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http://aegis.uws.edu.au/KISA/main.html

M. Cristina Martinez-FernandezClaudine SoosayVenni Venkata Krishna

Knowledge Intensive Service Activities

in Innovation of the Tourism Industry in Australia

Phillip TonerTim TurpinMerete Bjorkli Kalika N. Doloswala

Knowledge-Intensive Service Activities (KISA)in Innovation of the Tourism Industry

in Australia

October 2005

AEGIS is a Research Centre of the University of Western Sydney.

M. Cristina Martinez-Fernandez Claudine Soosay

Venni Venkata KrishnaPhillip Toner

Tim TurpinMerete Bjorkli

Kalika N. DoloswalaMerete Bjorkli

2 KISA in Innovation of the Tourism Industry

AcknowledgementsThis report has been prepared by the Australian Expert Group in Industry Studies (AEGIS). AEGIS is a research centre of the University of Western Sydney. The team involved in this report includes Dr M. Cristina Martinez-Fernandez (Chief Investigator), Dr Claudine Soosay, Professor Venni Venkata Krishna, Dr Phillip Toner, Professor Tim Turpin, Merete Bjorkli and Kalika N. Doloswala.

The cover artwork is credited to Monty Chanthapanya.

We are grateful to the contribution of Professor Jane Marceau to the early developments of the KISA project.KISA project.KISA

The study is part of an ARC Linkage funded project (LP 0349167) in partnership with Australian Government Departments DITR and DCITA. The report also informs the OECD based KISA project.

DisclaimerThe views expressed in this report are solely those of the authors and should not be attributed to the Department of Industry Tourism and Resources or the Department of Communications, Information Technology and the Arts.

© Australian Expert Group in Industry Studies, 2005

ISBN 1 74108 107 6 print editionISBN 1 74108 108 4 web edition

Published by the University of Western Sydney, October 2005http://www.uws.edu.au

Martinez-Fernandez, M.C.; C. Soosay; V.V. Krishna; P. Toner; T. turpin; M. Bjorkli and K.N. Doloswala (2005) Knowledge Intensive Service Activities (KISA) in Innovation of the Tourism Industry in Australia, University of Western Sydney: Sydney.

For further information please contact:Dr Cristina Martinez-FernandezAEGISUniversity Western SydneyPO Box Q1287 QVB Post Offi ce NSW [email protected]: + 61 28255 6200Fax: +61 2 8255 6222

Or visit the project website: http://aegis.uws.edu.au/KISA/kisa_main.html

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This report focuses on the role of knowledge intensive service activities in the tourism industry in Australia. The study is part of an ARC funded project1 on ‘Driving Innovation: Mixing, Matching and Transforming Knowledge-Intensive Services into Innovation.’ The study is also part of the OECD KISA project2.

Overview of the Industry

The Australian tourism industry has experienced a strong growth over the past 20 years. In 2002-2003, the tourism industry contributed 4.2 per cent to Australia’s gross domestic product. Four industries account for 80.1 percent of the output of the tourism. These industries are Transport and storage (27.6%); Accommodation, cafes and restaurants (20.9%) Manufacturing (16.9%) and Retail trade (14.7%).

The tourism sector draws on a wide range of industries supplying both services and goods. In 2002-03, 540,700 persons were employed. The majority of the jobs in the tourism industry are in retail trade, the accommodation sector and cafés and restaurants. There are over 350,000 tourism related businesses in Australia. Most businesses are small to medium sized, and 90 percent employ less than 20 staff. Tourism’s share of total employment (5.7%) is 50 percent larger than the industry’s share of national gross value added (3.8%). This implies that labour productivity, as measured by gross value added per employee in the tourism industry is lower than for the economy in general.

Tourism has less than half the number of Professionals (9.1% compared to 18.8%) and over 40 percent fewer Managers and Administrators (7.2% compared to 4.2%) than for all industries. Tourism’s share of Elementary Clerical, Sales & Service Workers is some 61 percent larger than for the economy as a whole. R&D expenditure on tourism as a share of the industry’s gross product is comparatively low. Tourism R&D was the equivalent of just 0.06 percent of tourism gross product in 2000-01. For the economy as a whole, R&D as a share of total gross domestic product was 1.53 percent in 2000-01. Although R&D as a share of tourism’s gross domestic product is 25 times less than R&D share of GDP, tourism fi rms do engage on research activities linked to innovation such as research on new markets.

Policies and Programs supporting the industry

A review of the tourism industry in Australia was undertaken as part of the development of the Tourism White Paper. The White Paper was subsequently released in November 2003 with an additional $235 million being put towards the tourism industry. A signifi cant change was the creation of a new body - Tourism Australia – that brings together the Australian Tourism Commission, See Australia, the Bureau of Tourism Research and the Tourism Forecasting Council.

Direct public tourism related expenditure accounted for AUD 140 million in 2002-3. Most of the expenditure covered activities by the Australian Tourist Commission, Export Market Development Grants, Regional Tourism Projects and Tourism Policy.

Executive Summary


Tourism fi rms are eligible for assistance under a range of generic industry programs offered by government but most tourism fi rms do not meet the criteria for those programs as they focus on innovation and research commercialisation.

Survey of Tourism Firms: Key Findings

The survey indicated that the fi rms in the tourism industry are quite innovative in terms of implementing product, process and organizational changes. Thirty-nine of the 44 fi rms (89%) made changes that involved a new product, a new process or other change such as a substantially changed accounting system or human resources management system. The innovation in these fi rms was mostly incremental (a series of small/gradual changes over time).

In relation to the use of inputs to KISA for the development and introduction of the above innovations, the most commonly used services were Research & Development, Marketing and Promotion, Accounting and Financial services and IT services. KISA-related services were used differently when mapped against the business life-cycle of the fi rm. Starting business did not use any service very often. Mature business used services regularly, especially IT services. Business in expansion used all services but specially marketing and IT. Firms identifi ed that they were most likely to access services intermittently (i.e. once or twice through the year).

The most important source of KISA-related services was in-house delivery which provided 32 percent of all KISA inputs. The next most signifi cant source was the private sector with 20 percent and Industry Association (14%). The least signifi cant sources were Universities (2%), Federal Government (3%) and Local Government (5%).

Expenditure on KISA related services was not very high. Sixty-four percent of respondents indicated that they spent less than AU$10,000 on KISA inputs. Eight of forty-four fi rms (18%) received government grants and these funds were used for Marketing and promotion, training services and research purposes.

Case studies: Key Findings

The six case studies interviewed depicted various knowledge intensive service activities they considered very important for their operations and their innovation. Marketing and promotion services, accounting and fi nance services were common among all the fi ve case studies and rated as highly important.

During the creation phase of a product, the main KISAs involved were industry development advice, the marketing and promotion, research and development, accounting and fi nance services and recruitment. The maturing phase involved business planning advice, IT services, e-commerce services and the customisation of wholesale packages. The standardisation phase involved marketing and promotion, accounting and fi nance services, training services, recruitment and accreditation. In relation to the fi rm life-cycle, the most used KISAs in the start up phase were industry development advice, business planning advice, R&D, recruitment and accreditation. At the entrepreneurial stage, the period after the initial 3 years have been survived, there was more emphasis on marketing and promoting their products, services and the business. At the professional management stage of the business life cycle, the main KISAs used were research and development, accounting and fi nance services, IT and E-commerce services. Firms in expansion tended to focus more on IT services, recruitment and the customisation of wholesale packages.

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These cases show that external inputs to KISA contributes signifi cantly to the core competences of the fi rms in areas as critical as product development, process innovation, marketing innovation, the use of best practices and the awareness of opportunities conducting to grow. These fi rms show also a high specialisation of KISA inputs from their own employees. The value of these inputs was in the strong specialised knowledge of staff and their capacity to ‘customise’ it with innovative behaviour to the core operations of the company. This customization of knowledge includes the adaptation to particular regional characteristics and the pursuing of long-term relationships with customers.

In general it was found that, though based on a small sample, the case studies analysis supports the view that for success in innovation, market research is as important as institutional, organisational and marketing factors. Secondly, the in-house capabilities of fi rms (technical and non-technical) particularly the part played by managers of the fi rms (often being owners of small fi rms which dominated the survey sample) has come out as important factors for the generation of KISA and the innovation process. Thirdly, our case studies indicate the network space of ‘cluster based tourism destinations’ (such as Snowy Mountains and Gold Coast) playing an important part in catalysing the process of KISA in the tourism industry. Not withstanding the fi ndings of the survey results, the signifi cance of local, state and federal governments (tourism departments) is crucial to the development and in sustaining ‘cluster based tourism destinations’. Such network space and clusters are seen to provide an important source of KISA inputs for business development, marketing, and tourism related learning from others.

Emergent Policy Themes

• Government tourism departments have a role in raising the awareness of KISA and its impact on innovation through diffusion activities;

• As tourism activity is linked to geographic cluster-based destinations, cluster oriented policies and programs are important both for catalysing KISA and for strengthening the ‘destination innovation system’;

• Policies and programs are needed to increase the innovation capabilities of the professionals working in the tourism industry (specially in SMEs);

• Government programs are needed to target non-technical components of the industry such as Marketing;

• Policies and programs oriented to building networks, especially at the ‘destination’ level, would facilitate informal process of learning and building competences for innovation;

• There is a need for governments to collect statistics that better refl ect innovative KISA not usually collected in relation to innovation.


Table of contentsACKNOWLEDGEMENTS ...........................................................................................................................2EXECUTIVE SUMMARY ...........................................................................................................................EXECUTIVE SUMMARY ...........................................................................................................................EXECUTIVE SUMMARY 31. INTRODUCTION .................................................................................................................................8

1.1 Innovation and Importance of KISA .............................................................................1.1 Innovation and Importance of KISA .............................................................................1.1 Innovation and Importance of KISA 91.2 Knowledge-Intensive Service Activities (KISA) ............................................................121.3 The KISA Study .........................................................................................................141.4 Research Questions and Methods ............................................................................14 1.4.1 Survey and Case Studies .............................................................................14 1.4.2 Sample and Characteristics of Tourism fi rms ................................................15 1.4.3 Data Analysis ...............................................................................................18 1.4.4 Limitations of the study ................................................................................18

2. OVERVIEW OF THE TOURISM INDUSTRY ..............................................................................................RVIEW OF THE TOURISM INDUSTRY ..............................................................................................RVIEW OF THE TOURISM INDUSTRY 19

2.1 A statistical overview of Tourism ................................................................................19 2.1.1 Composition of the Industry .........................................................................20 2.1.2 The economic contribution of the Industry ....................................................21 2.1.3 Inputs to Tourism .........................................................................................22 2.1.4 Employment .................................................................................................23 2.1.5 Domestic Tourism ........................................................................................25 2.1.6 Tourism Exports ...........................................................................................25 2.1.7 Tourism Research and Development ............................................................37 2.1.8 Tourism in OECD countries ..........................................................................382.2 Government Policies and Programs for the Industry ..................................................302.3 Summary ..................................................................................................................32

3. SURVEY OF TOURISM FIRMS: KEY FINDINGS .......................................................................................33

3.1 Innovation and the Use of KISA .................................................................................333.2 Provision of inputs to KISA ........................................................................................473.3 Access to Government Grants ..................................................................................423.4 Summary of Findings ................................................................................................43

4. CASE STUDIES: KEY FINDINGS .........................................................................................................44

4.1 Background to the cases ..........................................................................................444.2 Importance of KISA ...................................................................................................46 4.2.1 Sources of inputs to KISA ............................................................................47 4.2.2 KISA in the product life cycle ........................................................................50 4.2.3 KISA in the business life cycle ......................................................................51 4.2.4 Network KISA ..............................................................................................524.3. Rationale for the use of KISA ....................................................................................59 4.3.1 Strategy for using externally produced inputs to KISA ..................................59 4.3.2 Strategy for using internally produced inputs to KISA ...................................614.4 KISA and fi rm capabilities ..........................................................................................62 4.4.1 External inputs to KISA and fi rm capabilities .................................................62 4.4.2 In-house KISA and fi rm capabilities ..............................................................63 4.4.3 KISA mix and match process: the integration of internal and external KISA ..644.5 Challenges to the innovation process ........................................................................654.6 Access to Government Programs .............................................................................664.7. Summary of fi ndings ................................................................................................67

5. CONCLUSIONS ................................................................................................................................69

5.1 KISA in the innovation process of Tourism Firms .......................................................695.2 Emergent policy themes ............................................................................................70

REFERENCES .....................................................................................................................................71APPENDIX A: CASE STUDY SUMMARIES ..................................................................................................74

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LIST OF TABLES

Table 1: Educational qualifi cations (survey sample) ..........................................................................16Table 2: Business structure .............................................................................................................16Table 3: Profi le of case studies ........................................................................................................18Table 4 Number of businesses in the Tourism Industry in Australia ..................................................20Table 5 Number of management units by employment size for Tourism ..........................................20Table 6 Share of Tourism GDP (percent) ..........................................................................................21Table 7 Consumption of Domestically and Overseas Produced Tourism Goods and Services. 2002-03 (millions) ...............................................................................................................21Table 8 Tourism Industry Share of Total Gross Value Added (Percent) .............................................22Table 9 Short Term Arrivals and Departures (million) ........................................................................22Table 10 Inputs to the Tourism Industry. 2000-01 (Percent) .............................................................22Ta ble 11 Employed Persons in Tourism per Industry. 2002-03 .......................................................23Table 12 Occupational Structure of Total Employment and Tourist Industry. Australia. August 2003 .........................................................................................................................24Table 13 Proportion of Employment in ASCO Major Groups ...........................................................25Table 14: Exports of Tourism Goods and Services ..........................................................................26Table 15: Arrivals (1993-2012) ........................................................................................................27Table 16 Comparison with other OECD countries ...........................................................................28Table 17: Direct Tourism Related Spending (AUD $ million) by the Australian Government ..............31Table 18: Firms with Tourism Awards and radical innovation ...........................................................34Table 19: Use of KISA-related services ...........................................................................................34Table 20: Frequent use of KISA-related services by fi rm business cycle ..........................................35Table 21: Use of KISA-related services ...........................................................................................36Table 22: Expenditure on KIS by Tourism Award winners ................................................................37Table 23: >AU$50,000 Expenditure on KIS and size of the fi rm .......................................................37Table 24: Provision of KISA-related services ....................................................................................38Table 25: KISA mix of inputs ...........................................................................................................39Table 26: Importance of providers of inputs to KISA ........................................................................40Table 27: Preferred location for provision of KISA-related services ..................................................41Table 28: Tourism Awards and use of government grants ...............................................................42Table 29: Sources of knowledge-intensive service activities inputs in Australian tourism fi rms .........48Table 30 Frequency of knowledge/services provision ......................................................................49Table 31 KISAs mapped against product life cycle ..........................................................................50Table 32 KISAs mapped against fi rm life cycle ................................................................................51Table 33 Collaboration with partners ...............................................................................................58

LIST OF FIGURES

Figure 1: The Learning Space of Firm and Vectors in the C0-production of knowledge...................13Figure 2: Firm Size (survey sample) .................................................................................................15Figure 3: Years in operation ............................................................................................................16Figure 4: Average turnover ..............................................................................................................17Figure 5 Domestic Visitor Nights 2000-2012 ...................................................................................25Figure 6: International visitor arrivals December 1991–July 2003 .....................................................26Figure 7 International tourism: past and projected inbound tourism by region .................................29Figure 8 OECD International Tourism: Gross departure rate, trips per inhabitant ..............................30Figure 9: Change to products/services ...........................................................................................33Figure 10: Firm expenditure on KISA-related services .....................................................................36Figure 11: Provision of Services ......................................................................................................39Figure 12: Location of KISA-related providers .................................................................................41Figure 13: Inputs to KISA fi nanced by Government grants ..............................................................42Figure 14 The Importance of KISA ..................................................................................................46Figure 15: Snowy Mountains Tourism Development Network ..........................................................54Figure 16 The network space of Case A .........................................................................................55Figure 17 The network space of Case E .........................................................................................56Figure 18 The network space of Case B .........................................................................................57Figure 19 Challenges to the innovation process ..............................................................................65


Innovation is on the policy agenda in all OECD countries after two decades of research by the OECD itself and by researchers in many fi elds. In Australia the last few years have seen much increased government awareness of the major role in economic development played by innovation and the fi rms that carry it out. This awareness has been realised through the introduction of policies crossing many aspects of the innovative process and all sectors. Recognising that innovation is the key to sustained economic growth, governments in Australia now spend important amounts of money on a diverse range of innovation programs.

The international research-based literature clearly indicates the multiple dimensions of innovation and innovative activity by fi rms. From an initial focus on product innovation alone, understanding is now widespread that innovation encompasses not only radical and incremental product development but also new production methods and new organisational forms taken up by productive enterprises. It has become clear that all these aspects of change characterise innovative fi rms and infl uence competitive success.

It has also become clear that innovation, defi ned as novel activities of economic value to an enterprise, is a highly complex phenomenon and occurs differently in different industries, in relation to different products, in fi rms of different ages and size and at different stages of an industry or product cycle. Researchers in many countries have investigated most aspects of the innovation process and the operations of‘typical’ innovative fi rms but still there remain many areas where the processes involved and the ways in which fi rms go about changing their products, processes, markets, organisational shape and skill levels are still not

well understood. In the knowledge based ‘new economies’, a range of knowledge intensive service activities carried out by fi rms and aided by appropriate government policies that enable these fi rms to develop knowledge based capabilities and skills are seen as important as R&D itself in the overall success of innovation processes. It now seems likely that the mixed success of some policies designed to assist enterprises, especially small and medium fi rms, undertaking innovative activities results from both lack of clarity in understanding the processes and recognition of the impact on policy uptake of the factors mentioned above. In particular, it may be that many policies are designed with too little understanding of exactly how businesses using the programs offered mix and match knowledge-intensive services provided by public and private sources of expertise and assistance. In addition, limited understanding of the ways in which products and other innovative activities are developed in different industries often means that programs are insuffi ciently focused on the needs of particular client fi rms and industries.

The present report is an element of a broader project which aims to improve understanding of how fi rms use innovation services in different industries. The project is rooted in work AEGIS has been undertaking as part of an 9 countryOECD research project1 that will ultimately provide analysis of innovation-related policies or programs relating to specifi c industries and data on how fi rms in selected industries in the different countries use public programs and private sector sources of expertise available to them. The aim here is to provide policy makers with analytical and empirical insights to underpin the design and implementation of more effective industrial development strategies.

1. INTRODUCTION3. INTRODUCTION3. INTRODUCTION

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KISA are defi ned as the production and integration of service activities (technical and non-technical) undertaken by fi rms in manufacturing or service sectors, in combination with manufactured outputs or as stand-alone services (OECD, 2003:2). KISA can be provided by private enterprises or public sector organisations. Typical examples include: Research and Development (R&D) services, management consulting, Information Technology (IT) services, human resource management services, legal services such as Intellectual Property (IP)-related issues, accounting, fi nancing, and marketing services.

The project has three main areas of research for government assistance in Australia’s innovation system. These are:

• Better understanding of how fi rms interact with external providers of innovation services in order to develop innovation capability;

• Better understanding of how fi rms mix and match their use of services at different ‘stages’ of their innovation project(s);

• Better understanding of both the ways in which and the reasons why such mixing and matching varies according to the sector where the fi rm operates.

Specifi cally, the study will investigate KISA in the Australian tourism industry to better identify its features, which are critical to innovation in Australian companies. The study of KISA is a sophistication of the defi nition of knowledge intensive services in the literature (Miles, 2003), as it focuses on the complexity of how and why knowledge-intensive services are sought and acquired in interaction with formal and informal knowledge providers.

1.1 INNOVATION AND IMPORTANCE OF KISARecent research on innovation undertaken by the OECD and EU suggests that there are three principal ‘lenses’ useful for analysing innovative activities in a nation. In summary, these ‘lenses’ focus attention on understanding particular patterns of innovative activity seen in an economy as a function of the characteristics of the major players (institutions and organisations public and private), and the ways in which these link public and private sectors together. The players may link in different ways at different spatial levels (national, regional or local), through activities such as R&D provided through public or private enterprises, through the development and use of management and other business-related skills and expertise – seen in the rise of knowledge-intensive business service fi rms (KIBS) who provide skills and expertise to other players in the system – or they may link through their entrepreneurial activities as suppliers and customers.

Recent decades have seen a vast amount of investigative work, both theoretical and empirical, on the different aspects of the study of players and their interactions. Many studies have developed understanding of the systemicnature of innovation and the importance of all elements of a nation’s innovation system – legal, scientifi c, training, business programs, for example – working well together. Much of the more recent work is summarised in OECD 1999, 2000, 2001a. (See also Edquist, 1997). The focus on national systems of innovation was national systems of innovation was nationalsubsequently complemented by recognition of the similar importance of regional and local innovation systems (eg Cooke, 2001). Work also progressed on sectoral or technological systems of innovation in specifi c industrial fi elds (Malerba, 2002; Marceau et al., 2001 and Marceau and Martinez, 2002) and more recently on the need to integrate the spatial elements of these systems (OECD, 2001b). There has also been important work on the


growth of the services sector and the separate systems of innovation operating there (see eg. Anderson et al., 2000; Howells, 1999; Metcalfe and Miles, 2000) and on linkages between manufacturing and services in fi rms’ competitive strategies (Marceau et al., 2001). Very recent work is bringing together theories about fi rms, institutions and organisations to provide a ‘systemic’ theory of innovation at fi rm level (Coriat and Weinstein, 2002).

Over the same period, the shift towards the ‘knowledge economy’ has seen the creation of KIBS as important private sector players in the innovation game (see eg. Miles et al., 1994; Gallouj and Weinstein, 1997. See also Muller, 2001 for interactions between KIBS and SMEs and Muller and Zenker, 2001) while public organisations, notably universities, have been encouraged to make their expertise widely available to business and community. The production and diffusion of knowledge via KIBS fi rms has become central to innovation systems in these countries. KIBS typically include legal and accounting but also, and more relevantly here, design and computer-related services, R&D consultancy, recruitment of skilled personnel, environmental services and technical and training services (Windrum and Tomlinson, 1999:393). KIBS play a twofold role in a country’s innovation system – as providers of knowledge services to other fi rms and as a means of introducing internal innovations (internal consultancy).

