES SHOW PROMISING RESULTS

Overseas government programs designed to boost the dynamic capabilities of local businesses, while limited, have so far been highly successful. Our case studies from New Zealand and Singapore found that firms participating in these programs went on to expand into new businesses, products and markets, adopt new and improved ways of working, and increase collaboration and transformation.


TRIALLING EDUCATION PROGRAMS WOULD IMPROVE OUR UNDERSTANDING OF DYNAMIC CAPABILITIES

Trialling dynamic capabilities education in Australia would en- able us to test and evaluate a similar approach. It would also provide a valuable opportunity to improve our understanding of the links between dynamic capabilities, firm performance and productivity growth.

STATE AND FEDERAL GOVERNMENTS COULD EMBED DYNAMIC CAPABILITIES EDUCATION IN EXISTING PROGRAMS

Embedding dynamic management-capabilities education in existing programs would be a quick and cost-effective way of starting dynamic-capabilities education in Australia. At the federal level, it could form a key pillar of the new Industry Growth Program. At the state level, governments should also look to embed this education within their existing business-support programs.


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