Private sector experts, however, are not the only players in innovation. On the one hand, innovation expertise is also provided to fi rms by public sector research organisations and, on the other hand, by a range of government programs aimed at encouraging innovation in the private sector. Driving fi rms and organisations towards packing an ever greater innovation punch through the use of the science and technology system and related policy instruments has become a major aim of government in Australia (see, for example, the series of measures gathered into ‘Backing Australia’s Ability’ 2001), as elsewhere in the OECD (OECD, 2002a).

In contrast to the wealth of understanding about what knowledge-intensive public and private organisations can do, as indicated above, two aspects of the national innovation effort remain understudied. The fi rst concerns the factors that trigger enterprises to decide on innovation per se. The second concerns how fi rms use the variety of sources of expertise available to innovating fi rms and companies and how they choose among several providers of similar services and seek different sources of assistance at different times and for different innovation project purposes. Nonaka and his colleagues, for example, have shown that innovating fi rms indeed draw on a range of providers of expertise (1995). Services available and used include R&D, testing, prototyping and other technical and engineering services, ICT, legal (especially IP-related), fi nancial, marketing and training.

However critical questions remain about how, when or why fi rms choose to use why fi rms choose to use why particular different kinds of government and publicly and privately provided innovation programs or services among the variety available, why they choose x and not y or x and y but not z, or how and why these choices vary according to whether the innovation concerned is radical or incremental. Even less is known about how fi rms transform the innovation services they receive from outside to build capability and hence permit sustained innovation at fi rm level. As a result, innovation-related policies are still poorly targeted and often less effective than had been thought.

One of the most important aspects of the latest phase of international work on innovation at fi rm level has begun focusing on fi rms’ development and use of the different sources of expertise available to them. Thus, for example, two projects funded by the European Union in recent years have focused on innovation in services and services for innovation. The fi rst of these, the IS4S project, focused on innovation in service industries and specifi cally the development of services to support innovation by others. The second, the RISE project, focused on mapping the transformation of

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Research and Technology Organisations (RTOs) as they began to reach out more to private sector clients and to depend more on private sources of income (see Hales, 2001). The RISE project also began the investigation of how fi rms engage with external providers of innovation services, both public and private, at different stages of the innovation process and in different clusters (Hales, 2001; Hauknes, 2000; Preissl, 2001). In Australia, Marceau and Hyland, through their ARC Large Grant project, ARISE, are currently seeking to elucidate the shifting landscape of RTOs, with a particular focus on the public-private hybridisation of major scientifi c organisations, including universities.

Taken together these studies have shed considerable analytical light on many aspects of the fi eld. The fi rst results of the ARISE project, for example, have suggested strongly that three foci of research are now needed if government assistance for innovation in Australia is to be maximally effective. These are:

• better understanding of how fi rms interact with external providers of innovation services in order to develop innovation capability.

• better understanding of how fi rms mix and match their use of services at different ‘stages’ of their innovation project(s);

• better understanding of both the ways in which and the reasons why such mixing and matching varies according to the sector of principal activity of the fi rm.

The ARISE results thus suggest that what is missing now from innovation analysis is how fi rms seeking to innovate mix and match their use of publicly provided assistance programs and private sources of expertise including their own in order to transform different kinds of knowledge inputs into sustained innovation.

The Knowledge-Intensive-Service Activities (KISA) project, of which this report is a part, addresses precisely this issue. The study is

composed of several levels of analysis which provide the context for a fi rm-level analysis of innovation knowledge-seeking choices. The project involves detailed statistical description of the size and ‘shape’ of the industrial sectors selected for study and presentation of the policies available for fi rms in those sectors to use for innovation assistance. These two elements form the background for the empirical study of innovation at fi rm level. The results of this analysis for the tourism industry is presented in this report. The report also presents key fi ndings from an empirical study of tourism fi rms in Australia intended to show the choices among providers of innovation expertise made by fi rms in the tourism industry, to gain insights into the reasons for the choices made and to indicate how fi rms mix and match the knowledge-intensive services used.


1.2 KNOWLEDGE-INTENSIVE SERVICE ACTIVITIES (KISA)KISA are the knowledge-intensive service activities that fi rms undertake in conjunction with external or internal experts to build capability in the multiple areas needed for sustained innovative activity. A range of knowledge intensive service activities can be identifi ed as management and business service activities; consultancy services; legal; intellectual property and accounting services; recruitment and training activities; technology services such as IT; marketing services; research and development activities etc. There are generic KISA, such as those generated by software fi rms or engineering consultancy fi rms, for instance, and specifi c KISA which are sector or industry specifi c. The experts concerned may be from public or private sector or research organisations or they may have been developed inside innovating fi rms as part of a strategic package of actions designed to build long-term innovative capabilities. The ‘KISA’ project therefore focuses from a fi rm level view on how such expertise is accessed, adapted, incorporated, refi ned, added to and transformed into innovative products, processes and organisational forms and the innovation capability needed for the future. It is hoped that the analysis of what fi rms do in different industries will then enable us to connect to other work so as to build up industry (‘meso’) level analysis. It is this fi rm and then industry-level focus that distinguishes the KISA project from work on KIBS and innovation in service industries themselves and from most existing literature.

The particular and distinctive ways fi rms access, acquire, produce and integrate knowledge are the ‘KISA’ fi rms undertake in their learning and innovation processes. Learning processes can be internal and external to the fi rm as an outcome of engagement activities inside the fi rm or with external organisations. This engagement is produced through the acquisition of knowledge intensive services to internal

or external providers. The external providers are usually Knowledge Intensive Business Services (KIBS) but, increasingly, Research and Technology Organisations (RTOs) compete with KIBS as a result of changes in funding systems (Hales, 2001). Other important providers of expertise are competitors, customers and other organisations from the same or different industry sector and part of the network of fi rm. Inputs to KISA can come through networks and clusters via informal cooperation agreements.

The importance of the role of KIBS and RTOs might have been overestimated in the existing literature when we look in detail at how fi rms operate today within their learning space, especially in terms of their use of informal transactions for the co-production of knowledge. Figure 1 below illustrates the learning space of the software fi rm and the role of the three ‘vectors’ of knowledge providing inputs to KISA: KIBS, RTOs and other organisations in the network space of the fi rm. The fi gure also shows where KISA are taking place in the fi rm and in which way, i.e. as formal transactions (eg contractual) or informal (eg sharing information) or as internal to the fi rm. The arrows in the fi gure indicate the engagement function of KISA and its dependence on interaction for the co-production of knowledge.

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The activities that provide for the integration of KISA are important to building and maintaining a fi rm’s innovation capability. For example, a fi rms sourcing providers in the marketplace to ensure that they get the optimum service. The fi rm engages in activities for sourcing, evaluating between service providers, assessing the services offered, the price, quality, and packages available. In this process the fi rm learns about the marketplace and acquires additional competences. Upon receipt of the service, there is further enhancement value to the fi rm as a result of the integration of the new service. Therefore the new service has added functionality and competence as well as providing new knowledge and learning abilities to the fi rm from the service provider’s input. The process of the fi rm sourcing, obtaining, mixing knowledge-intensive services are the activities accompanying the innovation process. This

innovation process is positively affected in both sides of the interaction: the fi rm and the provider of services (Muller & Zenker, 2001).

KISA can vary according to the fi rm’s own capabilities and innovation processes, the ‘process of engagement’ of the fi rm with external providers and the internal provision of knowledge intensive activities. Thus, KISA can be different in each fi rm and the activities that are more effective may indeed be the ones that differentiate a fi rm from its competitors. For example, company X, a manufacturing company focusing on advance metal products, might require the latest technology and know-how in the application of cutting-edge machinery to maintain its position in the market. This particular activity will require a combination of expert services sourced externally and undertaken internally by the fi rm.

KIBS RTOs*

NETWORK

Formal KISA

Informal KISA**

Customers / Suppliers Other firms / Organisations

Community

Internal KISA ��

*RTOs-Research and Technology Organisations. Includes Government Departments that provides services

such as research and development to fi rms/organisations.

KIBS-Knowledge Intensive Business Services.

**Although informal KISA can happen at any level they are more likely to appear while interacting with other

fi rms/organisations of the network space of the software fi rm.

Figure 1. The learning space of the Firm and vectors in the co-production of knowledge


Understanding these innovation-related knowledge-intensive service activities – KISA – is important for governments because it relates directly to a set of issues which lie at the heart of policymakers’ attempts to use public policy instruments to promote sustained innovation in all areas of the economy. KISA is also important for organisations providing innovation services so that a better understanding of how their services work in practice, what areas needs to be improved in the range of service provision and the ways in which their services may be accessed and used.

1.3 THE KISA STUDY

The Australian KISA study focuses on three industries – software, mining technology services and tourism. The industries selected provide a contrast in scale and spread. The fi rms in each sector are mostly small, providing information on the constraints on policy services uptake faced by SMEs.

Tourism was selected for the increasing relevance of this industry to the Australian economy. It is also a complex industry with inputs from many other industries and has not been studied in depth. There is a consequent lack of KISA-related literature.

1.4 RESEARCH QUESTIONS AND METHODS

The research questions refer to the analysis of the role of KISA in fi rm innovation processes:

• What does KISA mean?• What KISA are used by tourism fi rms?• When are KISA used?• Why is KISA used?• How does KISA relate to fi rms

capabilities? • Who provides inputs for KISA?• How are the different inputs to KISA

mixed and matched by the fi rm?• What are the policy implications of the

role of KISA in innovation?

The study of the Tourism industry is carried out in three steps. Firstly a review of recent literature and statistical analysis of the signifi cance of the sector; then a survey of tourism fi rms and fi nally case studies to better understand the role of KISA in tourism fi rms. The study has found that there is very limited KISA-related literature in the tourism industry and that surveys and in-depth company investigation will help to understand how fi rms access, use and integrate different sources of expertise (internal and external) to build their innovation capability. A statistical analysis of the tourism industry informs on its signifi cance and frames the target sample of companies to be used for the survey of fi rms and the selection of case studies.

1.4.1 Survey and Case StudiesThe survey targeted tourism business units. The themes investigated are, the use and importance of KISA in such fi rms and the access to government grants. The survey was conducted using the Australian Tourism Data Warehouse, a public website7 joint initiative of all states and territories that provides details of 13,000 companies. The sample of fi rms was extracted from the categories of ‘accommodation’, ‘transport’ and ‘tour operators’8. Companies were randomly contacted by phone from a sample of 137 companies across all Australian states. The survey of fi rms also included the 2003 Australian wide Tourism award winners fi rms. The survey was open for three weeks. A total of 44 responses were collected and analysed; 45.5 percent of responses were returned by fax, 25 percent by email, 18.2 percent by mail and 11.3 percent were collected over the phone. The survey instrument is found at Appendix A.

The survey questionnaire included questions concerning:

• Background data on fi rms such as size, turnover, business life-cycle;

• Information on innovation and the use of KISA related services;

• Importance of providers of inputs to KISA;• Use of government grants to fi nance

KISA-related services.

15AEGIS UWS

Six fi rms were further analysed in-depth covering the activities (KISA) undertaken by the fi rm – internal/ external – over the course of the decisions to seek, receive and integrate KISA inputs of different kinds, from different sources of expertise and at different stages of the product cycle and life-cycle of the fi rm. The aim of the case studies is to understand the nature of KISA and the complex web of factors affecting the co-production of knowledge within the tourism fi rm. The case studies extracted the ‘why’ questions to complement the survey i.e., why do the fi rms undertake certain activities, at certain times and from certain sources. Four fi rms were part of the ‘Snowy Mountains’ tourism hub and an interview was also conducted with the regional tourism organisation. One fi rm was from the Gold Coast. One fi rm specialised in corporate and government applications and R&D for the travel industry. Case studies summaries are found at Appendix A.

The selection of the six tourism fi rms for the case studies is based on several parameters which are identifi ed as:

• Market focus• Size• Ownership• Annual Turnover• Phase of Company Life Cycle• Innovation/Industry awards received• State location• Innovation Processes• Destination

The case studies discussion themes refer to:

• Background of the fi rm- Customers- Most recent innovation- Network KISA

• Importance and use of KISA- KISA within the fi rm

• Access and interaction with external providers- External inputs to KISA- Public inputs to KISA

• Integration of external and internal inputs to KISA- Integration of expertise- Knowledge management and KISA- KISA and innovation capabilities

• Challenges to the innovation process• Business Models and competitiveness

1.4.2 Sample and Characteristics of Tourism fi rmsThe sample frame consists of 137 fi rms. Forty-four fi rms participated in the survey. The 44 fi rms comprised of 24 tour fi rms (55%), 3 transport fi rms (7%), 15 accommodation fi rms (34%) and 2 retail fi rms (4.5%). Seven fi rms (16%) received National tourism awards in 2003. Surveyed fi rms were located at every state of Australia.

The average number of employees per fi rm in the sample was fi fty. Twenty-fi ve of 44 fi rms (57%) had between 1 and 6 employees. There was one employer with 1,200 employees (Figure 2).

12001306552362920119531

8

6

4

2

0

Number of firm employees

Number of employees

Num

ber o

f firm

s

Figure 2. Firm size (surveyed sample)

Source: AEGIS KISA Tourism survey (2004)


Most employees across all fi rms had secondary education (82%) with only 6 fi rms having employees with a high degree such as a Masters or a Doctorate (see Table 1). This result is consistent with our statistical analysis of the industry.

The survey identifi ed the business structure of the respondents. Up to 64 percent of the surveyed companies had a mature business structure with more than two years of operation. Only one fi rm was a starting business.

Consistently with the majority of the fi rms being in a mature stage of development, the average years of operation of fi rms was 12.6 years. Eighteen percent of fi rms were in operation for over 20 years (see Figure 3).

Figure 3. Years in operation


Table 1. Educational qualifi cations (survey sample)

Education No Firms % Firms % Employees

High Degree 6 14 0.6Degree 30 68 12.7Secondary 34 77 82Primary 10 23 4.3

Table 2. Business structure

Structure No Firms % FirmsStarting business 1 2New business 9 20Mature business 28 64Business in expansion 6 14

0%

5%

10%

15%

20%

25%

No ans 1-2 yrs 3-5 yrs 6-10 yrs 10-20yrs

>20years

% o

f firm

s

Years

Years in Operation



17AEGIS UWS

Twenty-nine fi rms (66%) identifi ed their average yearly turnover as less than $500,000. Nine fi rms (20%) identifi ed average yearly turnover greater than $2million (Figure 4).

Figure 4. Average turnover


0

10

20

30

40

50

60

70

Not answered < $500,000 Between $1mil -$2mil

>$2mil

Average yearly turnover as % of total respondants

$

% o

f tot

al fi

rms (

44)


1.4.4 Limitations of the studyThere are certain limitations to the analysis presented in this report. First, the number of respondents to the survey was not a statistically representative sample of the Australian Tourism Industry, so no claims can be made in regards to the representation of the whole industry. Second, the number of case studies was very small so it is not possible to draw conclusions about innovation across the Tourism industry as a whole. Nevertheless the analysis of the fi rms participating in the study contributes to an understanding of the role of KISA in Australian tourism fi rms.

This report gives an overview of the tourism industry in Australia, and then presents empirical results on the role of KISA from surveys and case studies.

1.4.3 Data AnalysisThe study relied on both quantitative and qualitative techniques of data collection and analysis. The survey conducted through a structured questionnaire involved simple statistical analysis9 of tabulating responses to various questions on KISA in percentages so descriptive statistics were applied. The case studies provided a more detail qualitative analysis of the KISA process. Case studies were recorded and transcripts generated for

writing the case studies and for presenting the results.

The case studies ranged from small family-owned businesses to large corporations. The table below summarises the profi le of these fi rms. The majority of the cases were medium and large companies with more than 15 years in operation and more than AUD$100,000 of yearly turnover.

Table 3. Profi le of case studies (fi rms)

Case Life cycle phase Annual turnover

Market Focus

Main products/services State Recent

InnovationInnovationprocessprocessprocess

Micro businesses (4 or less persons)

E Entrepreneurial (5 years)(5 years) < $100,000 Domestic Hospitality and

horticulture NSW incremental Small group improvementsimprovements

Small businesses (5 to 19 persons)

A Expansion (27 years) < $100,000 Domestic Ski school & ski

retail NSW incremental Small group improvements

Medium and large companies (20 or more persons)

B Expansion (29 years)(29 years)

$100,000 - $1mil$1mil International Transportation QLD radical External R&D

C Expansion (15 years)(15 years) >$1 mil International Accommodation NSW radical External R&D

DProfessional management (48 years)

>$1 mil Domestic Tourism resort NSW Incremental and radical External R&D

FProfessional management (9 years)

>$4 mil International Corporate applications NSW Incremental

Small group improvements (with CEO)

Source: AEGIS KISA Tourism case studies data, Sept 2004

19AEGIS UWS

2.1 A Statistical Overview of Tourism

The international system for defi ning and classifying industries and the local equivalent, the Australian and New Zealand Standard Industrial Classifi cation (ANZSIC) do not recognise tourism as a discrete ‘industry’ because ‘industries are classifi ed according to the goods and services they produce, whereas tourism depends on the status of the consumer’ (ABS 2004: 3). For the purpose of separating the consumption of tourists from non-tourists ‘tourism’ is defi ned as ‘activities ‘activities ‘of persons traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited’ (ABS 2004: 48). This is adapted from the World Tourism Organisation (WTO) defi nition of Tourism10.

To provide data on the economic contribution of tourist activity to the economy, the Australian Bureau of Statistics applies a classifi cation system to identify the industries supplying inputs to tourist activities and how these inputs are consumed (OECD 2000). Each year since 1997-1978 to 2002-2003 data on the tourism industry has been presented in ‘satellite accounts’ to the standard national accounts. In the ABS, Australian National Accounts, tourism is defi ned according to these international standards to include visitors ‘whose primary purpose is private or government businesses, as well as more familiar tourism for leisure purposes’ (ABS, 2003a). It is therefore not only restricted to leisure activity, but also includes travel for business and other reasons, for example education. If the person stays longer than one year at a place, they are no longer regarded as a tourist.

2. Overview of the Tourism Industry


2.1.1 Composition of the Industry

Table 4 and Table 5 depict the nature of types of businesses in the tourism industry in Australia.

Table 4 above shows that there were 353,473 tourism related businesses in 1998; of these, 60,054 businesses were classifi ed as tourism characteristic and 293,419 businesses were tourism connected. They formed about 34 percent of total businesses in Australia.

Table 4. Number of businesses in the Tourism Industry in Australia

ANZSIC IndustryNo of

businessesbusinessesTotal

businessesbusinessesTourism characteristic industriesTravel agency and tour operator servicesTaxi transportAir and Water transportMotor vehicle hiringAccommodationCafes and restaurantsTakeaway food retailingTotal

5 3462 4722 168

9909 158

21 49318 427

60 054

ANZSIC IndustryNo of

businessesTotal

businessesTourism connected industriesClubs, pubs, taverns and barsOther road transportRail transportFood and beverage manufacturingTransport equipment and other manufacturingAutomotive fuel retailingOther retail tradeCasinos and other gambling servicesLibraries, museums and artsOther entertainment servicesEducationOwnership of dwellingsTotal

10 01827 8831 8065 061

58 3128 010

132 1562 7095 715

15 47422 4103 865

293 419Total tourism related businesses 353 473

Source: Australian Bureau of Statistics, 1998, ABS Business Register (unpublished data)

Table 5. Number of management units by employment size for Tourism

ANZSIC industryMicro

businesses11Small

businesses12Medium to large businesses13

Total businesses

Travel agency and tour operator services 3 100 848 123 4 071

Taxi transport 1 946 397 55 2 398Air and water transportAir and water transport 1 183 393 123 1 699Motor vehicle hiringMotor vehicle hiring 516 175 19 707Accommodation 4 429 2 610 701 7 740Cafes and restaurants 9 475 8 678 1 272 19 425Takeaway food retailingTakeaway food retailing 10 877 4 608 733 16 218Total tourism characteristic 31 523 17 709 3 026 52 258Clubs, pubs, taverns and barsClubs, pubs, taverns and bars 3 113 4 462 1 884 9 459Other road transportOther road transport 21 376 3 841 688 25 905Rail transportRail transport 20 8 14 42Food and beverage manufacturingFood and beverage manufacturing 1 636 1 617 1 001 4 254Transport equipment and other manufacturingTransport equipment and other manufacturing 29 033 17 561 6 199 52 793Automotive fuel retailingAutomotive fuel retailing 3 402 3 147 294 6 843Other retail trade 85 113 34 894 3 999 124 006Casinos and other gambling servicesCasinos and other gambling services 1 662 699 50 2 411Libraries, museums and artsLibraries, museums and arts 3 032 616 206 3 854Other entertainment services 9 056 3 079 1 037 13 172Education 5 776 3 070 1 469 10 315Ownership of dwellingsOwnership of dwellings 3 131 243 53 3 427Total tourism connected 166 350 73 237 16 894 256 481Total tourism related 197 873 90 946 19 920 308 739

Source: Australian Bureau of Statistics 1999, ABS Business Register (unpublished data)

21AEGIS UWS

The tourism industry share of total gross value added has declined from a high of 4.3 percent 1997-98 to a low of 3.8 percent in 2002-03 (Table 8).16 The higher level of tourism output between 1997-98 and 2000-01 related to a buoyant world economy, the impact of the Sydney Olympic Games and the price effect of the introduction of the GST. Concerns over terrorism, the ANSETT collapse and SARS in Asia have lowered tourist arrivals and

departures after 2000-01 (Table 9). Tourism’s declining share of national gross product is the result largely of this fall in international arrivals and resident departures. The number of international visitors declined by 7.6 percent from the peak of 5.03 million in 2000-01 to 4.65 million in 2002-03. Departures of local residents overseas as tourists declined by 7.8 percent over the same period to 3.29 million departures.

Table 6. Share of Tourism GDP (percent)

1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03Households 67.9 67.7 66.9 65.0 65.9 67.2Business/Govt. 10.8 11.0 10.9 10.8 10.2 10.2Domestic 78.7 78.7 77.8 75.8 76.2 77.4International 21.3 21.3 22.2 24.2 23.8 22.6

Source: ABS 2004 (Table 2)

Table 7. Consumption of Domestically and Overseas Produced Tourism Goods and Services. 2002-03 (millions)

Australian residents outbound

Non-residents inbound

Total

Domestically produced tourism goods and services Domestically produced tourism goods and services 2921 16,666 19587Overseas produced tourism goods and servicesOverseas produced tourism goods and services 14,886 4626 19512Total 17807 21292

Source: ABS 2004 (derived form Tables 14 and 15)

Table 5 shows the number of management units according to business size. It is characteristic that more than half of fi rms in tourism related businesses were micro businesses employing four or less employees. About another thirty percent of fi rms were small businesses employing between fi ve and nineteen employees.

2.1.2 The economic contribution of the IndustryThe Australian tourism industry has experienced strong growth over the past 20 years with only a few minor downturns. In 2002-2003, the tourism industry contributed 4.2 per cent to Australia’s gross domestic product.14

This fi gure is lower than the 2000-01 share of 4.8 percent because while tourism GDP decreased marginally during 2001-2002, GDP for the whole economy grew by 6.5 percent.15

The demand for tourism goods and services comes predominantly from domestic sources. In 2002-03 demand from Australian residents consumed 77.4 percent of tourism output, with international visitors consuming 22.6 percent of output.

In 2002-03 Australia ran a small positive tourism services trade balance of AUD$75 million as measured by the difference between tourism consumption by Australian residents on outbound trips and tourism consumption by non-residents on inbound trips (Table trips and tourism consumption by non-residents on inbound trips (Table trips and tourism consumption by non-residents on inbound trips ( 7).


2.1.3 Inputs to tourism

The value of tourism output is derived in the satellite accounts from the value of goods and services that are directly consumed by domestic and international tourists. The value of these goods and services from a wide range of industries can be conceived as inputs to the tourism industry. The share of these various inputs to the total value of tourism output is given in column 1 of Table 10. Just four industries account for 80.1 percent of the output of the tourism. These industries are Transport and storage (27.6 percent); Accommodation,

cafes and restaurants (20.9 percent) Manufacturing (16.9 percent) and Retail trade (14.7 percent). This indicates that the tourism industry draws on a wide range of industries supplying both services and goods.

Aside from identifying which industries supply inputs to tourism and how they contribute to total tourism output it is useful to examine the share of industries’ output going to the tourism industry. This data is given in column 2 of Table 10.

Table 9. Short Term Arrivals and Departures (million)

1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03Arrivals (International Visitors) 4.22 4.28 4.65 5.03 4.76 4.65Departures (Australian Residents) 3.03 3.18 3.33 3.57 3.36 3.29

Source: ABS 2004 (Tables 17 and 18)

Table 8. Tourism Industry Share of Total Gross Value Added (Percent)

1997-98 1998-99 1999-2000 2000-01 2001-02 2002-034.3 4.2 4.2 4.1 3.9 3.8

Source: ABS 2004 (Table 1)

Despite this decline the tourism industry contributes more to national gross domestic product than other industries such as Cultural & Recreational Services 1.9 percent; Electricity Gas & Water 2.5 percent and Communication Services 2.9 percent.

Table 10. Inputs to the Tourism Industry. 2000-01 (Percent)

Contribution to Tourism Output From Industries

%

Tourism’s Share of Industries’ Gross Value Added

%Agric., forestry & fi shing 2.2 3.2Mining .01 0.1Manufacturing 16.9 3.6Electricity, gas & water Na naConstruction Na naWholesale trade 3.4 2.4Retail trade 14.7 9.6Accomm., cafes & rests. 20.9 36.1Transport and storage 27.6 16.5Communication servs. 1.4 2.2Finance and insurance Na naProperty & business servs. 1.6 naGovt. admin.& defence 0.03 0.3Education 2.1 3.9Health & community servs. 1.4 1.4Cultural and recreational servs. 4.0 10.4Personal and other servs. 0.2 0.5Ownership of dwellings 3.0 2.6Total 100 3.6

Source: ABS 2004 (Tables 7 and 6)

23AEGIS UWS

Whilst tourism derives its inputs from a wide range of industries, the tourism industry absorbs, in general, only a small proportion, of the value added of other industries. This is because the industry represents only 3.8 percent of national gross value added. Tourism absorbs more than 3.8 percent of the value of the output of the following industries: Accommodation, cafes and restaurants (36.1 percent); Transport and storage (16.5 percent); Cultural and recreational services (10.4 percent) and Retail trade (9.6 percent).

2.1.4 EmploymentThe tourism industry employed 540,700 persons in 2002-03, that is a 5.7% of National employment.17 The majority of the jobs in the tourism industry are in retail trade, the accommodation sector and cafés and restaurants. There are over 350,000 tourism related businesses in Australia. Most businesses are small to medium sized, and 90 percent employ less than 20 staff.18 In 2001-2002 the tourism industry stake of total employment decreased slightly to 5.9 percent after remaining at 6 percent since 1997 –1998.19

Estimates of employment in tourism are derived by the ABS by assuming that employment in each of the supplying industries is in proportion to the value added supplied to the tourism

industry (ABS 2004: 39). Tourism’s share of total employment (5.7 percent) is 50 percent larger than the industry’s share of national gross value added (3.8 percent) (Table gross value added (3.8 percent) (Table gross value added (3.8 percent) ( 11). This implies that labour productivity, as measured by gross value added per employee in the tourism industry is lower than for the economy in general. This result refl ects the lower level of labour productivity in the industries that supply the principal inputs to tourism, notably, accommodation, cafes and restaurants and retail who have a higher proportion of part time workers in these industries. Even adjusting for hours worked, these industries have substantially lower output per employee than for the economy as a whole (DITR 2004: 32).

Table 11. Employed Persons in Tourism per Industry. 2002-03

Industry ‘000Percent of Total

Employment in TourismTransport and storageTransport and storage 84.6 15.6Accommodation, cafes & restaurants 175.3 32.4ManufacturingManufacturing 45.8 8.5Retail trade 140.4 26.0Cultural and recreational services 28.5 5.3Education 24.6 4.5Total identifi ed industries 499.3 92.3Other 41.5 7.7Total tourist employment 540.7 100Total employmentTotal employment 9441.4

Tourism share of total employment 5.7

Source: ABS 2004 (derived from Table 16 by aggregating disaggregated industry data)


Applying the same method to deriving employment estimates by industry to cross tabulated data on industry and occupation, provides estimates of the occupational structure of the tourism industry (Table 12). This method assumes that the share of value added in a particular industry that is an input to tourism is the same as the share of all occupations in the industry that are employed in tourism (The value added data by industry was derived from ABS 2004: Table 8). Cross-tabulated data on the industry and occupational structure of all industries was derived from the ABS Labour Force (Cat. No. 6201.0), August 2003. The cross tabulated data consisted of Australian and New Zealand Standard Industrial Classifi cation (ANZSIC 1993 edition) Division and Australian Standard Classifi cation of Occupations (ASCO second edition) Major Group data. The total level of employment in tourism and its share of total employment differ from that reported in Table 12 largely because no employment

level could be assigned to the industry called ‘ownership of dwellings’ which provides value added inputs to tourism (ABS 2004: Table 8). The data represents 5.1 percent of total employment compared to 5.7 percent as reported in Table 12.

It is clear that the occupational structure of tourism is quite different from the occupational structure of total employment in the economy. Tourism has less than half the number of Professionals (9.1 percent compared to 18.8 percent) and over 40 percent fewer Managers and Administrators (7.2 percent compared to 4.2 percent). The higher proportion of Associate Professionals in tourism largely refl ects the fact that chefs are classifi ed to this occupational category and they work in tourism related industries. Tourism’s share of Elementary Clerical, Sales & Service Workers is some 61 percent larger than for the economy as a whole.

Table 12. Occupational Structure of Total Employment and Tourist Industry. Australia. August 2003

ASCO Major Group

Employed Total(‘000)

Occupation as a Share of Total

Employment(%)(%)

Employed in Tourism(‘000)

Occupation as a Share of Total Tourism

Employment

1 Managers & Administrators 680.9 7.2 21.4 4.2

2 Professionals 1762.7 18.8 46.5 9.1

3 Associate Professionals 1146.4 12.2 86.4 16.9

4 Tradespersons 1204.4 12.8 47.1 9.2

5 Advanced Clerical & Service Workers 377.1 4.0 11.7 2.3

6Intermediate Clerical, Sales & Service WorkersWorkers 1623.7 17.3 107.9 21.2

7Intermediate Production & Transport WorkersWorkers 794.8 8.5 53.6 10.5

8Elementary Clerical, Sales & Service WorkersWorkers 944.3 10.0 83.8 16.4

9 Labourers & Related Workers 862.4 9.2 52.0 10.2

Total 9396.7 100 510.4 100Source: ABS 2004 (derived from Table 6) and ABS (2003)

25AEGIS UWS

2.1.5 Domestic Tourism

The backbone of Australian tourism is domestic tourism. Up to three quarters of tourism consumption in Australia is domestic tourism, and it is a signifi cant contributor to regional Australia. It is the platform upon which inbound tourism is built. The domestic visitor share of tourism consumption was 77.3 percent in 2002-0320.

Over the forecast period, visitor nights are expected to grow by an average annual rate of 0.5 percent, from 298.7 million in 2002, to 314 million in 2012, as indicated by Figure 5.

Table 13. Proportion of Employment in ASCO Major Groups

Proportion of Total Employment in ASCO Groups

(Percent)

Proportion of Tourism Employment in ASCO Groups

(Percent)

ASCO Major Groups 1-5 (skilled)(skilled)

55 41.7

ASCO Major Groups 6-9 (less skilled)skilled)

45 58.3

Source: Derived from Table 12

Overall, tourism employs a smaller proportion of skilled workers (ASCO major groups 1-5) than the economy as a whole and a higher proportion of lesser skilled workers (ASCO major groups 6-9) (Table 13). These differences

in occupational structure between tourism and the economy as a whole, largely refl ect differences in industrial structure, the type of products produced and the tasks and skills required to produce them.

Figure 5. Domestic Visitor Nights 2000-2012

Source: Extracted from the Tourism White Paper, p. 16, National Visitor Survey and Tourism Forecasting Council, May 2003

200820072006200520042003200220012000 2009 2010 2011 2012

275

280285

290

295300

305

310

315320

('000s)Actual

Forecast


Visitors consumed a total of 73.3 billion worth of goods and services in 2002-2003, this was an increase of 26 percent of consumption in 1997-98. 23The international visitor share of tourism consumption was 22.7 percent in 2002-03, up from 22% in 1997-9824. There were 4,463, 000 inbound visitors into Australia in 2002. Their total expenditure in 2002, was AUD $11,377 million. The majority of the visitors came

from New Zealand, Japan, United Kingdom and USA.25 The Japanese inbound tourism industry is an example of the importance of the sector. In 2002, 668, 000 Japanese traveled to Australia. The growing economic benefi ts to Australia from the international tourist such as the Japanese are undeniable. Figure 6 shows the International visitor arrivals in December 1991- July 2003.

Table 14. Exports of Tourism Goods and Services

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

International visitor consumption (AUD $m)

12 792 13 446 14 611 17 140 17 080 16 700

Total Export (AUD $m) 113 744 112 025 126 034 153 511 152 357 NA

Tourism Share of Exports (%) 11.2 12.0 11.6 11.2 11.2 11.2

Growth in international visitor consumption (%)

5.1 8.7 17.3 -0.3 NA

Growth in total exports (%) -1.5 12.5 21.8 -0.8 NA

Source: ABS (2003) Australian National Accounts: Tourism Satellite Account 2001-2002, 5249.0, p. 8

2.1.6 Tourism ExportsTourism contributes signifi cantly to Australia’s export earnings. Tourism made more than AUD$16.6 billion in export earning in 2002-2003, through the direct sale of goods and services to international visitors. While tourism exports grew quite strongly between 1997–98 and 2000–01, so did exports of other goods and services. However both tourism exports

and total exports declined in 2001–02 (see Table 14).21 International visitors consumption was AUD $16.7 billion in 2002-2003. This is 11.2% of total exports. This is the same share as in 1997-98, but is down from its highest share of 12.0% in 1998-99.22

Iraq and SARS

September 11 and Ansett

Asian Economic Crises

Gulf War2000000

2500000

3000000

3500000

4000000

4500000

5000000

5500000

1991 1992 1993 1994 1994 1995 1996 1997 1997 1998 1999 2000 2000 2001 2002 2003

Num

ber o

f Vis

itors

Figure 6. International visitor arrivals December 1991–July 2003

Source: Extracted from the Tourism White Paper, p. 16, Australian Bureau of Statistics, Overseas Arrivals and Departures Catalogue No. 3401.0

27AEGIS UWS

Between 5 and 16 April 2004, the Australian Tourism Expert Council (ATEC) opened an on-line survey on the inbound sector. Those who were invited to respond were Inbound Tour Operator members of the Australian Tourism Export Council (ATEC) and international wholesalers. ATEC launched a unique International Tourism Index to estimate business confi dence within the tourism export industry and to identify trends in forward booking patterns, profi tability, turnover, competitive advantage and travel impediments.

The survey found that the majority of fi rms were confi dent about the growth prospects for their business; growth expectations were strongest from Japan, United Kingdom, Continental Europe and North America. Growth prospects were expected between up to fi ve percent. Operators also expected the profi tability of their businesses to grow. The majority of fi rms also expect employment to grow by more than one percent. Although these fi gures might suggest Australia will enjoy a greater comparative share of the inbound market, fi rms reported the negative effect of the strong Australian dollar on increased growth.26

2.1.7 Tourism Research and Development

In 2000-01 R&D expenditure with tourism as an objective totaled AUD 19.5 million, of which business supplied AUD 9.7 million; AUD AUD 8.7 million by universities and AUD 1.1 million by government (DITR 2004: 30). This represented only 0.2 percent of total R&D expenditure (ABS, 2002b: Table 1). This is signifi cantly less than tourism’s share of national gross product, which was 4.1 percent in 2000-01.

R&D expenditure on tourism as a share of the industry’s gross product is comparatively low. Tourism R&D was the equivalent of just 0.06 percent of tourism gross product in 2000-01 (derived from ABS 2002: Table 1 and ABS 2004: Table 1). For the economy as a whole R&D as a share of total gross domestic product was 1.53 percent in 2000-01 (ABS, 2002b: 3). R&D as a share of tourism’s gross domestic product is 25 times less than R&D share of GDP.

Table 15. Arrivals (1993-2012)

Year Arrivals Year Arrivals

1993 2,996,000 2003 4,992,000*4,992,000*1994 3,362,000 2004 5,266,000*1995 3,726,000 2005 5,549,000*1996 4,165,000 2006 5,864,000*1997 4,318,000 2007 6,190,000*1998 4,167,000 2008 6,534,000*1999 4,459,000 2009 6,898,000*2000 4,931,000 2010 7,282,000*2001 4,864,000 2011 7,686,000*2002 4,823,000* 2012 8,107,000*

(* TFC estimates)

The development of the tourism industry is built on the already well-developed platform of domestic tourism (75% of tourism GDP). Internationally the sector has experienced a diffi cult time with the downturn in the global economy, fear of terrorism, the Iraq war and SARS. It has been hard for the industry to

maintain sustained growth and respond quickly and effectively to major incidents. Tourism arrivals fell from 4.9 million in 2000 to 4.8 million in 2001-2002 due to the above mentioned factors. Australia’s inbound tourism industry is however expected to grow over the next years (see Table 15).

Source: Extracted from http://www.atec.net.au/Tourism_Export_Industry.htm


This result refl ects the low R&D intensity (ratio of R&D to value added) in the industries which supply the bulk of tourism’s value added. For example, the innovation intensity of Retail trade and Accommodation, cafes & restaurants and Transport and storage is quite low, though these industries supply nearly two-thirds of tourism’s value added (Toner, Marceau, Hall and Considine, 2004).

2.1.8 Tourism in OECD countries

Tourism plays an important role in the economy and has great potential for growth and employment creation. Table 16 provides a glimpse of the economic contribution of tourism in several countries.

Table 16. Comparison with other OECD countries

Country Year Contribution to GDP (%)

Australia 2003 4.2New Zealand 1995 3.4Mexico 1999 8.2France 1998 7.3Austria 1996 4.3Norway 1995 3.0 (est)Poland 1995 0.99Sweden 1996 3.3United Kingdom 1995 2.9Switzerland 1999 5.3Japan 2000 2.2Korea 1998 4.7Spain 1998 16.8

Source: OECD Manual on tourism satellite accounts and employment, 2000; OECD reports on various countries’ tourism policy background reports. Tomillo Centre for Economic Studies, Spain 2004.

The tourism sector has displayed tremendous growth since the 1950s as a result of the general decrease in working hours, rise in number of days of paid leave and overall increase in wealth anddisposable income. This growth has primarily benefi ted OECD countries although, increasingly, non-OECD countries are beginning to gain ground. There is a difference in the growth of domestic tourism compared with international tourism (OECD, 2002).

Comprehensive data on international tourism fl ows is collected and compiled by both the WTO and the OECD. These allow for a fairly good understanding of the characteristics and trends in international tourism travel. International tourism has grown at an annual average rate of 7.1 percent since the 1950s (see the following fi gure) and is projected to grow at an annual average rate of 4.3 percent through the year 2020. Past growth has primarily concerned

Europe and, to a lesser extent, the Americas (in particular North America). It is projected that these regions will see a relative decline in their growth rates as tourism in the East Asia/Pacifi c region picks up. Growth in this region has proved to be relatively resilient despite the recent economic hardships it has experienced. Overall, the WTO predicts that in 2020, tourism arrivals worldwide will be triple their 1995 levels (OECD, 2002).

29AEGIS UWS

Participation in international tourism travel is generally conditioned by wealth with higher GDP/capita and levels of disposable income leading to more international trips and, to a lesser extent, greater distances traveled. The following fi gure provides an overview of OECD international tourism activity in 1996 as measured by OECD tourists’ destination choices. It compares the gross departure rate

(e.g. the number of trips divided by number of inhabitants) throughout the OECD. Most countries have relatively small international departure rates confi rming that growth potential for international travel exists and, conversely, that international tourism travel concerns a relatively small number of people in many OECD countries.

Figure 7. International tourism: past and projected inbound tourism by region

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Source: OECD (2002) OECD Programme on sustainable consumption. Sector Case Studies Series. Household Tourism Travel:

Trends, Environmental Impacts and Policy Responses, Paris: Organisation for Economic Development, p. 14.


2.2 Government Policies and Programs for the IndustryTourism fi rms are eligible for assistance under a range of generic industry programs offered by the Australian government. However, the major theme of those programs is promoting innovation as a source of competitive advantage and commercialising Australian research. Most tourism fi rms do not meet the criteria for those programs.

Tourism industry policy supports the development of a sustainable, internationally competitive and innovative tourism sector. Tourism provides a solid base for employment and wealth creation, especially in regional Australia. Successive governments have developed initiatives to support tourism including:

• the overseas promotion of Australia as a tourist destination by the Australian Tourist Commission;

• improving the competitiveness and diversity of regional attractions through regional tourism programs;

• providing assistance to small and medium tourism exporters through the Export Market Development Grants Scheme;

• Programs to encourage Australian’s to take more holidays domestically.

Direct public tourism related expenditure accounted for AUD 140 million in 2002-3 (see the following Table).

Figure 8. OECD International Tourism: Gross departure rate, trips per inhabitant

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Source: Source: OECD (2002) OECD Programme on sustainable consumption. Sector Case Studies Series. Household Tourism Travel: Trends, Environmental Impacts and Policy Responses, Paris: Organisation for Economic Development, p. 16.

31AEGIS UWS

The Australian Government’s recently released AUD $235 million to boost the growth of the Tourism industry. Tourism White Paper (DITR, 2003) provides the strategic framework for the sector. The Tourism White Paper was prepared against the backdrop of a diffi cult period brought about by international travel uncertainty following a series of external shocks such as the September 11 events.

As part of the Tourism White Paper, a new body is being created, Tourism Australia, a merger of four tourism organisations:

• the Australian Tourist Commission;• See Australia;• the Bureau of Tourism Research; and • the Tourism Forecasting Council.

Tourism Australia aims to connect all the skills and knowledge of these organisations under one umbrella to market a revitalised Brand Australiain key global markets and leverage international and domestic promotion of Australia through strategic partnerships with State and Territory marketing bodies and industry.

Tourism Australia will have a marketing coordination role, both globally and within Australia. Tourism Events Australia will provide assistance and infrastructure to businesses and governments aiming to attract events to Australia. Tourism Research Australia is to provide research services including industry wide data – particularly at the regional level,

assistance in identifying key niche markets, tourism forecasting and yield maximisation strategies.

At a sectoral level the strategic focus is on identifying those specifi c tourism markets that will lift capacity. Part of capacity lifting involves benchmarking sound management practices that are successful in meeting customer expectations and assisting other business to take up similar practices. For example, a National Tourism Accreditation Framework is being developed to improve professionalism and standards.

While the responsibility for the implementation of the majority of the medium to long term strategy for tourism rests with the Australian Government, all levels of government and industry are responsible for repositioning the sector towards sustainable growth, including by assuming joint responsibilities for the implementation of initiatives.

Table 17. Direct Tourism Related Spending (AUD $ million) by the Australian Government

Activity 2002–03 Agency

Australian Tourist Commission 100 Industry, Tourism and Resources

Export Market Development Grants27 17 Austrade

Regional tourism projects Regional tourism projects 9 Industry, Tourism and ResourcesIndustry, Tourism and ResourcesSee Australia 2 Industry, Tourism and ResourcesIndustry, Tourism and Resources

Bureau of Tourism Research 2 Industry, Tourism and ResourcesCooperative Research Centre for Sustainable Tourism

3 Education, Science and Training

Australian Bureau of Statistics 2 Australian Bureau of StatisticsConservation of Rural and Historic Hotels 4 Environment and HeritageEnvironment and HeritageTourism Policy 9 Industry, Tourism and Resources

Total (direct assistance to tourism) 148Source: Tourism White Paper, p. 16.


2.3 SummaryThe Australian tourism industry has experienced a strong growth over the past 20 years. In 2002-2003, the tourism industry contributed 4.2 percent to Australia’s gross domestic product. Four industries account for 80.1 percent of the output of the tourism. These industries are Transport and storage (27.6%); Accommodation, cafes and restaurants (20.9%) Manufacturing (16.9%) and Retail trade (14.7%).

There are over 350,000 tourism related businesses in Australia. Most businesses are small to medium sized, and 90 percent employ less than 20 staff. Tourism’s share of total employment (5.7%) is 50 percent larger than the industry’s share of national gross value added (3.8%). This implies that labour productivity, as measured by gross value added per employee in the tourism industry is lower than for the economy in general.

Tourism has less than half the number of Professionals (9.1% compared to 18.8%) and over 40 percent fewer Managers and Administrators (7.2% compared to 4.2%) than for all industries. Tourism’s share of Elementary Clerical, Sales & Service Workers is some 61 percent larger than for the economy as a whole. R&D expenditure on tourism as a share of the industry’s gross product is comparatively low. Tourism R&D was the equivalent of just 0.06 percent of tourism gross product in 2000-01. For the economy as a whole, R&D as a share of total gross domestic product was 1.53 percent in 2000-01. R&D as a share of tourism’s gross domestic product is 25 times less than R&D share of GDP although this fi gure might not take into account that tourism organisations extensively research new markets when developing products and services. Tourism fi rms are elegible for assistance under a number of government programs but, as the major theme of these programs is promoting innovation, most tourist fi rms do not meet the criteria for these programs.

Next chapter shows the use of knowledge intensive service activities by tourism fi rms that provide further light on their engagement on innovation activities.

33AEGIS UWS

This section presents key fi ndings from the survey of 44 tourism fi rms. The structured survey instrument included 14 questions. Results on innovation and the use of KISA, provision of inputs to KISA and use of government grants for fi nancing KISA are provided below. Inputs to KISA and KISA related services are used in somewhat interchangeable manner in this section.

3.1 INNOVATION AND THE USE OF KISAThe survey indicated that the fi rms in the tourism industry are quite innovative in terms of implementing product, process and organisational changes. Thirty-nine of the 44 fi rms (89%) made changes that involved a new product, a new process or other change such as a substantially changed accounting system or human resources management system. Twenty-eight of 44 (64 %) fi rms identifi ed introducing a new product. Fifty-two percent (23 of 44) implemented a new process and fi fty percent (22 of 44) identifi ed a new way of doing something, for example, a new or substantially changed accounting system or human resource management system.

3 Survey of Tourism fi rms: Key Findings

Figure 9. Change to products/services

Firms indicating change (% of total firms)

0%

10%

20%

30%

40%

50%

60%

70%

New Product New Process Other changes



Tourism fi rms, as reported in the literature, face a twofold challenge that forces continuous and radical innovation. On the one hand, fi erce competition and a small product/service cycle force the introduction of changes and the marketing of new products and services (Hollick 2003; Braun and Hollick 2004). On the other hand and increasingly savvy consumer is forcing the industry to rapidly adapt new technologies in an integral way within their business (Beeton & Graetz 2001; Bloch & Segev 1996).

In relation to the use of inputs to KISA for the development and introduction of the above innovations, the most commonly used services were Research & Development (35), Marketing and Promotion (34), Accounting and Financial services (34) and IT services (33). The fact that ‘other’ was so small a value suggests that the range of potential services used by the sample has been comprehensively covered (see Table 19 below).

Table 18. Firms with Tourism Awards and radical innovation

CompaniesRadical innovation (no companies)

% companies

Tourism Awards 4 out of 7 57.1%

No Award 8 out of 37 21.6%


Table 19. Use of KISA-related services

KISA –related servicesNumber of fi rms using KISA

As a % of total fi rms

1. Industry development advice 29 66%

2. Business planning advice 25 57%

3. Marketing and promotion 34 77%

4. Research (including market research) and product development

35 80%

5. Accounting and fi nance services 34 77%

6. IT services 33 75%

7. E-commerce services 23 52%

8. Training services (e.g. TAFE ) 23 52%

9. Recruitment 18 41%

10. Accreditation 28 64%

11. Customisation of wholesale packages

14 39%

12. Other 2 5%


The innovation in these fi rms was mostly incremental (a series of small/gradual changes over time). Twenty-nine of the forty-four fi rms (66%) regarded these innovations as incremental while 27 percent of respondents (12 of 44) identifi ed the change as radical (i.e.

a one time big change). Seven fi rms in the sample have received a 2003 Tourism Award.28

These fi rms regard their innovations as radical in a higher proportion than non-award winners (see Table 18).

35AEGIS UWS

The survey provides no information about the type of R&D that these fi rms use but as market research was part of the question we assume it is a big component of the referred service. Market research is an important KISA itself as it implies analysis of markets, a core activity for developing new or adapted products and services. The use of IT services was mentioned by 75 percent of the fi rms which is an important reference especially when Tourism fi rms have been regarded as slow in integrating ICT into normal business management systems (Main 2002) or in using ICT in ways more sophisticated than using email and a basic website (Buhalis 2003; Braun 2004; Danielle & Mistilis 1999; Hollick 2003; Jameson 2000).

Our survey, however, indicates the high priority that Australian tourism fi rms are putting in place to compete within a now ICT-driven sector (Braun & Hollick 2004). For example, 52 percent of the surveyed companies use e-commerce services though mostly as an in-house activity.

KISA-related services were used differently when mapped against the business life-cycle of the fi rm. Starting business did not use any service very often. Mature business used services regularly, especially IT services. Business in expansion used all services but especially marketing and IT (see Table 20below).

Table 20. Frequent use of KISA-related services by fi rm business cycle

KISA –related servicesStarting29

businessNew30

businessMature31

businessExpansion32

business

1. Industry development advice

2. Business planning advice

3. Marketing and promotion

4. Research (includes market research) and product development33

5. Accounting and fi nance services

6. IT services

7. E-commerce services

8. Training services (e.g. TAFE )

9. Recruitment

10. Accreditation


Source: AEGIS KISA Tourism survey (2004) * Only frequent use is mapped

Table 20 above supports previous fi ndings in the literature regarding the lack of access to specialised services by micro-fi rms due to resource constrains (Jameson, 2000). It also supports previous fi ndings on time and fi nancial constraints experienced by small tourism fi rms in terms of their ability to engage in training activities (Collins, Buhalis and Peters, 2003). In

our survey only business on expansion regularly participated in training activities although intermittently use of this activity is reported by 52 percent of all participant fi rms (see Table 20and Table 21). Firms identifi ed that they were most likely to access services intermittently i.e. once or twice through the year (142 of 301 total uses of KISA being 47%).


Sixty-four percent (28 of 44) of respondents indicated that they spent less than AUD 10,000 on KISA inputs. Five percent (2 fi rms) spend over AUD 100,000 and six fi rms (14%) spent between AUD 50,000 and AUD 100,000 on such activities. Six fi rms (14%) did not expend any money on KISA related services.

Figure 10. Firm expenditure on KISA-related services


Table 21. Use of KISA-related services

Daily Weekly Monthly Once or twiceTotal number

of uses

1.Industry development advice 2 7 7 13 29

2. Business planning advice 2 6 4 13 25

3. Marketing and promotion 7 8 13 6 34


6 6 9 14 35

5. Accounting and fi nance services 3 5 14 12 34

6. IT services 3 8 10 12 33

7. E-commerce services 2 4 4 13 23

8. Trainging services (e.g. TAFE, Industry courses)

0 2 3 18 23

9. Recruitment 0 2 5 11 18

10. Accreditation 0 1 4 23 28

11. Customisation of wholesale packages 3 3 5 6 17

12. Other 0 0 1 1 2

28 52 79 142 301

9% 17% 26% 47%


Expenditure on services by firm as % of total sample (44)

0

5

10

15

20

25

30

none <$3,000 <$10,000 <$20,000 <$50,000 <$100,000 >$100,000

$

%

37AEGIS UWS

3.2 Provision of Inputs to KISAIn relation to the source of expertise, Table 24 cross-classifi es the type of inputs to KISA by the source that provides the service. The most important source of KISA-related services was in-house delivery which provided 32 percent of all KISA inputs. The next most signifi cant source was the private sector with 20 percent and Industry Association (14%). The least signifi cant sources were Universities (2%), Federal Government (3%) and Local Government (5%).

It is interesting to note that on average fi rms sourced inputs to KISA from more than one

source, the highest being 2.42 sources for Industry Development Advice, the lowest being IT services at 1.33 providers being sourced predominantly from in-house and the private sector. Firms sought Industry Association services on a broad range of areas most signifi cantly in Industry Development Advice, Research and Product Development, Marketing and Promotion, Accreditation, and Business Planning Advice.

The expenditure on KISA-related services is not conclusive about that Tourism fi rms engage in ‘little formal skills and intelligence gathering’ as suggested by Braun and Hollick (2004:4); on the contrary it shows that most fi rms engage external sources of expertise in addition to KISA occurring in-house or through informal

non-commercial network relationship (see Table 22 below) as suggested also by previous AEGIS KISA research in the software sector (Martinez-Fernandez et al, 2004a). Companies, which have won Tourism Awards have a higher frequency of expenditure on these services than non-award winners.

Table 22. Expenditure on KIS by Tourism Award winners

Companies > AU$50,000 (no companies)

% companies

Tourism Awards 4 out of 7 57%

No Award 3 out of 37 8.1.5%


The size of the fi rm was not a signifi cant factor in relation to expenditure in these fi rms. The size of those companies expending more than AUD 50,000 on provision of inputs to KISA varies from 10 to 50 employees to more than 50 (see Table 23 below).

Table 23. >AU$50,000 Expenditure on KIS and size of the fi rm

No Employees No companies

<10 1

10-50 3

>50 4



Table 24. Provision of KISA-related services

KISA - Related KISA - Related Services

In House

Local Government

State Government

Federal Government

Universities/CSIRO

Private Sector

Industry Association

Informal Networks

Total% Type of Total

Number of fi rms using

services

Avg Number

of sources per fi rm


13 7 10 1 2 10 15 12 70 13% 29 2.42


19 0 6 1 1 7 10 5 49 9% 25 1.96


22 4 7 3 0 13 13 11 73 13% 34 2.15


18 9 11 6 1 6 14 16 81 15% 35 2.31


18 1 0 0 0 23 1 4 47 9% 34 1.38

6. IT Services 15 0 1 1 0 22 0 5 44 8% 33 1.33


12 0 2 0 1 13 1 5 34 6% 23 1.48

8. Training services (e.g TAFE, industry TAFE, industry courses

7 3 13 0 4 4 5 1 37 7% 23 1.61

9. Recruitment 23 0 0 1 1 4 2 3 34 6% 18 1.89

10. Accreditation

6 4 11 2 1 2 12 2 40 7% 28 1.43


19 1 3 1 0 4 5 3 36 7% 17 2.12

12. Other 4 0 0 0 0 0 0 0 4 1% 2 2

549 100%

Total 176 29 64 16 11 108 78 67 549

% source of total

32% 5% 12% 3% 2% 20% 14% 12%


The type of KISA-related services most used by fi rms from different sources was Research and Product Development (15% 81 of 549 instances), followed by Marketing and Promotion and Industry Development Advice

(13% each). This can be noted in the table below that highlights the mix of most important sources for these KISA. Table 25 suggests ‘Industry Development Advice’ is the most mixed and matched input to KISA.

39AEGIS UWS

Figure 11. Provision of Services

Where services were sought (all types)

0%

5%

10%

15%

20%

25%

30%

35%

In-house

Local Governm

ent

State Government

Federal Gover

nment

Universit

ies /CSIRO, etc

Private Sector

Businesses

Industry Associa

tions

Informal n

etworks

Source

%


Table 25. KISA mix of inputs

KISA –related servicesIn-

houseState

GovernmentKIBS

IndustryAssociac

Networks




4. Research (includes market research) and product development


6. IT services



9. Recruitment

10. Accreditation


Source: AEGIS KISA Tourism survey (2004) * Only the most frequent sources are depicted

Figure 11 shows the most signifi cant sources of expertise for KISA. In-house, KIBS, industry associations and networks were the most common sources of expertise. This result is consistent with previous KISA studies in the

software sector pointing out the important role played by informal networks in the co-production of knowledge (Martinez-Fernandez et al 2004a; Forseen et al, 2004; Broch & Isaksen, 2004).

As identifi ed in the box below 59 percent (26 of 44) of fi rms considered in-house service providers and Informal networks (52% or 23 out of 44) to be of high importance. The private sector was considered of high importance by 32 percent (14 of 44) of fi rms. Forty-three percent (19 of 44) of fi rms considered Industry associations to be of medium importance,

followed by the State government (36%, 16), Federal Government (34%, 15) and Local Government (32%, 14). Consistent with the results from Table 24 only 2 percent of fi rms regarded Universities as of high importance. Only 7 percent regarded the federal government of high importance.


Table 26. Importance of service provider

Not

relevent Small

importance Medium

importance High

importance In-house 20% 9% 11% 59% Local Government 34% 27% 32% 7% State Government 25% 20% 36% 18% Federal Government 39% 20% 34% 7% Universities /CSIRO 55% 25% 18% 2% Private Sector 23% 18% 27% 32% Industry Associations 16% 14% 43% 27% Informal networks 16% 5% 27% 52%


The table below highlights the provider’s importance as per highest frequency of responses.

Providers of inputs to KISAProviders of inputs to KISA

Small Importance

Medium Importance

High Importance

In-house

Local government

State Government

Federal Government

Universities/CSIRO

Private sector (KIBS)

Industry Associations

Informal Networks

Source: Derived from Table 26

In terms of where KISA-related providers are located fi rms indicated that in-house providers were the most utilised (31% of instances). The next most signifi cant location of external

providers was local (30%). Twenty-fi ve percent of all KISA service providers were located regionally, within the state.

(no companies)

41AEGIS UWS

Figure 12. Location of KISA-related providersSource of KISA by location

0%

5%

10%

15%

20%

25%

30%

35%

In-house Local (inCity)

Regional (instate)

National International

Source

% of

total

servi

ces


Findings from these fi rms in relation to the source of their knowledge intensive inputs support the importance of geographical proximity and the generation of clusters and networks strengthening the innovative system of the fi rm (Acs, 2002). It also supports recent fi ndings by AEGIS that knowledge systems have a spatial dimension most signifi cantly related to local and regional (state) level than towards national

and international spaces (Martinez-Fernandez, et al, 2005b). While national and international linkages are important they are not as vital for the fi rm’s innovation system as local and regional linkages. The table below shows the most common location for provision of inputs to KISA. For these fi rms, only R&D was often sourced also nationally.

Table 27. Preferred location for provision of KISA-related services

KISA –related servicesIn-

houseLocal

Regional (State)(State)

National International



3. Marketing and promotion4. Research and product developmentdevelopment5. Accounting and fi nance servicesservices6. IT services



9. Recruitment

10. Accreditation




Figure 13. Inputs to KISA fi nanced by Government grants

Firms using grant allocations to finance knowledge intensive services

01

234

56

1. Ind

ustry

devel

opmen

t advic

e

2. Busi

ness

planni

ng ad

vice

3. Marke

ting an

d prom

otion

4. Res

earch

(inclu

ding m

arket r

esea

...

5. Acco

unting

and fi

nance

servic

es

6. IT

servic

es

7. E-co

mmerce s

ervice

s

8. Train

ing se

rvices

(e.g. TA

FE, in

du...

9. Recr

uitmen

t

10. Accr

editat

ion

11. Cus

tomisa

tion o

f whole

sale p

ac...

12. Othe

r

Type of service

Num

ber o

f Firm

s


Companies with Tourism awards used government grants with a higher proportion than companies without any award (see Table below).

The size of the fi rm was irrelevant in relation to the use of government grants. Three fi rms have less than 10 employees, three fi rms have between 10 and 50 and two fi rms have more than 50 employees.

Table 28. Tourism Awards and use of government grants

CompaniesUse of grants (no companies)

% companies

Tourism Awards 3 out of 7 43%No Award 5 out of 37 13.5%

3.3 Access to Government GrantsEight out of forty-four fi rms (18%) received government grants. These companies received seven grants from the state government, four from the federal government and two from the local government. As can be seen in the

following table these funds were used fi ve times for Marketing and promotion, four for training services and three for market analysis purposes.

Consistent with previous fi ndings in this survey, e-commerce services are not mentioned by the fi rms using public funding for their KISA inputs. This and previous results support other fi ndings from the literature on the limited external access

that tourism fi rms have to expertise for extending their distribution channels to the Internet as the major transformer of the industry (Bloch & Sebev 1996, Braun 2004, OECD, 2004).

Source: AEGIS Tourism survey (2004)

43AEGIS UWS

3.4 SUMMARY OF FINDINGS

The survey indicated that the fi rms in the tourism industry are quite innovative in terms of implementing product, process and organizational changes. Thirty-nine of the 44 fi rms (89%) made changes that involved a new product, a new process or other change such as a substantially changed accounting system or human resources management system. Twenty-eight of 44 (64 %) fi rms identifi ed introducing a new product. Fifty-two percent (23 of 44) implemented a new process and fi fty percent (22 of 44) identifi ed a new way of doing something, for example, a new or substantially changed accounting system or human resource management system. The innovation in these fi rms was mostly incremental (a series of small/gradual changes over time).

In relation to the use of contributors to KISA for the development and introduction of the above innovations, the most commonly used services were Research & Development (essentially market analysis and product development), Marketing and Promotion, Accounting and Financial services and IT services. KISA-related services were used differently when mapped against the business life-cycle of the fi rm. Starting business did not use any service very often. Mature business used services regularly, especially IT services. Business in expansion (those with a more complex structure and involved in diversifi ed markets) used all services but especially marketing and IT. Firms identifi ed that they were most likely to access services intermittently (i.e. once or twice through the year).

The most important source of KISA-related services was in-house delivery which provided 32 percent of all KISA inputs. The next most signifi cant source was the private sector with 20 percent and Industry Association (14%). The least signifi cant sources were Universities (2%), Federal Government (3%) and Local Government (5%). The type of KISA-related services most mixed & matched by fi rms from

different sources was Research and Product Development (15%), followed by Marketing and Promotion and Industry Development Advice (13% each).

In terms of where KISA-related providers are located, fi rms indicated that in-house providers were the most utilised (31% of instances). The next most signifi cant location of external providers was local (30%). Twenty-fi ve percent of all KISA service providers were located regionally, within the state.

Expenditure on KISA related services shows that fi rms are purchasing external expertise for their KISA. Sixty-four percent of respondents indicated that they spent less than AUD$10,000 on KISA inputs. Eight of forty-four fi rms (18%) received government grants and these funds were used for Marketing and promotion, training services and market analysis purposes. Firms that have received a Tourism Award show higher levels of expenditure towards KISA and hold higher number of government grants than companies without tourism awards.


This chapter presents key fi ndings from the case studies. Background to the cases is presented below; full summaries are presented in Appendix A. The chapter discusses the importance of KISA, the rationale for the use of KISA, the signifi cance of KISA for fi rm capability building, challenges of these fi rms to the innovation process and access to government grants.

4.1 BACKGROUND TO THE CASES

The statistical analysis pointed out three industries as the most important for tourism inputs and employment composition. These industries are Transport, Accommodation and Retail trade. Background analysis and literature review also shows that an important component of the tourism industry as a whole is the ‘destination’. Case studies were chosen taking into account these factors. Five cases were located in NSW, four in the Snowy Mountains region (cases A, C, D, E, G) and one in Sydney (case F). One case was located in Queensland, in the Gold Coast (Case B). All cases dealt with the main functions supporting tourism.

Case A was established in 1977 by three Case A was established in 1977 by three Case Aentrepreneurs. The business started as a small tour business but has expanded its operations and diversifi ed into retail. It currently leases and sells snow gear and equipment as well as conducting skiing lessons. It was originally located in Cooma, but moved to Jindabyne in 1989. Their three largest customers are currently ‘Perisher Blue’, ‘Outdoor Adventure Companies’ and the ‘Big Alpine Tours’. Since their dealings with Perisher Blue began three years ago, the fi rm has had an opportunity to expand and diversify the business into niche areas such as cross country skiing, guided

snow shoeing and introducing the latest Nordic aspects in snow activities. Eighty percent of the business is attributed to Perisher Blue and they have formed a long-term relationship with them.

By establishing such relationships with Perisher Blue, they are able to innovate in terms of marketing and accessing more customers. By adopting this strategy, they can target and receive a wider customer base than if they were doing their own marketing. In addition, Perisher Blue promotes this company in magazines and other advertisements as a partner company.

Case B was originally established in 1995 but was taken over in 1996 by the current management. The business expanded to 65 employees; and recently commenced operations in McKay, Queensland. They provide ground transport to the MacKay airport and are currently negotiating for provision to the Sunshine Coast with a group operating under their license. The business consists of two core areas. Firstly, transfer between the theme parks, hotels and the accommodation houses. This part of the business fl uctuates. Secondly the Airport Transfers, which is more reliable.

Their largest customer is currently ‘Break Free Resort’ and ‘Holidays’ which is a public company listed on the Australian Stock Exchange. They are the largest client and manage 50 resorts. Their other two customers are Sun-lover Group, owned by the Queensland Government and ‘Blue Holidays’, the holiday arm of Virgin Blue. These three clients represent 25% of the total business. The most recent innovation in the fi rm was radical in nature with the introduction of a Global Positioning System (GPS) in all their 30 vehicles. It involved a satellite tracking system and the objective of the system was to merge with their reservation system. Together,

4. Case Studies: Key fi ndingsKey fi ndingsK

45AEGIS UWS

these could cut down and save on the work processes within the fi rm.

Case C is a large hotel in the Snowy Mountain region. It is currently in its expansion stage employing 65 staff and earning about AUD 9.5 million in turnover. Ninety-fi ve percent of employees have secondary education, while the remaining employees have some form of tertiary education. The market is mainly leisure-based, with 75 percent comprising families and couples. The other 25 percent of the business is attributed to corporate clients and serving conferences. They have long-term relationships with different clients, but the business is basically market-driven.

The most recent innovation in the fi rm was the introduction of a new service, comprising guided walks in the national parks during summer. They try to attract people to the region in the summer, since the Snowy Mountains is mainly a winter holiday region. This is a new concept since they previously provide only accommodation. This new service is considered to be radical in nature, because they have moved into a new area. In addition, the hotel designed a new program, which incorporates safety manuals and selling their products and services over the phone. A new manager from the business division was employed to manage that program.

Case D is a publicly listed company established in 1956. The fi rm is a large skiing operator that deals with all aspects of the snow and mountain business from skiing products to retail, accommodation and tour operations. It employs 250 people in summer and 1200 during winter. About 95 percent of their full time employees are skilled with secondary education and the remaining with tertiary education. Winter staff have a higher proportion of tertiary education as many of the temporary staff is formed by university students. Their clients are the tourists who arrive in Thredbo. A target market is being created for the younger age groups. Most of the revenue is derived from the lifts’ operations to the mountains (40%). Other

sources of revenue include property investment (20%) and food and beverage sales (10%).

The most recent innovation in the fi rm was incremental in nature introducing new forms of equipment in snow sports. However the design, development and introduction of these were radical for them. It involved external market research to foresee changes expected by younger customers to traditional equipment for snow sports. It also involved a group of employees presenting their research and proposed product to the high management of the company. This was headed by junior employees and fi nally collaborated with an advertising company to launch the product. Other changes included a management restructure in the organisation two years ago. The parent company amalgamated recently with another company, bringing synergies for knowledge.

Case E is a micro family business with only three employees. It was established in 1999 and is currently in its entrepreneurial stage. It provides hospitality and horticulture services. The average annual turnover is around AU$100,000. Their clients are the general public and the locals living in the small town of Dalgety. 80 per cent of their sales are attributed to tourists in the Snowy mountains region. Their high returns are based on good service and 7-day operations all year.

The most recent innovation in the business was the introduction of ‘country cuisine’ as part of the products they offer. This was considered as incremental innovation to increase their sales. Another area of innovation was the introduction of a town walk in the quaint, remote and small population town. They have also recently adopted Occupational Health and Safety procedures due to their importance in the cuisine partnership.

Case F was established in 1997 as a result of a merger two computing based travel companies. Its primary activities commenced primarily as corporate and government applications and


R&D company in the travel industry. For about 3 years since its establishment the fi rm worked mainly R&D through self and government aided fi nance through contracts. In the fourth year they were able to develop products, which have put the fi rm in business at the world level. The fi rm has a turnover of AUD $4 million and employs about 65 people in its three offi ces in Australia, Malaysia and Britain. 95% of the revenue of the fi rm is generated through exports.

The recent innovation includes MICE which is an integration of a product management suite through a MXL engine that includes a marketing database. This product serves events, conventions and bookings. The fi rm moved into an Internet based space where individual small hotel operators can manage their own product and manage booking information. Closely linked to this is also the development of ‘Website Management System’, which was developed and designed internally. These software based products developed can be

characterised as incremental innovations.

Case G is a non-profi t tourism organisation in the Snowy Mountains area giving information and networking services to the fi rms and institutions in the tourism hub.

4.2 IMPORTANCE OF KISAInterviews held with the managers of the fi ve case study fi rms have shown various knowledge intensive service activities which they considered very important for their operations and their innovation. Each fi rm had its own list of services due to the varying nature of operations, functions and processes. However, it was found that Marketing and Promotion services; and Accounting and fi nance services were common among all the fi ve case studies and rated as highly important. This is shown in Figure 14 below

Figure 14. The Importance of KISA

0 1 2 3 4 5

R&D

Accounting and finance

IT services

E-commerce services

Training services

Recruitment

Accreditation

Customisation of wholesale packages

No of firms

Low importanceMedium importanceHigh importance


47AEGIS UWS

The modern business world is all about information handling: information gathering, synthesis and analysis. Accounting and fi nance involves the preparation of fi nancial reports, investment activities and implementing cash management strategies. These services assist to direct the organisation’s fi nancial goals, objectives, and budgets. The relevant managers oversee the investment of funds and manage associated risks, supervise cash management activities, execute capital-raising strategies to support the fi rm’s expansion, and deal with mergers and acquisitions. Secondly, marketing and promotion marketing includes all business activities involved in the moving of goods and services to the consumer, including selling, advertising and packaging. In the tourism industry, these fi rms consider that customer-satisfaction strategies and customer retention achieves competitive advantage.

Other important KISAs for these fi rms were Business planning advice which involves developing the strategic direction of the fi rm. Four out of fi ve fi rms considered this to be highly important. In addition to business planning advice, the fi rms also sought industry development advice to supplement the operations of the business. These fi rms found that they can align their business and strategic plans in accordance with industry trends, regulations and practices. Other KISAs include training and development of employees, recruitment of skilled and competent employees and accreditation of services. Some of the fi rms found that the customisation of wholesale packages and the use of e-commerce services were relatively unimportant for the innovation of the business. The lack of importance that some fi rms give to e-commerce services confi rms fi ndings by our survey that tourism fi rms might not yet be restructuring their operations to the Internet as a new marketing channel (Bloch & Segev, 1996). It should be noted, however, that the development of new information and communication technologies (ICT) and in particular, the development of e-business requires important fi nancial resources and a high level of competence that is probably

impacting the development of e-commerce in Tourism fi rms (OECD, 2004).

Case F for example places considerable importance in R&D and different types of consulting such as engineering and management including IT for generating KISA. However, the consulting inputs can be seen only as marginal inputs compared to the internal innovation infrastructure and skills through personnel. The fi rm began as an R&D based fi rm through the grant of 2.0 AU$ million from Austrade, R&D and ICT related grant programs. The fi rms has become self reliant over the years to generate products and services for different clients and customers. The fi rm uses external inputs but not for generating KISA but to aid its administrative and managerial skills in obtaining grants and interacting with government and other offi cials.

4.2.1 Sources of inputs to KISAThe particular and distinctive ways fi rms access, acquire, produce and integrate knowledge are the KISAs fi rms undertake in their learning and innovation processes. In the case studies, each fi rm had its own strategy for internalising or externalising such services. This was because of the various business functions and processes among the case study fi rms and the different needs they serve. Thus, KISA can be different in each fi rm and the activities that are more effective may indeed be the ones that differentiate a fi rm from its competitors. Although the results between the case studies varied, the analysis showed generally how they were used. This is depicted in the Table 29. Internal inputs to KISA are business planning advice, IT services, e-commerce services and recruitment. External inputs were industry development advice, R&D, training services and accreditation. Mix and match of services occurred more frequently with marketing and promotion activities, accounting and fi nancing services and customisation of wholesale packages.


The fi rms tended to seek Industry development advice from external sources. These included mainly Industry Associations, networks and clusters, government departments and international businesses. For example, the managers in Case A constantly keep in touch with organisations in the United States and in Europe on the latest snow products and activities; and are among the fi rst to introduce them in Australia. International links are therefore important for some fi rms although inputs to KISA sourced at the international level were limited. For some of these fi rms, industry development advice was critical during the start up of the company and during the expansion phase in the business life cycle. The advice was used especially during the creation and maturing phase of their products and services.

Business planning advice however, originated from within the fi rms by the management. They were important for innovation and during the start up of the company. Business planning was required during the creation of products and services. In case C, this was continuous because of the nature of hotel operations. They faced constant competition with other accommodation businesses, and needed to constantly plan for the future. In case D, the managers planned for the business with some consultation from informal networks and clusters. Similarly, Case E sought the advice from government departments prior to the start up of the business.

Marketing and promotion services tended to be a mix of internal and external sources. In Case A, the fi rm capitalised on the advertising from its major clients. Other fi rms outsourced to private sector organisations whilst still retaining some internal marketing. Industry associations were also sought in promoting the region for them and attracting visitors. Marketing and advertising was highly important when these fi rms introduced a new product, service or concept in tourism. They also had to maintain sales during the maturing phase of these products and services. In Case D, Marketing and promotion services were also conducted both internally and externally with the help from industry associations, networks and clusters and overseas fi rms.

Research (including market research) and Product Development in tourism was generally Product Development in tourism was generally Product Developmentoutsourced and mostly refers to market analysis. Although some fi rms wanted to analyse markets internally, they were lacking the resources and expertise and had to rely on external knowledge and information on the industry and their products and services. Market analysis was critical in keeping up with the standardisation phase of some of the products and services and for the promotion of these products and services. External institutions providing inputs for their analysis of markets included government departments, industry associations and network groups. In Case C, research and development was

Table 29: Sources of knowledge-intensive service activities inputs

KISA InternalMix and MatchMatch

External

1. Industry development advice 1. Industry development advice 2. Business planning advice2. Business planning advice3. Marketing and promotion3. Marketing and promotion4. Research (including market research) and product developmentdevelopment5. Accounting and fi nance services6. IT services7. E-commerce services 8. Training services (e.g. TAFE, industry courses)8. Training services (e.g. TAFE, industry courses)9. Recruitment 10. Accreditation11. Customisation of wholesale packages


49AEGIS UWS

regarded as highly important for the innovation and used during the professional management stage of the hotel. This was mainly outsourced to private sector fi rms (KIBs).

The accounting and fi nance services were carried out by both external fi rms and among the fi rms internally. There was some external professional expertise sought periodically from the private sector KIBs in terms of auditing and for tax purposes. This activity was important after the business was established and in the entrepreneurial, professional management and expansion stages of the fi rm. Other fi rms such as Case D engaged professionals from government departments and informal networks and clusters during the maturing phase of their services.

Information Technology and E-commerce services tended to be conducted internally by highly trained and skilled employees for maintaining the business systems and operations. Three of the case studies did not considered e-commerce services as of high importance; two of the case studies were actively pursuing e-commerce activities. One case identifi ed the need and importance of implementing a knowledge-based tourism marketing information system and deployed a team of experts to implement it. Similarly in Case C, the hotel product is increasingly being sold electronically, and identifi ed as one of the key motivators for encouraging customers to purchase online.

The training of employees in tourism tended to come from external sources. Some fi rms trained their employees with the basic skills when they were newly employed. However, for more advanced skills and knowledge, the training depended on industry associations and government departments. The areas of training included computer and software skills; auditing, fi nance and accounting skills. In Case A, the ski instructors and trainers had to be recognised with the Australian Professional Snow sport Instructor certifi cation. Case B outsourced most training to universities and public sector

organisations. In case D, training services were used during the start up and entrepreneurial stages of the market cycle only. Being a large enterprise, they engaged external consultants from government departments, private sector organisations and industry associations.

The recruitment of personnel tended to come recruitment of personnel tended to come recruitmentfrom internal sources. Some fi rms considered recruitment as an important and ongoing issue. There is constant recruitment in Case A because the nature of the industry is seasonal, and a lot of casual employees are employed during the peak winter periods from July to October. Cases B and C hired new people when creating new products and services, and during the fi rm’s expansion.

All accreditation was outsourced to Industry associations, RTOs and government departments. This was especially important throughout the maturing and standardisation phase of products and services.

The customisation of wholesale packageswas conducted both internally and externally. Organisations included industry associations, KIBS, networks and clusters and organisations from overseas. This was normally used during the maturing phase of products and services.

The case study analysis also shows who provided the knowledge intensive service activities. Among the case studies many of the services or knowledge was developed

Table 30. Frequency of knowledge/services provision

SourcesFrequency of sources34

In-house 29Private sector businesses (KIBs) 18Industry Associations 14Government departments 11Networks and clusters 10Overseas fi rms or departments 7

Universities and public sector research organisations

2



in-house within the fi rm. This is because it accounts for both those provided internally and those mixed and matched. For those services that were outsourced to external organisations, KIBS were used most frequently, followed by industry associations. A signifi cant fi nding in the case study analysis was that universities and RTOS, as well as overseas fi rms were not popular choices as service providers. These fi ndings confi rm survey results (Figure 11) and is also consistent with fi ndings in other industry sectors (Martinez-Fernandez et al, 2004a).

4.2.2 KISA in the product life cycleThe product life cycle comprises three main phases: creation phase, maturing phase and standardisation phase. During the interviews, the managers were asked to indicate three main KISA that the company relied on for each phase in the product or service life cycle. During the creation phase, the main KISA involved were industry development advice, the marketing and promotion, research and development, accounting and fi nance services

and recruitment. The maturing phase involved business planning advice, IT services, e-commerce services and the customisation of wholesale packages. The standardisation phase involved marketing and promotion, accounting and fi nance services, training services, recruitment and accreditation. These are depicted in the table below.

The analysis found that these fi rms used different KISAs at different stages of the product life cycle. Due to the nature of the tourism industry being dynamic and requiring distinct services, the focus of the services changed over time. During the creation of the product or service, there was more emphasis on analysing the market, the industry and on developing the actual product or service itself. Financial budgets were planned and services required for launching the product into the market. The fi rms also recruited new staff to assist with new products and services being introduced. There was heavy marketing and promotion as these fi rms advertised new concepts, products and services.

Table 31. KISA mapped against product life cycle

KISACreation phase

Maturing phase

Standardisation phase

1. Industry development

2. Business planning



5. Accounting and fi nance

6. IT

7. E-commerce

8. Training (e.g. TAFE, industry courses)

9. Recruitment 10. Accreditation10. Accreditation11. Customisation of wholesale packages

Source: AEGIS KISA Tourism case studies, September 2004.

51AEGIS UWS

After the product was introduced, the fi rms adopted different strategies to help their products and services to survive in the competitive industry. The business strategy had to be reviewed. The use of Information technology and e-commerce also enabled the products and services to become more competitive. With the introduction of many products and services and competing in the industry, the fi rms had to customise their products and services to suit target markets or consumer groups.

Finally in the standardisation phase, the fi rms had to ensure that the products and services were established in the market. There was heavy advertising and promotion again. Additional staff had to be recruited and trained to be skilled and competent, and in keeping their products and services competitive. At this stage, the fi rms also had to make sure their

products and services were reputable and in line with industry or national standards.

Case F places high importance in R&D and consulting for developing products both in terms of product and market life cycle. While R&D is given high importance, it is the market and the demand pattern emerging in the travel and tourism industry and its structure, which is seen to be driving the innovation process.

4.2.3 KISA in the business life cycleThe use of KISA in the business life cycle also illustrates why particular KISAs are important at certain stages of the fi rms’ operations. The life cycle can be divided into four stages: start-up, entrepreneurial, professional management and expansion. The use of KISAs during the market life cycle is shown in the following table below.

Table 32. KISAs mapped against fi rm life cycle

KISA Start-up EntrepreneurialProfessional Management

Expansion

1. Industry development

2. Business planning



5. Accounting and fi nance

6. IT

7. E-commerce

8. Training (e.g. TAFE, industry courses)

9. Recruitment

10. Accreditation

11. Customisation of wholesale packagesSource: AEGIS KISA Tourism case studies data, Sept 2004

According to the case studies, the most used KISAs in the start up phase were industry development advice, business planning advice, R&D, recruitment and accreditation. The fi rms found that in order to establish or start the business, they required services on fi nding out about the tourism industry, the market situation and how the business was going to operate or

survive. There was a lot of research, especially in the market, the potential of their operations, the customers and expected market share. The fi rms also recruited personnel to assist in the day to day running of the business and this was mainly done at the beginning during the start up phase. They also made sure that their services were accredited and competitive with industry standards.


The entrepreneurial stage was the period after they survived for more than three years. At that stage, the fi rms found that they needed a different strategy and as a consequence, the KISAs used during that stage were different. There was more emphasis on marketing and promoting their products, services and the business. Although research on the industry, market and customers were still ongoing, there was additional effort on establishing the fi nances for the fi rm. They had to devise ways to make more profi ts, cut costs, invest in technology, telecommunication facilities and plan for growth. IT services were used more during this stage.

At the professional management stage of the business life cycle, the main KISAs used were research and development, accounting and fi nance services, IT and E-commerce services. The fi rms found that they could expand their market by capitalising on the internet. All these fi rms advertised their business and gained more customers through the World Wide Web. They implemented booking systems online. At this stage, the fi rms still recruited staff because of the seasonal nature of tourism, and the high turnover rate.

There were three out of the fi ve fi rms undergoing the expansion stage of the business life cycle. These fi rms tended to focus more on IT services, recruitment and the customisation of wholesale packages. During expansion, these fi rms found that they had to keep up with technology, equipment and best practices. They recruited additional and competent staff to assist with more complex and diversifi ed operations. With the proliferation of products and services over the business cycle, these fi rms also customised them to suit differing needs of different customers. This was eased through market segmentation and targeting new customer groups.

The fi ndings of KISA use at different stages of the fi rm life-cycle complement fi ndings from the survey of 44 fi rms although the picture arising from both methods are different (see Table

20). For example marketing was an important KISA for business in expansion in the survey; industry development and business planning related activities were important for the mature fi rms (professional development) in the survey. However, fi ndings both in the survey and in the case studies are consistent in relation to the use of IT related KISA. These differences refl ect the importance of different methods to investigate the use of KISAs at different stages of life-cycle. In the case of the survey KISAs were mapped from their frequent use by fi rms at different stage of the business cycle (cross tabs of two questions in the analysis). In the case studies the fi rms were asked to remember KISA use at previous stages in their life-cycle which can introduce some distortions to the accuracy of information (Mandler, 1979). A more detailed investigation with more cases is needed to be conclusive of the KISAs associated to the fi rm life-cycle.

4.2.4 Network KISAThe analysis of network KISA is better understood under the innovation systems literature. The systems approach to innovation is based on an interactive model which implies that innovation is viewed ‘as a complex, interactive, non-linear learning process inside fi rms and between fi rms and their environments’ (Asheim, 2004:20). This view of innovation goes beyond the linear model of innovation more focused on radical or technological innovations. An approach to the analysis of innovation based in an interactive model will consider the interrelationships between departments at the fi rm level and the relationships of the fi rm with other fi rms and organisations of their network space. These include KIBs, RTOs, customers, suppliers, government departments, local organisations, professionals and community organisations. All of them facilitate the learning of the fi rm through formal and informal information exchange, knowledge diffusion, knowledge creation and ‘intangibles’ such as ‘civic motivation’ that may have an unexpected impact on fi rm innovation.

53AEGIS UWS

Innovation at the national level has been identifi ed as driven by networks of public-private sector organisations whose activities and interactions initiate, import, modify, and diffuse new technologies and practices (Cook, 2001). In the case of regions, these public-private networks can be clearly identifi ed as a system of interactions sometimes called ‘innovative milieu’ which advocates that the fl exibility of the space stimulates innovation cycles that benefi t the region (Capello, 1999). Authors of this approach (Camagni, 1999; Maillat, 1991; Kogut et al, 1993) advocate the importance of the formation of tacit knowledge and the close interaction needed among fi rms to facilitate learning. Cooperation is then seen as a decisive factor in collective learning and innovation (Martinez-Fernandez, 2004b). The impact and benefi ts of networks to regions have been discussed elsewhere in the literature (Cooke, 2001; Martinez-Fernandez, 1998, 2001) and recent research has moved into Regional Innovation Systems (RIS) arguing that fi rms are increasingly dependent on the direct involvement of institutions to stimulate innovation and thus competition (Cooke, 2001; Landabaso, 1997; de la Mothe and Paquet, 1998). The literature shows that a strong, regionalised innovation system is one with systemic linkages between the sources of knowledge production (universities and research organisations), intermediaries (government and private innovation services) and fi rms especially in geographical proximity (Cook, 1995).

The formation of a ‘networked space’ can develop clusters of competencies and specialisation that translate into competitive advantage both for the fi rms involved in the cluster and for the region as a whole. Porter (2000:11) defi ned clusters as concentrations of highly specialized skills and knowledge, institutions, rivals, related businesses, and sophisticated customers in a particular nation or region.

The advantage of the application of the systems approach to innovation and cluster theory to the analysis of the Tourism industry

is that ‘tourist destination’ is a critical space for the concentration of highly specialised skills, fi rms and institutions impacting in innovation. Australia has several of these ‘destinations’ across the country: Cairns, Uluru, Kakadu, Gold Coast, and the Snowy Mountains to cite some of the most representative. Four of the case studies analysed were part of the Snowy Mountains tourist hub, one was in the Gold Coast. The section below maps the Tourism system of innovation in the Snowy Mountains through the network space of the case study fi rms. It is also presents the network space of the Gold Coast case study. A cross case study analysis on collaboration partners is presented at the end.

4.2.4.1 Snowy Mountains Tourism HubThe Snowy Mountains is a popular tourism destination. Jindabyne as a shire grows from 6,000 people in summer to 30,000 in winter. Tourism brings in AUD 270 million to the region compared with 20 million brought by agriculture for example. On average, 50 percent of the population is employed in the tourism industry. Winter is the highest season for the region and the extra staff are brought from outside the region, then they are trained in the region and these human resources work in the area for 3-4 months. The result of this seasonality and the higher cost of public liability insurance is that many businesses are forced to close down. Others are able to survive working only during the winter months as there is not enough activity to justify maintaining the business operations open during the summer months.

The most signifi cant companies operating in the snowy mountains are members of the Tourism Snowy Mountain Inc., a regional tourism organisation that is funded 70 percent by the NSW Government, 25 percent by local Councils and 5 percent by local tourism operators. Tourism Snowy Mountain develops tourism products and markets the region as a whole. The region is best known as a winter destination and 75 percent of all visitors come during the winter months so the main


challenge is to market the region during the summer months. Big companies operating in the region such as Perisher Blue, Kosciusko Thredbo or Novotel have developed summer products such as ‘Walking to Kosciuszko’ or ‘Kosciuszko Alpine Walks’ that Tourism Snowy Mountains can market. Thus, there is a high dependence on collaboration in the region for product innovation and marketing purposes.

The big operators ran multimillion dollar campaigns to attract tourists to Thredbo or Perisher but they cannot accommodate all the tourists so the small operators greatly benefi t from being part of the tourism hub. Companies are actively participating in planning tourism actions. One of the interviewees noted ‘companies do not work in exclusion, the ski resorts for example, spend money on going to a trade show, and they would not go up there separately. They will talk to each other and go as a united front and that is something tourism in the snowy Mountains really works on. Instead of just going there as a single business they talk to as many people as possible and go there together as a group’ (AEGIS interview data, 2004).

Figure 15 shows the Tourism Development Network in the Snowy Mountains. This network is important for the development of the tourism operations, it is highly inclusive of public-private organisations and it includes big and small operators. Tourism Snowy Mountains Board acts as the catalyser of effects, it runs meetings, keeps the information about new programs and policies from Tourism NSW fl owing and advocates for the region in order to gain recognition and funding for new activities. Figure 15 shows the involvement of the local Chamber of Commerce and the local tourism associations as an important component of the network. The professionals behind these associations and the members of the different tourism committees are largely volunteers, civic entrepreneurs, non-profi t oriented and with high motivation for the development of the region as a whole. The network will meet at formal meetings but also at informal gatherings where more informal information is discussed. The geography of the Snowy Mountains and its special climate conditions defi nes a confi ned space in term of inter-relationships of the network members which added to the formal and informal gatherings contributing to the trust-building process among the regional tourism stakeholders35.

Figure 15. Snowy Mountains Tourism Development Network

��

��

��

��

Tourism NSW

Chambers Commerce ��

Firms/Org

Snowy River

Cooma Monaro Tumbarumba Tumut

Kosciuszko Thredbo

Novotel Snowy Hydro

Perisher Blue

SMEs Natural Parks & Wildlife Services

Source: AEGIS case studies data, Sept 2004

55AEGIS UWS

Although network analysis of centrality, frequency, density, equivalence, and centralisation was not undertaken in these cases, a simple centrality analysis is applied. Centrality refers to the location or positions of organisations in networks (Freeman, 1978: 217). It is relevant to the way groups get organised to solve problems, and it is commonly used to identify network leaders (Mizruchi and Galaskiewicz, 1994; Scott, 1994; Martinez-Fernandez 2001). In relation to these tourism fi rms it shows the different sources from where KISA inputs can be drawn, the richness of their network connections to public-private

partners and the strong link to organisations in their geographic proximity. It is interesting to note that although fi rms do not indicate strong interaction with ‘competitors’ for provision of KISA inputs they are included as been part of their network and learning space.

Figure 16 shows the network space of case A where the relationships with the different actors of the innovation system can be appreciated. Tourism Snowy Mountains appears in the network of Case A as one of their connections.

Figure 16. The network space of Case A

Customers

Perisher Blue

Business Enterprise Centre

Tourism Snowy Mountain

Universities

Competitors

Other organisations

Other government bodies

Suppliers

��

Source: AEGIS Kisa Tourism case studies data, Sept 2004

The network structure in Case A shows the different stakeholders in the region, where Tourism Snowy Mountains appears as one of the network nodes. The fi rm considered itself as a central role with very effective communication among other fi rms and partners. The knowledge intensive service activities that they capitalised on were to build and establish such relationships which could improve their competitive advantage. The fi rm recently underwent a restructuring to

integrate their systems and processes better. The analysis also shows that their use of KISA is mainly a mix and match of services, as well as in-house production of services. This shows the fi rm’s strategy of building relationships, receiving the knowledge-intensive services, and ultimately building it into fi rm capabilities for providing them in-house in future. Case A tries to develop competencies on emergent technologies and new knowledge. They are constantly developing and maintaining the


competitiveness of the network and try to establish more partners for future benefi ts.

Similarly, the network structure in Case E shows the stakeholders of infl uence in their operations and the link to Tourism Snowy Mountains ( Figure 17). This retail fi rm is very small and highly innovative in terms of its interrelations with the broad community and sustaining the entire innovation system of the town where it is located. The fi rm is the Local chamber of commerce, the Post offi ce, the representative to the Snowy Mountains

Board, and the historic archive of the town of Dalgety. In addition the business is open seven days a week which locates them also as the central point of communication in the town, especially for older residents that can call in if an emergency. The extraordinary functions of this fi rm as central to the town’s innovation system are infl uencing the number of visitors to the town and the business. The owner noted that ‘the business would not survive without all these different functions, but neither would the town survive without us’.

Case E

School

Australian Post

Other businesses

Tourism Snowy

Mountain Chamber

Commerce

Council

Suppliers

Local Residents (Surrounding Towns)

TAFE

Tourists

Ski Resort (Thredbo)


The centrality of Tourism Snowy Mountains to the Tourism Network in this destination is suggested in the two case studies above. Other two companies from the region noted the important role of this organisation to diffuse information and provide ‘communication infrastructure’ for tourism companies that will otherwise be more isolated (AEGIS case studies data, September 2004).

Figure 18 shows the network space of Case B, located in a different destination, the Gold Coast in Queensland, a very popular beach and sun destination South of Brisbane. The fi rm is a medium transport company with turnover of more than AUD$2 million. The fi gure shows the complexity of relationships of the fi rm especially among contractors of the fi rm (drivers), customers (tourists and tourism

Figure 17. The network space for case E

57AEGIS UWS

resorts) and professionals (providers of services and KIB). These three vectors of knowledge have strong interrelationships and provide most of the knowledge the company needs for innovation purposes. This particular company did not actively participate with regional tourism organisations (apart from industry associations) and did not think there was a tourism network in the Gold Coast. However, the fi rm explained how the strong inter-relationships between contractors, customers and professionals supplying services facilitated the interchange of knowledge and human resources over the years; KIBS will work also for the fi rms’ customers as a result of the close connections,

and contractors will also go back and forward to work directly for customers for some time. The fi rm manager acknowledged how human capital was an important part of the knowledge generation and understood the sharing of human resources as an advantage for the fi rm innovation system and for the services offered by Gold Coast companies. This case provides an interesting example of a fi rm sharing its own external experts with other actors in their network space resulting in a complex system of KISA inputs provision, both formal and informal.

Figure 18. The network space of Case B

Case B

Suppliers

Professionals (KIBs)

Contractors Customers


Direct Agents Internet


The OECD has recently been concerned about policies and programs addressing networking and cooperation of Tourism SMEs. Cooperation involves also SME public services such as marketing and promotion and expert advise on co-operative strategies. Co-operative strategies involving management networks of destinations are of particular interest as it aims to include the whole service chain in a region. An example of Australian government support

to adjusting products to the regional level is found at ‘See Australia’ www.seeaustralia.com (OECD, 2004).

Case F places high importance to personal and friendly mode informal relations with other fi rms, competitors, KIBS, industry associations and with personnel in government departments. The only formal relations the fi rm indicates is with customers. The fi rm operates from Sydney


but much of its customer and market expansion base is outside Australia in Malaysia, U.K and to lesser extent in USA. Even though the fi rm operates in a network space interacting with a variety of clients and customers in the travel industry and tourism boards of governments in UK and Australia, much of the sustenance of company and its marketing success is some how related to the leadership of the fi rm and his/her network of informal relationships. In many cases, the acquisition of knowledge has been through an informal process of engagement with other fi rms and not through formal contractual arrangements. It is in this engagement that the fi rm is able to customise the knowledge to its own needs and to successfully transfer and integrate it into the fi rm’s innovation processes.

4.2.4.2 Collaboration with partners for innovation

During the case studies, the managers were requested to state how important their service providers or partners were for their overall innovation process and what type of collaborations they engaged in. The analysis of the case studies showed that all of them were critical for the innovation, except for universities and research and technology organisations and competitors. The types of collaboration were also depicted. These are shown in the table below.

Table 33. Collaboration with partners

Partners Level of

importanceType of

collaboration

1. Other fi rms within the same industrial group (Network)

HIGH Informal

2. Competitors MEDIUM Informal

3. Customers HIGH Informal

4. Consultancy Firms (KIBS) HIGH Formal

5. Government Departments HIGH Formal

6. Universities and Colleges (RTOs) MEDIUM both

7. Industry Associations HIGH Formal

8. Regional/Community Organisations HIGH Formal


The case studies had dealings with networks or informal groups in the same industrial group. They had frequent discussions, get togethers and disseminated information on the latest trends and outcomes of the market. Although the relationship tended to be mainly informal, the information and knowledge derived is highly important for their operations, strategy and the innovation.

Competitors were considered medium in importance for innovation. They obtain limited information such as knowledge about the market or customers during informal sessions, such as during networking and industry association meetings. Some of the information

or new knowledge was useful or important for their strategic direction or innovative efforts. For example, one fi rm decided to upgrade their accounting and fi nancial system after discovering that many of their competitors were using more thorough and advance methods.

Customers were generally regarded as extremely important to the fi rms in their innovation. The customers indicate what they expect of the product or service offerings, and give insights on how certain processes could be improved. Firm B upgraded their booking system to serve a wider range of customers and gain a larger share of the transportation market.

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Private sector organisations such as consultancy Private sector organisations such as consultancy Private sectorfi rms or Knowledge Intensive Businesses (KIBs) were regarded as highly important to the innovation of the fi rms in the case studies. This is because the knowledge and skills received from these fi rms were invaluable and often provided new knowledge for the fi rm to culminate. The relationships were formal, with clear guidelines as to their responsibilities and duties to the services provided.

The relationship with government departmentstended to be formal and highly important. Often, these departments gave feedback, guidelines and policy advice on how the business should operate. The most important aspect for most of the fi rms was the issue of public liability. Other government departments included the business enterprise centre which assisted some of the fi rms in setting up operations. They provided consultancy and advice.

The fi rms in the case studies had both formal and informal collaborations with universities and research organisations. For example in Case A, the fi rm had an informal cooperation with the Australian National University in Canberra where research students conduct case studies in consultation with them. Case D had formal collaboration with universities. They collaborated in terms of students undertaking research from the University of Technology, Sydney; Australia National University, Canberra; and Griffi th University in Brisbane. The fi rm believes in strategic planning to produce high quality products based on research. In Case B, the relationships with universities mainly involved informal discussions. Industry associations were considered to be highly important for the innovation in fi rms. All the case study fi rms reiterated this point. They stressed the importance of renewing memberships within the associations and having continued networking. The advice, information and knowledge received served these fi rms in technical matters, business operations, market conditions, and regional outlook. Therefore

they were important. The collaboration was mainly formal in nature. Similarly, regional and community organisations provided the same level of services and were just as important.

The fi ndings confi rm results in our survey of the importance of networks for Australian Tourism fi rms as a source of inputs for KISA (Table 25). Findings contrast with a recent survey of OECD countries that draws attention to ‘insuffi cient awareness among tourism enterprises of the potential benefi t of cooperation and partnerships’ (OECD 2004:11).

4.3 RATIONALE FOR THE USE OF KISAThe knowledge-intensive service activities performed by the fi rm refer to the engagement processes of the fi rm’s employees with external or internal providers of services. The engagement process is a continuum from formal processes (contractual) of interaction with external providers of expertise to informal acquisition of knowledge that is blurred inside the fi rm with internal competencies. The KISA inputs produced internally are constructed mainly on the resources, capabilities and competencies of the fi rm. The KISA inputs that are sourced externally are those that have been carefully considered, measured against and cost effective for the business.

4.3.1 Strategy for using externally produced inputs to KISAThe case study analysis showed that all the fi rms outsourced some aspects of their business services to external providers. The decision about whom to outsource to varied among the fi rms. Each fi rm selected their external service providers through different means. These were some of the methods mentioned.

• Word of mouth;• Personal and business networks;• Industry magazines;• Involvement in committees;• Market research.


In Case A, the outsourcing of KISA was mainly conducted via email and business dealings. The fi rm is cautious and selects their external service providers very carefully. They liaise with reliable and reputable fi rms who are accredited. The manager expressed:

“Tourism fi rms face many diffi culties with public liability. As a result we have high insurance premiums to worry about.” (AEGIS case studies data, Sept 2004).

In Case C, the general manager normally conducts research and assesses viable organisations to collaborate with. To ensure good quality services provided to them, the fi rm signs formal contracts with their service providers. They are constantly monitored and the relationships are usually long-term relationships. The expertise comes from outside the region with a lot of networking required. There must be face to face meetings with trust established.

The reasons for outsourcing included the following

• Save costs;• Save time;• More effi cient operations;• Lack the expertise in-house;• Objectivity of the business;• To keep up with industry standards.

In Case A, the primary reason for outsourcing was to save on time and resources. The fi rm did not see much disadvantage in outsourcing or any impact on their innovations.

“We would like to continue with this sort of arrangements for more effi cient operations at current. This is part of the strategic plan and is in line with the objectives of Perisher Blue…. The industry is quite dynamic and we have to adapt and keep up with our clients.” (AEGIS case studies data, Sept 2004).

They do not intend to internalise these outsourced operations although they are important and they plan to internationalise their products and services in future.

In Case B, the company outsourced some of the services because it was cost effective. For instance, the software program designed by the professional will be owned and licensed by the business and considered their intellectual property. The fi rm does not see any threat or dangers of outsourcing some of the knowledge intensive services but in due time they intend to develop the expertise in-house. However, it was better to outsource and have contracted drivers for the transport vehicles. In addition, they fi nd the services provided by external providers satisfactory and reliable. They have also established good relationships with these providers.

In Case C, the fi rm outsourced many of the services because they lacked the expertise. It was also costly to employ full-time expertise in the hotel. The disadvantage or danger of outsourcing too much is that the fi rm has to rely on external/non local providers. The snowy mountain region is a small local area, so they need to establish long term relationships. As the company expands the services, the fi rm becomes very particular about their suppliers. The fi rm maintains long-term relationships with suppliers so it is easier to source expertise from them. It was a strategic business decision to externalise many of the knowledge intensive services. For instance marketing research needs to come from external sources in order to be more objective about the impact of their own products and services.

In Case D, external consultants were employed for service provision because of their expertise and objectivity especially in the areas of research and development. The managers expressed:

“This form of outsourcing does not disadvantage the fi rm because we do not lose our core knowledge or

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formula in the operations. Certain information such as those for research purposes are released when necessary.” (AEGIS case studies data, Sept 2004)

There were particular service areas which had to be outsourced because of a growing emphasis on things such as Occupational Healthy and Safety. They did not have the expertise and had to hire externally. The service providers usually performed to expectations providing good, reliable services. They were evaluated on timeliness and productivity.

In Case E, the fi rm outsourced services but also faced problems with high costs, and these service providers did not have a full understanding of their business operations.

In summary most companies regarded the services received were satisfactory and reason enough to maintain long-term relationships with service providers and there was good communication and coordination in the provision of services. Firms noted that services that are essential and should be developed are best practices in snow activities and sports, the infrastructure to facilitate such services and sustainable tourism in the Snowy Mountains region. In the area of Information Technology, KISA are rather diffi cult because of the technicalities involved, and the employees are not well-versed in the fi eld. They need to inform the IT professionals about the business operations through regular face to face meetings so that these professionals become equally involved in the business. The fi rm in Case D, for example, felt that the essential KISAs in the tourism industry are new designs and using new technologies. For example, one of their employees went to Japan to study snow-making technology. The manager expressed that government departments do not have suffi cient expertise and continuity so they do not have the knowledge of the industry to be able to develop it in an effective way. Similarly, the manager in Case E expressed that there

is a need for more training and accreditation in the area of horticulture, updated training in Occupational Health and Safety, and that the government should invest more in training being made available for small businesses.

4.3.2 Strategy for using internally produced inputs to KISAKISA can be carried out internally by the fi rm, either by separate and often specialised departments or groups, or through organised interaction and collaboration across the fi rm. An example is through project teams within the fi rm. This internal provision of KISA implies that the main intention for the production is not for market sale but for the business operations itself. From the previous section, there were several knowledge-intensive services activities in the software fi rms conducted internally. They were:

• Business Planning Advice;• Information Technology services;• E-commerce services;• Recruitment;• Marketing and Promotion services;• Accounting and Finance services;• Customisation of wholesale packages.

The internalisation of activities within the fi rm may add to the fi rm’s competitiveness. As many inputs to KISA are intangible, the fi rm may have some indirect knowledge gained as a result of conducting the activity itself. For example in Case B, the fi rm intended to develop all the outsourced expertise in-house in future. These included training, research and development, information technology and e-commerce services.

The most common reason for an internalisation strategy lies in cost advantages. Most of the case study analysis discovered cost savings as one of the main reasons fi rms chose to provide services in-house. Secondly, one of the case studies strongly noted that they did not want to outsource specialised services because they wanted to maintain the knowledge and skills within the organisation as an important part


of their intellectual capital. Thirdly, in the case studies, certain services were produced within fi rms because the employees were skilled and competent. The fi rms already possessed or built such capabilities from various sources such as through training, through recruitment or through previous external consultants transferring knowledge to them.

The lack of funding available to tourism fi rms for investing in innovation has been reported across OECD countries as one of the challenges for Tourism SMEs and as one of the areas where public support can be encouraged (OECD 2004).

4.4 KISA AND FIRM CAPABILITIES

4.4.1 External inputs to KISA and fi rm capabilitiesIn Case A, the fi rm strove for effi ciencies and consistencies. This had already been achieved with the combination of these internal and external services. The fi rm found that there was nothing radical to change, and that they are heading in the right direction. There are some aspects however, which they need to improve as a result of these inputs to KISA. These services encourage the fi rm to incorporate and invest in new technology to keep up with competitors and the industry. As a result of KISA, the company relies on its staff structure to enable the integration of knowledge intensive service activities in the fi rm. These services are central to the performance of the business. Their approach was to give the employees knowledge and get them involved in the business, providing motivation and a sense of belonging along with ownership of processes and systems in the fi rm. Everything is documented in manuals for the staff to refer to. The fi rm currently is highly motivated with informed and proactive staff that contributes to the growth and engages in improvement activities. The use of external service providers has also pushed the fi rm to adopt best practices and international standards.

In Case B, external KISA provide a combination of feedback and new knowledge gained around the services provided. For example, there was assimilation of knowledge and expertise on managing their vehicles and property from their fi nancial consultant. This assisted the fi rm in better planning, payments, scheduling and budgeting, making the business more cost effective and effi cient. As a result they intend to develop this skill and provide it in-house in future. New knowledge was disseminated in the company through informal discussions and formal meetings. They conducted these meetings with all staff and contractors bi-annually, and using emails, sending instructions and spending time with staff. As a result of dealings with external service providers, the fi rm has improved in a few instances, mainly in handling their fi nances and being more specifi c about their requirements. The service providers assist the fi rm indirectly with their innovation because they are more aware of the opportunities. The fi rm is able to grow from the new knowledge and feedback gained from these service providers

In Case C, the fi rm gained new knowledge on marketing from the external KISA. The service provider enabled a new form of public relations and assisted them with how to launch their products in the market. In order to disseminate the knowledge throughout the fi rm, the management ensured a good induction period, job descriptions, training needs and discussions with staff. They also exchange emails with other managers within the fi rm on how to improve the quality of their employees’ services.

In Case D, there were certain areas or services where the knowledge and information were diffi cult to assimilate, because they were too technical and required specifi c skills (such as market research). All new knowledge was transferred to other employees at the responsibility of managers. They conducted executive meetings fortnightly to obtain feedback from different managers. Emails were also sent to senior managers advising of new ideas. In addition, they established good

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recruitment and training processes where the training manual is upgraded every year. The effects of KISA on the fi rm were better research and marketing. The services gained from external providers assisted the fi rm in product development and innovation process.

These cases show that external inputs to KISA contribute signifi cantly to the core competences of the fi rms in areas as critical as product development, process innovation, marketing innovation, the use of best practices and the awareness of opportunities for continued growth.

4.4.2 In-house KISA and fi rm capabilitiesAs a result of providing knowledge-intensive service activities, employees are able to build capabilities within the organisation and be involved in the practice of learning in order for the fi rm to remain innovative. The activities of the fi rm that provide for the integration of KISA are important for building and maintaining a fi rm’s innovation capability; and include those that are internally produced as well. The fi rms are able to build capabilities and competencies as a result of the service activities that facilitate learning by doing, knowledge diffusion and building capabilities for innovation. Each fi rm in the case study possessed different capabilities due to the disparate operations, functions and strategies of each individual fi rm. For example Case C was a hotel and focused on accommodation functions, whereas Case B focused on transportation activities. Therefore it was expected the capabilities be heterogenous although capabilities related to management or fi nances are common among all cases.

In Case A, the capabilities that the fi rm possessed were the skills and expertise of their personnel. There were strong group dynamics which formed the collective innovative behaviours in the fi rm. Secondly, the company provided unique services and was up-to-date with the latest trends and activities in winter sports such as Snow Shoeing, Telemark

Skiing, and Cross Country Skiing. In Case B, the capabilities apparent were the established technology and their striving for continuous improvement. This was evident with recent attempts to computerise the booking system for greater effi ency in business operations.

The capability in Case C as a result of internal KISA provision was new product development. The fi rm constantly tries to introduce new products and services in the market to remain competitive. In Case D, after many years of experience in their operations and with steady growth, they have built capabilities in their business for management and technology use. These are discernable in their approach to snow-making technology and their effi cient reservation and booking systems. In Case E, although the business is relatively young, the employees have extensive specialised research and knowledge of their township.

As each case was different, the capabilities required for the future varied. For Case A, the fi rm needed to develop more diverse services and to expand. However, for Case B, the new capabilities required were a more effi cient accounting and fi nance system. Due to the fi rm’s recent growth and expansion there was a need to manage their proliferating debtors and creditors. In addition, the fi rm required more skilled staff and is planning to invest in training and development of their personnel, which should be instrumental in facilitating their diversifi ed services and expansion strategy. Similarly Case E also wanted to increase the skills and competencies of the employees. In Case C, the fi rm wanted to develop and expand their marketing capability and engage in e-commerce. Similarly, Case D, wanted to improve their management process of projects.

These fi rms show a high specialization of KISA inputs from their own employees. The value of these inputs was in the strong specialized knowledge of staff and their capacity to ‘customise’ it with innovative behaviour in the core operations of the company. This


customization of knowledge includes adapting to the particular regional characteristics and the pursuing of long-term relationships with customers. These cases suggest that KISA changes according to core business more than according to stage of business development of size of the fi rm.

4.4.3 KISA mix and match process: the integration of internal and external KISAThe learning process of obtaining, producing or even integrating KISA inputs enables new knowledge to be generated in the fi rms. The capacity of organisations to exploit such benefi ts is dependent on the ability to manage and coordinate this mix-match process of KISA. The fi rm has to infuse knowledge-intensive services from various sources together such that their synergistic outcomes allows for competitiveness and innovation.

The case study analysis has shown that the mix and match of internal and external KISAs occurred differently. In Case A, the integration of KISA occurred throughout the fi rm involving all employees. The manager commented:

“Because we are a small fi rm, the employees work in an integrated manner and are committed to upholding the operations and performance of the business. The employees are constantly involved and updated about events, products or services... and regularly network to discover newer or better service providers.” (AEGIS case studies data, Sept 2004).

The internal KISAs were provided by all the employees who had individual skills and abilities to incorporate external KISAs into the business operations. There was good communication among the staff at their two

branches in Jindabyne and Perisher Blue. The employees were constantly involved and updated about events, products or services and regularly networked to discover newer or better service providers. The core competence of integrating these KISA was by being open, fl exible and removing boundaries for interaction and improvements to the business. Once they had developed alliances or dealings with their service providers, the fi rm constantly maintained these relationships and ensured long-term continuity and effi cient operations. This approach was similar in Case C, where the fi rm integrated external and internal KISAs using their own personnel and occasionally consulted the external expertise. They collaborated on how to integrate such KISAs to sell their products and services. In addition, the fi rm conducted management meetings and department meetings weekly to ensure effi cient operations. The managers were dedicated and skilled in dealing with external service providers and established long-term relationships with them.

Another approach was that the mix and match process was handled by senior managers. This was evident in Cases B and D. The Director in Case B was in charge of integrating the activities. He got feedback from the employees through constant interaction. He was also assisted by the Marketing Executive who oversaw the building managers and their agents. They were updated about the tourism industry though associations and networks. The fi rm had a strategy of developing long-term relationships with external service providers and suppliers. This enabled them to work through many problems, and be fl exible. Correspondingly, for Case D, the integration of KISA was performed by the managers. They were skilled and professional in sourcing external expertise and services; and made sure they fi tted in with business objectives. They focused on training to ensure competent managers. The communication of ideas was generally conducted at management level only.

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For Case F much of the inputs to KISA is generated internally but as the fi rm is involved in marketing of tourism related and travel related software, it is interacting with a variety of clients and customers. What is the mechanism or organisational style that the fi rm adopts for generating KISA has led to the following observation:

“… We have a group called OVER SIGHT in the fi rm consisting of senior members from commercial area, management area and particularly the CEO. They are basically the custodians of our products and services. Any area that comes up with an idea with regard to the product has to go through that group. We also have a project manager linked to this group co-ordinating client related activities and development related activities for products”.

It is clear that there is an organisational form

consisting of CEO or head of the fi rm and a managerial team that is responsible for absorbing and assimilating crucial inputs to generate KISA.

Evidence from these case studies and previous research in the software industry (Martinez-Fernandez et al, 2004a) suggest that the owner/operator of the business plays a central role in maintaining and developing KISA for innovation of the Tourism fi rm and that this factor is linked to the relatively small size of tourism fi rms. These fi ndings are consistent with fi ndings across OECD countries in relation to the centrality of the owner of micro and small tourism fi rms in maintaining the fi rm’s competitive advantage (OECD 2004).

4.5 CHALLENGES TO THE INNOVATION PROCESS

Findings from the case study analysis show that all the fi rms faced some challenges to their

Figure 19. Challenges to the innovation process

0 1 2 3 4 5

No of firms

High innovation costsGreat economic risk

Lack of appropriate financeLack of skilled personnel

Strict standards and regulationLack of market information

CompetitionOrganisational management

Management structureLack of time


innovation process. This is shown in the fi gure below.

The most common or frequent barrier to innovation was the high costs associated with it. All the case study fi rms faced this problem and expressed their views. The second most frequent obstacle were the risks faced in general

in the tourism industry. One of the managers commented that the tourism industry was a fragile economy. In the Snowy Mountains, many places were being sold as investment properties. Although real estate was booming, there were not many residents. As a result, the people were not really contributing to the local community because they did not live there or


spend any money there. The current residents however found it too expensive to live there since it was a tourist environment and most things were focused on tourism. Four out of the fi ve fi rms were fi rms located in this regional area.

Other barriers to the innovation process included the lack of appropriate fi nancing, skilled personnel and the strict standards and regulations to adhere. The fi rm in Case A stressed the need to abide by government regulations and public liability insurance which was imposed on all tourism fi rms.

There were also challenges faced by these fi rms such as:

• Refusal to transfer know-how by other fi rms;

• Requirements to enter into cross-licensing agreements to get a license from other fi rms; and

• Refusal to license by other fi rms.

As a result of the barriers and challenges to innovation, protection of knowledge in the tourism industry is not uncommon. These fi rms chose to protect their knowledge through the complexity of design of the services, speed to market their products and services, establishing trademarks and copyrights and secrecy. One fi rm indicated that the opportunity to successfully innovate would be to take advantage of the World Wide Web and the Internet technology because many customers were now booking through the Internet; however most of the case study companies were not yet making much use of e-commerce to change their operations and access potential big markets.

These fi ndings are consistent with other OECD countries where the development of new innovative business models to enhance growth potential is recognized as a big challenge. This is because ‘the uncertainty about the returns on investment in innovation and the high level of risk perception do not push small fi rms to take this direction’ (OECD 2004:11).

4.6 ACCESS TO GOVERNMENT PROGRAMS

The analysis of the case studies showed that these fi ve fi rms generally did not obtain grants, assistance or participate in government programs. The fi rm in Case A felt that they did not meet the needs or qualify in terms of their revenue and size of the fi rm. Other fi rms mentioned that they did not apply for government assistance because of the lack of information on the available programs, high administrative costs, diffi culty, complication and the huge amount of work involved. The fi rm in Case B however obtained subsidies for staff training from the Queensland government. It was commented that the time and effort in establishing what subsidies they are entitled to and to fi le for a claim was diffi cult, complicated and time consuming.

The manager in Case A reiterated that many small fi rms were disadvantaged due to too many guidelines and compliances. Most of them were diffi cult to fulfi ll.

“There should be other forms of assistance such as marketing of the region, business development advice and research data which could be made more available to smaller businesses. Similarly, we hope that more money could be allocated and distributed to established small businesses who are seeking to expand and diversify.” (AEGIS case studies data, Sept 2004)

This manager also suggested more workshops for small businesses in upgrading skills, research and development, and in keeping up with technology. These workshops and seminars would serve as collaboration for government and businesses, and the opportunity for fi rms to network, grow, develop skills and ultimately collaborate with each other.

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Another of the interviewed managers noted that government departments needed to improve their communication with the tourism industry in order to prioritise funding that at the moment is competing under different agendas by different agencies.

One of the very positive initiatives mentioned by the Tourism Snowy Mountain organisation was ‘See Australia’. According to this organisation this program expends more than 1 million dollars in research and this has changed the way tourism organisations operate. Now organisations such as Tourism Snowy Mountain heavily rely on research so the industry as a whole is working in a smarter way. Tourism Snowy Mountain had recently gained a grant for AUD 0.5 million dollar to market the extended region of Snowy Mountains with Canberra.

The case studies of fi rms in our sample did not show any signifi cant positive orientation towards government programs and assistance schemes. This cannot be taken as an industry wide generalization; it needs further exploration. However, Case F, in variance to the above fi nding, indicates an important role for government programs and schemes of assistance. As this case study shows, government programs have been critical for this company both in terms of establishing its R&D base through grants and through partnering with local and state government tourism bodies for technology and product development. This fi rm’s business expansion into Malaysia and its membership in the Multimedia Super Corridor Cluster were seen as the outcome of the success achieved through its R&D base.

4.7 SUMMARY OF FINDINGS

The fi ve case studies that were interviewed depicted various knowledge intensive service activities which they considered very important for their operations and their innovation. Marketing and Promotion services, Accounting and fi nance services were common among all the fi ve case studies and rated as highly important. Other important KISAs for these fi rms

were Business-planning advice which involves developing the strategic direction of the fi rm. In addition to business planning advice, the fi rms also sought industry development advice to supplement the operations of the business. Other KISAs include training and development of employees, recruitment of skilled and competent employees and accreditation of services. Some of the fi rms found that the customisation of wholesale packages and the use of e-commerce services relatively unimportant for the innovation of the business.

Internal inputs to KISA are business-planning advice, IT services, e-commerce services and recruitment. External inputs were industry development advice, market research and analysis and product development, training services and accreditation. For these inputs KIBS were used most frequently, followed by industry associations. There was some use of government departments and informal networks and clusters. A signifi cant fi nding in the case study analysis was that universities and RTOS, as well as overseas fi rms were not popular choices as service providers. Mix and match of services occurred more frequently with marketing and promotion activities, accounting and fi nancing services and customization of wholesale packages.

During the creation phase of a product, the main KISAs involved were industry development advice, marketing and promotion, research and development, accounting and fi nance services and recruitment. The maturing phase involved business planning advice, IT services, e-commerce services and the customisation of wholesale packages. The standardisation phase involved marketing and promotion, accounting and fi nance services, training services, recruitment and accreditation. In relation to the fi rm life-cycle, the most used KISAs in the start up phase were industry development advice, business planning advice, R&D, recruitment and accreditation. The entrepreneurial stage was the period after they survived for more than 3 years. At that stage, there was more emphasis on marketing and promoting their


products, services and the business. At the professional management stage of the business life cycle, the main KISAs used were research and development, accounting and fi nance services, IT and E-commerce services. Firms in expansion tended to focus more on IT services, recruitment and the customisation of wholesale packages.

These cases show that external inputs to KISA contribute signifi cantly to the core competences of the fi rms in areas as critical as product development, process innovation, marketing innovation, the use of best practices and the awareness of opportunities for sustained grow. These fi rms show a high specialization of KISA inputs from their own employees. The value of these inputs was in the strong specialized knowledge available to staff and their capacity to ‘customise’ it with innovative behaviour to the core operations of the company. This customization of knowledge includes the adaptation to particular regional characteristics and the pursuit of long-term relationships with customers.

The case study analysis has shown that the mix and match of internal and external KISAs occurred differently. Sometimes, the integration of KISA occurred throughout the fi rm involving all employees. Other times the fi rm integrated external and internal KISAs using their own personnel and occasionally consulted the external expertise. They collaborated on how to integrate such KISAs to sell their products and services. An important fi nding was that the mix and match process was commonly handled by senior managers or the owner of the fi rm.

The most common or frequent barrier to innovation was the high cost associated with it. All the case study fi rms faced this problem. The second most frequent obstacle were the risks faced in the tourism industry. Other barriers to the innovation process included the lack of appropriate fi nancing, skilled personnel and the strict standards and regulations to adhere. As a result of the barriers and challenges to innovation, protection of knowledge in the

tourism industry is not uncommon. These fi rms chose to protect their knowledge through the complexity of design of the services, speed to market their products and services, establishing trademarks and copyrights and secrecy.

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5.1 KISA in the Innovation Process of Tourism FirmsThe study reported here sought to achieve a better understanding of the nature of innovation processes through the study of the use by fi rms of knowledge-intensive service activities (KISA). The main conclusions are as follows:

A common fi nding from previous KISA studies relates to the meaning of KISA. The survey of fi rms, interviews and case studies suggest that there are information fl ows and knowledge fl ows between different actors in the network space of the fi rm. KISA is generated within the fi rm or through interactive processes with customers and external providers in the network space. Evidence from this study suggests that we need to distinguish between inputs to KISA, the providers of inputs to KISA and the KISA itself. KISA is a knowledge interactive activity between two or more actors.

In the knowledge economies KISA can be considered as an important dimension of innovation in fi rms contributing to their market dynamics and success. KISA has both tacit and codifi ed dimensions and its manifestation, generation and effectiveness to have an impact is mediated through personnel in the fi rms, their skills and the ability of the fi rm to draw inputs from various sources including market research, marketing and business advice etc. The latter is an important feature of organisational and institutional innovation.

The Australian tourism industry (Chapter 2) witnessed considerable growth over the last two decades. During 2002-2003 the industry accounted for 4.2% of Australian GDP. Compared to some OECD countries for which data is available for 1990s, France (7.3%); Mexico (8.2); Switzerland (5.3%); and Spain (16.8%), there is a scope for further improvement. Over

the last decade the tourism industry, which is an integral part of other industries and sectors of economy, has become knowledge intensive where the prospects of growth are more and more determined by innovations particularly in the domain of KISA and its networking space.

A notable feature of the tourism industry that has resulted from our survey of fi rms (Chapter 3) and case studies (Chapter 4) is that the generation of KISA and its role in the overall innovation process is dependent on both technical (R&D, product development and process development, software development and its services etc) and non-technical factors (industry and business development planning, marketing, accounting and fi nance, training of personnel etc) - which have an equal and important part. From the perspective of innovation studies this insight, though based on a small sample, supports the view that for success in innovation, R&D is as important as institutional, organisational and marketing factors. In the tourism industry this mean ‘Market analysis’ is a core activity of fi rm marketing functions. An important factor is the ways fi rms match their research investment services to marketing investments and how they built their business and core competences around this match.

Secondly, the in-house capabilities of fi rms (technical and non-technical as above) particularly the part played by managers of the fi rms (often being owners of small fi rms which dominated the survey sample) has come out as important factors for the generation of KISA and the innovation process.

Thirdly, our case studies indicate the network spacespace of ‘cluster based tourism destinations’ (such as Snowy Mountains and Gold Coast) playing an important part to catalyse the process of KISA in the tourism industry. Not withstanding the fi ndings of the survey results, the signifi cance of local, state and federal

5. CONCLUSIONS


governments (tourism departments) can be considered very crucial to the development and sustenance of ‘cluster based tourism destinations’. Such network space and clusters can be seen to provide an important source of KISA inputs such as for business development, marketing, and tourism related learning from others. What is also of signifi cance here is the informal processes operating in the learning and building of the core competencies of the fi rm and its organisational processes linked to innovation success. The survey results indicated the importance of informal networks and the role of industry associations being important features of KISA generation and the case studies reinforced this observation.

Closely related to the above is the feature of fi rm capabilities concerning, particularly, the mix and match process in the generation of KISA. While the skills of personnel stand out as an important factor in building fi rm level capabilities, our case studies have shown the crucial role of owner and managers playing an important part in the mix and the match process. It may be noted that this fi nding is consistent with the previous research and similar studies on software fi rms (Martinez-Fernandez et al, 2004). This is however a limited fi nding given the limitations of our sample dominated by small and medium sized fi rms. The processes of mix and match of KISA occurring in distinct organisational and functional forms with a clear division of intellectual labour needs further exploration with a sample of larger fi rms.

5.2 EMERGENT POLICY THEMES The fi ndings pointed out to the following areas of policy discussion:

• Tourism fi rms (specially SMEs) have little awareness of the importance and contribution of KISA in the innovation process. Government tourism departments have a role in raising this awareness through diffusion activities;

• As tourism activity is linked to geographic cluster-based destinations, cluster oriented policies and programs are important both for catalysing KISA and for strengthening the ‘destination innovation system’;

• Tourism fi rms are particularly dependent on the skills and training of their human resources to perform KISA that is mainly in-house and with critical inputs from the owner/manager of the fi rm. Policies and programs are needed to increase the innovation capabilities of the professionals working in the tourism industry (specially in SMEs);

• The innovation process of tourism fi rms suggests that technical and non-technical factors impact in the innovation process. Specifi cally there is evidence than ‘Marketing’ is as important as Research and Development. Government programs should target these non-technical components of the industry acknowledging their relationship with innovation;

• Tourism fi rms rely on informal processes of learning for building core competences. Policies and programs oriented to building networks, especially at the ‘destination’ level would facilitate this process;

• There is a need for governments to collect statistics that better refl ect innovative KISA activities not usually collected in relation to innovation.

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Broch, M. and Isaksen, A. (2004) Knowledge Intensive Service Activities in the Norwegian Software Industry. Part project report from the OECD KISA study http://www.oecd.org/dataoecd/32/22/29965961.pdf.

Buhalis, D. (2003) E-Tourism: Information Technology for Strategic Tourism Management. Englewood Cliffs, N.J.: Prentice Hall.

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de La Mothe, J., Paquet, G. (1998) Local and Regional Systems of Innovation. London: Kluwer Academic Publishers.

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Martinez-Fernandez, C., Soosay, C., Bjorkli, M. and Tremayne, K. (2004a) ‘Are Knowledge-Intensive Service Activities Enablers of Innovation Processes? - A Study of Australian Software Firms’. Paper presented at the CINET Conference, 22nd-24th of Sept. Sydney.

Martinez-Fernandez, C., Potts, T. and Bjorkli, M. (2004b) ‘Territorial Ecosystems in Western Sydney: An Innovative Approach to Modern Regional Planning’. ACSP 2004 Conference. Portland, USA.

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Appendix : Case study summaries

Case A1. Background of the fi rm

Case A was established in 1977 by three entrepreneurs. The business started as a small tour business but has expanded its operations and diversifi ed into retail. It currently leases and sells snow gear and equipment as well as conducts skiing lessons. It was originally located in Cooma, but moved to Jindabyne in 1989.

1.1 CustomersTheir three largest customers are currently Perisher Blue, Outdoor Adventure Companies and the Big Alpine Tours. Since their dealings with Perisher Blue three years ago, it has given the fi rm an opportunity to expand and diversify the business into niche areas such as cross country skiing, guided snow shoeing and introducing the latest Nordic aspects in snow activities. 80% of the business is attributed to Perisher Blue and they have formed a long-term relationship with them. Perisher Blue recognised that Case A possessed the expertise and investments in a niche area and decided to pursue this long-term business dealing. On the other hand, Case A sees the opportunity to capitalise on the well-established multi-million dollar infrastructure by Perisher Blue in terms of facilities.

By establishing such relationships with Perisher Blue, they are able to innovate in terms of marketing and accessing more customers. Perisher Blue owns a large marketing department which is very proactive and imaginative. Case A is included in their website providing a Nordic snow report which has never been done before in Australia. By adopting this strategy, they can target and receive a wider customer base as compared to marketing on their own. In addition, Perisher Blue promotes Case A in magazines and other advertisements.

1.2 Recent InnovationThe fi rm has recently improved their operations by having a more integrated communication system. Having their operations located at Jindabyne and Perisher, they needed to streamline a lot of their processes and systems, and effectively the communicating them between the two locations. At present the Jindabyne branch pays fees to the National Parks, whereas the Perisher Blue branch has to comply with a different set of regulations. Next year, they intend to simplify the current accounting system and integrate the two businesses.

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2. The Importance and Use of KISA2.1 The importance of KISA

High importance Medium Importance Low Importance

- Industry development advice- Business planning Advice- Marketing and Promotion- Research and development- Accounting and Finance- Training services- Recruitment- Accreditation

- IT services- E- commerce

services

- Customisation of wholesale packages

Industry development advice was considered highly important for innovation in the fi rm. This was carried out both internally and from external sources such as Industry Associations and international businesses. The managers constantly keep in touch with organisations in the United States and in Europe on the latest snow products and activities; and are among the fi rst to introduce them in Australia. Business planning was conducted mainly within the fi rm by the three managers and also considered highly important for innovation. The marketing and promotion was conducted mainly by Perisher Blue and other clients. Research and Development was conducted both within the fi rm and by the partners. This was highly critical in keeping up with the standardisation phase of their products. The accounting and fi nance was important and carried out mainly internally. There was some external expertise sought periodically from the private sector in terms of auditing and for tax purposes. This activity was important after the business was established and in the entrepreneurial, professional management and expansion stages of the fi rm.

Information Technology Services were conducted internally by highly trained and skilled employees for maintaining the business systems and operations. There were used throughout the whole life cycle of the fi rm from the start up till present. The fi rm viewed these IT services as well as E-commerce activities to be of medium importance to the innovation of the fi rm. Training was considered very important and was conducted both in-house and by Industry Associations. The areas of training included computer and software skills; auditing, fi nance and accounting skills; and the professional trainers are recognised with the Australian Professional Snowsport Instructor certifi cation.

The recruitment of personnel was considered important and an ongoing issue within the fi rm. There is constant recruitment by the fi rm because the nature of the industry is seasonal, and a lot of casuals are employed during the peak periods from July to October. The accreditation is also important but sourced externally from Industry Associations throughout the whole life cycle of the fi rm. All these points are further illustrated in the following table.


2.2 KISA in the product Life cycleIn the product life cycle, the knowledge-intensive service activities that were critical in the various stages are shown below.

Creation phase Maturing phase Standardisation phase

- Marketing and promotion- Industry development advice- Customisation of wholesale

packages

- Business Planning Advice

- Recruitment- Maintenance

- Marketing and promotion- Research and development- Recruitment

2.3 KISA in the Market Life cycleIn the market life cycle, the knowledge-intensive service activities that were used in the various stages are shown below.

Start-up Entrepreneurial Professional Management Expansion

- Business Planning Advice

- IT services- Recruitment- Accreditation

- Industry Development Advice

- Accounting and Finance services





- IT services- Recruitment- Accreditation- Customisation of

wholesale packages

KISA InternalMix and

MatchMatchExternal

1. Industry development advice 1. Industry development advice 2. Business planning advice2. Business planning advice3. Marketing and promotion3. Marketing and promotion4. Research (including market research) and product development4. Research (including market research) and product development5. Accounting and fi nance services6. IT services7. E-commerce services 8. Training services (e.g. TAFE, industry courses)9. Recruitment 10. Accreditation11. Customisation of wholesale packages NA NA NA

12. Other

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3. Network KISA

3.1 Collaboration with other fi rmsCase A engages in both formal and informal collaborations with various partners. They are summarised below.

PARTNERSPARTNERS

Form

al (

cont

ract

ed)

Info

rmal

(no

n-co

ntra

cted

)

Hig

h Im

port

ance

Med

ium

Impo

rtan

ce

Low

Impo

rtan

ce


2. Competitors

3. Customers

4. Consultancy Firms (KIBS)

5. Government Departments

6. Universities and Colleges (RTOs)

7. Industry Associations

8. Regional/Community Organisations

Most of the partners for these knowledge intensive services (except for competitors) were considered highly important. The fi rm does not collaborate with any Multinational corporations (MNCs). However they have some cooperation with the Australian National University in Canberra where research students conduct case studies in consultation with them.

Customers

Perisher Blue

Business Enterprise Centre

Tourism Snowy Mountain

Universities

Competitors

Other organisations

Other government bodies

Suppliers

��


4. Rationale for the Use of KISA

4.1 Access and interaction with external KISA providers

The fi rm sources external services through collaboration, contacts and networks. They were mainly conducted via email and business dealings. The primary reasons for outsourcing were to save on time and resources. The fi rm did not see much disadvantage in outsourcing or any impact on their innovations. They would like to continue with this sort of arrangements for more effi cient operations at current even though it is quite costly for them. This is part of their strategic plan and is in line with the objectives of their major client. The industry is quite dynamic and they have to adapt and keep up with their partners, customers and major clients. They do not intend to internalise these outsourced operations. However they are planning to internationalise their products and services in future.

The services received from external suppliers were satisfactory and reason enough to maintain long-term relationships. There was good communication and coordination in the provision of services. However there were issues or problems to encounter or be aware of in the tourism industry. Most tourism fi rms face the high cost of public liability insurance. Secondly, many of the tourism fi rms are not fully accredited . Firms need to be more cautious and liaise with reliable and reputable fi rms when outsourcing their services.

The services that are essential and should be developed are best practices in snow activities and sports, the infrastructure to facilitate such services and sustainable tourism in the Snowy Mountains region.

4.2 The effects of KISA on the fi rm

The use of these services has confi rmed many things for the fi rm. In the beginning as part of their strategic plan, they aimed for effi ciencies and consistencies. That has already been achieved with the combination of these internal and external services. The fi rm fi nds that there is nothing radical to change, and that they are heading in the right direction. There are some aspects in which they need to improve as a result of these KISAs. They encourage the fi rm to incorporate and invest in new technology to keep up with competitors and the industry.

As a result of KISA, the company relies on its staff structure in enabling the integration of knowledge intensive service activities in the fi rm. They are central to the performance of the business. The approach was to give the employees knowledge and get them involved. They will then get motivated and feel a sense of belonging and ownership of processes and systems in the fi rm. Everything is documented into manuals for the staff to refer to. They will put in more effort and contribute to the development of a more profi table business. The fi rm currently is highly motivated with an informed and proactive staff. They contribute to the growth and engage in improvement activities.

The use of external service providers has also pushed the fi rm to consider best practices and international standards.

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5. KISA and Firm Capabilities

The capabilities that they currently possess are the skills and expertise of staff in the fi rm. There are strong group dynamics which form the collective innovative behaviours in the fi rm, and the company provides unique services and is up-to-date with the latest trends and activities in winter sports. (such as Snow Shoeing, Telemark Skiing, and Cross Country Skiing)The new capabilities the fi rms needs for future development are to develop more diverse services and expand.

6. KISA mix and match process

6.1 Integration of KISAThe integration of KISA from internal and external sources occurs throughout the fi rm involving all the employees. The manager commented that by being a small fi rm, everyone is closely integrated and committed to the operations and performance of the business. The internal KISA are provided by all the employees who have individual skills, and the ability to incorporate the external KISA into the effi cient operations of the business. This is done through good communications among the Jindabyne and Perisher Blue branch staff. They are constantly involved and kept up to date with any events or services being provided or produced. The staff is committed to constantly networking and fi nding better service providers and being fl exible. The core competence of integrating these KISA is being open and removing boundaries for interaction and improvements to the business.

Once they have developed alliances or dealings with their service providers, the fi rm constantly maintains relationships with them and ensures long-term continuity and effi cient operations.

7. Challenges to the Innovation process

The main barriers that the fi rm faces in their innovation process are shown below.

Barriers

- Great economic risk- High innovation costs- Lack of appropriate fi nancing- Lack of market information- Strict standards and regulation- Competition

The tourism industry is a fragile economy. At the snowy mountains, a lot of places are being sold as investment properties. Although real estate is booming, there are not many residents. As a result, the people are not really contributing to the local community because they do not live there or spend any money there. The current residents however fi nd it too expensive to live there since it is a tourist environment and most things are focused on tourism.


The biggest challenge and opportunity to successfully innovate would be abiding by government regulations and public liability insurance which is imposed on all tourism fi rms. Other challenges include the following

Challenges

- Refusal to license by other fi rms- Requirements to enter into cross-licensing

agreements to get a license from other fi rms

- Refusal to transfer know-how by other fi rms

The methods used to protect the knowledge in the fi rm are by complexity of design of the services, speed to market their products and services and registering the event as the business name itself.

8. Access to Government Programs

The fi rm did not apply for any government assistance at all. This is because they did not meet in needs or qualifi cations in terms of their revenue and size of the fi rm. The manager interviewed reiterated that many small fi rms are disadvantaged when seeking government assistance because there are too many guidelines and compliances which are diffi cult to meet. There are other issues pertaining to small fi rms who are surviving and do not need fi nancial assistance. There should be other forms of assistance such as marketing of the region, business development advice and research data which could be made more available to smaller businesses.

On the other hand, the government has provided assistance to some businesses in the region. The Business Enterprise Centre provides start up funds to new and young fi rms. However, it is commonly known that 50% of these will fail. The money should be more carefully distributed and perhaps focus on established small businesses who are seeking to expand and diversify. For example, the Business Enterprise Centre could identify those businesses that have been successfully operating for many years and surviving. They can then organise workshops for businesses in upgrading skills, research and development, and keeping up with technology. Some of these fi rms do not want or need fi nancial assistance, but rather, the incentives to improve and survive the intense competition. These workshops and seminars serve as collaboration for government and businesses, and the opportunity for fi rms to network, grow, develop skills and ultimately collaborate with each other.

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Case Study B 1. Background information

Case B was established in 1995 but was taken over in 1996 by the current management. The business has been expanding to a total of 65 employees; and recently commenced operations in McKay, Queensland. They provide ground transport to the MacKay airport and are currently negotiating for provision in the Sunshine Coast with a group operating under their license. The business consists of two core areas. The fi rst is transfer between the Theme Parks, hotels and the accommodation houses. This area of the business fl uctuates and is quite risky. The other area is mainly Airport Transfers (from airport to and from hotels and accommodation houses, as well as residential market).

1.1 CustomersTheir three largest customers are currently Break Free Resort and Holidays which is a public company listed on the Australian Stock Exchange. They are the largest client management of 50 resorts. The other two customers are Sun-lover, which is owned by the Queensland Government (Congo) and Blue Holidays, which is the holiday arm of Virgin Blue. These three clients represent 25% of the total business.

The relationship was established with Break Free since the start of the business. With Blue Holiday, they successfully tendered for the business and negotiations, so there was no previous existing personal relationship and have strengthened the relationship over time. The relationships with these clients were not considered important. The service functions were basic and straightforward. They transport people from an airport to the hotel. The customers are in constant contact with the business. They provide useful indicators of the transportation in tourism and market fl uctuations.

1.2 Recent InnovationThe most recent innovation in the fi rm was the introduction of a Global Positioning System (GPS) in all their 30 vehicles. It was a radical change for the business. GPS is a satellite tracking system which enables them to track any vehicle at any time. The objective of the system is to ultimately integrate the reservation system and the GPS to cut down the work processes within the fi rm. Currently there are different booking systems and Global Position system for the transportation. They hope to integrate everything within one program eventually.

Other improvements to processes and procedures recently implemented were the booking system which deployed a software that was custom-made for Case B. The main goal for the business is to improve its services and try to integrated both systems for better control of the operations.


2. The Importance and Use of KISA

2.1 The importance of KISA


- Industry development advice- Business planning Advice- Marketing and Promotion- Accounting and Finance- IT services- E-commerce services

- Research and product development- Training Services- Recruitment- Accreditation- Customisation of wholesale

packages

Industry development advice was considered highly important for innovation in the fi rm. This was carried out both externally and internally, mainly from private sector businesses, industry associations and informal networks. These services were critical during the start up of the company and during its recent expansion. Business planning was conducted mainly within the fi rm by the management themselves and also considered highly important for innovation. There was a mix of internal and external marketing and promotions. They were conducted both internally and externally through private sector organisations and industry associations. They relied heavily on business planning during the start up of the fi rm and throughout the maturing phase of their transportation services once they were established.

The marketing and promotion services were also highly important and used during the creation and standardisation phase of their services. In the life cycle of the fi rm, it was used mainly in the entrepreneurial stage. These were conducted both internally and externally to the fi rm. They engaged private sector organisations and industry associations in assisting to market their services. Research and Development was conducted externally by using both public and private sources. They included government departments, industry associations and network groups. Although the fi rm considers this to be of medium importance, this was highly critical in keeping up with the standardisation phase of their products.

Accounting and fi nance was important for the fi rm’s innovation and were carried out both internally and externally. They engaged professionals from the private sector organisations. They were used in the standardisation phase of their services and at the entrepreneurial stage of the business. Information Technology and E-commerce Services were outsourced to private sector fi rms and considered highly important. These professionals were employed during the maturing phase of their services and also used during the expansion of the fi rm.

Training services were of medium importance and only used during the expansion of the fi rm. It was outsourced to universities and public sector organisations. All recruitment activities were conducted by the fi rm and were considered of medium importance. They recruited during the creation of services only. All accreditation was done by the government. This was especially important throughout the life of the business and at the standardisation phase of their services.

The customisation of wholesale packages was conducted both internally and externally. Organisations included industry associations, networks and clusters and organisations from overseas. Although this was considered medium importance, it was used throughout the life cycle of the company. A summary of the use of KISA can be illustrated in the following table.

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KISA InternalMix and Match

External






6. IT services


8. Training services (e.g. TAFE, industry courses)

9. Recruitment

10. Accreditation




- Market Research- Recruitment- Marketing and promotion

- IT services- E-commerce services- Business Planning Advice

- Marketing and promotion- Accounting and Finance services- Accreditation


Start-up EntrepreneurialProfessional ManagementManagementManagementManagement

Expansion


- Business planning advice

- Research and product development

- Accreditation- Customisation of

wholesale packages

- Marketing and promotion- Research and product

development - Accounting and Finance

services- Accreditation- Customisation of

wholesale packages


- Accreditation- Customisation of

wholesale packages



- IT services- E-commerce services- Training services- Recruitment- Accreditation- Customisation of

wholesale packages


3. Network KISA

3.1 Collaboration with other fi rmsCase B engages in both formal and informal collaborations with various partners. They are summarised below.

PARTNERS Form

al (

cont

ract

ed)

Info

rmal

(no

n-co

ntra

cted

)

Hig

h Im

port

ance

Med

ium

Impo

rtan

ce

Low

Impo

rtan

ce


2. Competitors

3. Customers






The fi rm considers their customers, private sector fi rms, government departments and research and technology organisations to be highly important partners for innovation. These were normally a mix of formal and informal agreements, except for government departments which were all formal contractual agreements. Other organisations which they network with and competitors have informal relationships, and were considered of medium importance for innovation. The fi rm also has formal contractual agreements with industry associations and regional or community organisations. These were considered to be of medium importance for their innovation.

In addition, the fi rm collaborates with a Multinational corporation (MNC). This relationship is benefi cial and assisted them in their recent growth and expansion. The relationships with universities involve mainly informal discussions.

The fi rm believes in providing a high stand of services which gives customers a good service from money.

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4. Rationale for the use of KISA

4.1 Access and interaction with external KISA providersThe fi rm sources external services through word of mouth and by networking. They collaborated with external service providers. In the area of Information Technology, it is rather diffi cult because of the technicalities involved, and the employees are not well-versed in the fi eld. They need to inform the IT professionals about the business operations through regular and thorough face to face meetings. In this way, these professionals become equally involved in the business.The company sourced externally for some of the services because it was cost effective. For instance, the software program designed by the professional will be owned and licensed by the business and considered their intellectual property. The fi rm does not see any threat or dangers of outsourcing some of the knowledge intensive services. But in due time they intend to develop the expertise in-house because it will be more cost effective. However, in the areas of drivers, it is better to outsource and have contracted employees. In addition, they fi nd the services provided by external providers satisfactory and reliable. They have also established good relationships with these providers.

The fi rm fi nds that about 70% of the KISAs essential in the tourism industry are available. Some of the service providers are very good some are very ordinary. The greatest diffi culties are with accountants and printers when they are very busy. Professional services are offering very poor services.

4.2 The effects of KISA on the fi rmThe effect of KISA on the fi rm is a combination of feedback received and new knowledge gained based on questions asked. For example, they are able to assimilate more knowledge and expertise from their external consultant who manages their fi nances on vehicle and property. The new knowledge assists the fi rm in better planning, payments, scheduling and budgeting, making them more cost effective and effi cient. As a result they intend to develop this skill and provide it in-house in future.

Network Space of Firm B

Case B

Suppliers

Professionals (KIBs)

Contractors Customers


Direct Agents Internet


New knowledge is usually disseminated in the company through informal discussions and formal meetings. They conduct these meetings with all staff and contractors bi-annually. Other methods of disseminating knowledge or training include using emails, sending instructions and spending time with staff.

As a result of dealings with external service providers, the fi rm has improved in a few instances, mainly in handling their fi nances and being more specifi c about their requirements. The service providers assist the fi rm indirectly with their innovation because they are more aware of the opportunities. The fi rm is able to grow from the new knowledge and feedback gained from these service providers.

5. KISA and fi rm capabilities

The capabilities that they currently possess are the technology they have built and constantly trying to improve. The booking system is now computerised and proven more effi cient in the business operations. The new capabilities the fi rms needs for future development are better accounting and fi nance. Due to the growth and expansion, there is a greater need to manage debtors and creditors more effi ciently. Secondly, the fi rm requires more skilled staff, training and development, diversifi ed services and expansion.


6.1 Integration of KISAThe fi rm is able to integrate these activities by constantly querying and researching. It is mainly done by the Director of the fi rm. He gets feedback and interacts with employees. The Marketing Executive looks after the building managers and their agents. They are in touch with industry though associations and networks

The fi rm has a strategy to develop long-term relationship with providers and suppliers. This enables them to work through problems that might occur and still maintain the relationships and services with them. It takes a lot of fl exibility and familiarity for such a strategy.


The main barriers that the fi rm faces in their innovation process are shown below

Barriers

- High innovation costs- Lack of skilled personnel

The fi rm fi nds the innovation involves high costs. As a result, they need to have a long term view.

The biggest challenge and opportunity to successfully innovate would be taking advantage of the World Wide Web and the internet technology. Many customers are now booking through the internet and this serves as a big potential market.

87AEGIS UWS

Other challenges include the following

Challenges

- Refusal to license by other fi rms- Requirements to enter into cross-licensing

agreements to get a license from other fi rms

The methods used to protect the knowledge in the fi rm are by establishing trademarks and copyrights.


The fi rm did not apply for any government programs. They only got subsidies for the training of staff from the Queensland government. They fi nd that they lack information with regards to subsidies. They do not apply for R&D programs because of high administrative costs, and the huge amount of work. The manager also commented that they have never used fuel subsidies. The time and effort in establishing what they are entitled to and to fi le for a claim is diffi cult, complicated and time consuming.


Case Study C 1. Background information

Case C is part of a large hotel chain, currently in its expansion stage earning about AUD 9.5 million in turnover. It employs 65 staff at full capacity. On average about 48-50 people are working all year round.

1.1 CustomersThe market is mainly leisure based, with 75% comprising families and couples. 25% of the business is attributed to corporate clients, some of them serving conferences. Their largest corporate client is mainly the Australian government, comprising of various departments.

They have long term relationships with different clients, but it is different in the hotel branch. The conference organisers are good clients and they also have long-term relationships for leisure customers. They try to introduce new products to market, and offer more choices to clients. The business is basically market-driven.

1.2 Recent InnovationThe most recent innovation in the fi rm was the introduction of a new service, comprising guided walks in the national parks during summer. They try to attract people to the region in the summer, since it is mainly a winter holiday region. This is a new concept since they provide only accommodation. This new service is considered to be radical in nature, because they have moved into a new area. In addition, the hotel designed a new program, which incorporates safety manuals and selling their products and services over the phone. A new manager from the business division was employed to manage that program.




- Business planning Advice- Marketing and Promotion- Research and product development- Accounting and Finance- E-commerce services- Training Services- Recruitment- Accreditation- Customisation of wholesale

packages

- Industry development advice- IT services

Industry development advice was considered medium in importance for innovation in the fi rm. This was carried out externally through government departments. They were only used during the entrepreneurial stage of the business. Business planning was considered highly important for innovation and conducted mainly within the fi rm. This was used during the creation of their products and services and also during the expansion of the hotel. Marketing and services were also highly important for the innovation in the hotel. All these services were outsourced to private

89AEGIS UWS

sector organisations especially in the maturing phase of the products and services, and during expansion of the hotel.

Research and Development was regarded as highly important for innovation and were used during the professional management stage of the business. This was mainly outsourced to private sector fi rms. Similarly, Accounting and fi nance services were also highly critical for innovation, yet it was all outsourced to private sector organisations. These services were deployed during the creation of their products and services, the standardisation phase and during the professional management stage of the hotel.

E-commerce Services were carried out in-house and considered highly important. They were used during the professional management phase of the business. Information Technology services were also conducted in-house. However, they were not as important as e-commerce. They were also used during the professional management phase of the business and at the standardisation phase of their products and services.

Training services were of high importance and only used during the expansion of the fi rm at when standardising their products and services. It was outsourced only to government departments. Similarly, all recruitment activities were outsourced to private sector organisations, and new people were hired when creating new products and services, and during the fi rm’s expansion.

All accreditation was done by the industry associations. This was carried out during the maturing phase of their products and services and during the professional management of the market life cycle. The customisation of wholesale packages was conducted in-house and used during the maturing phase of their products and services and expansion of the hotel. A summary of the use of KISA can be illustrated in the following table.

KISA Internal Mix and Match

External






6. IT services



9. Recruitment

10. Accreditation






- Accounting and fi nance services

- Recruitment

- Marketing and promotion

- Customisation of wholesale packages

- Accreditation

- Training services- IT services- Accounting and

fi nance services



- Industry development advice



- IT services- E-commerce services- Accreditation

- Business Planning advice


- Training services- Recruitment- Customisation of

wholesale packages

3. Network KISA

3.1 Collaboration with other fi rmsCase C engages in both formal and informal collaborations with various partners. They are summarised below

PARTNERSPARTNERS

Form

al (

cont

ract

ed)

Info

rmal

(no

n-co

ntra

cted

)

Hig

h Im

port

ance

Med

ium

Impo

rtan

ce

Low

Impo

rtan

ce


2. Competitors

3. Customers






91AEGIS UWS

The fi rm considers their customers, industry associations and regional or community organisations as highly important partners for innovation. These were normally formal agreements except for their customers. Other formal agreements were with private sector organisations and government departments, but they were not as important for innovation. They also considered networks, competitors and research organisations to be less important or to be informal in their dealings. The fi rm does not have any collaboration with multinational corporations, universities or research institutions.


4.1 Access and interaction with external KISA providersThe fi rm sources external services through their contacts and through networking. The general manager normally conducts research and considers other business operations. They outsourced many of the services because they lack the expertise. It was also costly to employ the expertise to be with the fi rm full-time.

The disadvantages or dangers of outsourcing too much is that the fi rm has to rely on external providers, and the good communication skills. The snowy mountain region is a small local area, so they need to establish long term relationships. As the company grows some of the services, suppliers are very particular. So it is easier to source from outside. It was a strategic business decision to externalise many of the knowledge intensive services. For instance marketing research needs to come from external sources.

To ensure good quality services provided to them, the fi rm signs formal contracts with their service providers. They are constantly monitored and the relationships are usually long-term relationships. The expertise comes from outside the region with a lot of networking required. There must be face to face meetings with trust established.

4.2 The effects of KISA on the fi rmThe fi rm is able to gain new knowledge from the external marketing company. It gives a new form of public relations and new knowledge is gained on launching the products in the market. In order to disseminate the knowledge throughout the fi rm, the management ensures good induction period, job descriptions, training needs and discussions with staff. They also exchange emails with other managers on how to improve the quality of their employees.


The capabilities that they currently possess are the constant strive for new products and services to introduce in the market. The capabilities they would like to develop in future are to expand their marketing and get into e-commerce with more web planning and maintenance.



6.1 Integration of KISAThe fi rm is able to integrate these activities by using their own expertise and consulting the external expertise as well. There is collaboration on how to integrate both expertise to sell their products and services. Secondly, they conduct weekly management meetings and department meetings. They have dedicated, skilled managers to deal with external service providers and establish long-term relationships with them.



Barriers

- Great economic risk- High innovation costs- Lack of skilled personnel- Strict standards and regulation

The biggest challenge facing the organisation is being located in a regional area. They do not get the same networking facilities as other organisations in the cities.


Challenges

- Requirements to enter into cross-licensing agreements to get a license from other fi rms


The methods used to protect the knowledge in the fi rm are by establishing copyrights, secrecy and the speed to market.


The fi rm did not apply for any government programs or assistance. This was because of the lack of information available to them. It takes too much time and effort in getting any programs or assistance. Furthermore the government was not represented in the region and located rather far away.

93AEGIS UWS

Case D 1. Background information

Case D is a public listed company established in 1956. It is involved in all tourism activities in skiing fi elds including leasing and franchising in the skiing village. It employs 250 people in summer and 1200 during winter. About 95 percent of their employees are skilled with secondary education and the remaining with tertiary education.

1.1 CustomersTheir clients are the tourists who arrive in Thredbo. There are many long-term clients that repeatedly visit every year. The company conducts market research every month to identify new products and needs. A target market is being created for the younger age groups. Most of the revenue is derived from the lifts’ operations to the mountains (40%). Other sources of revenue include property investment (20%) and the sale of food and beverage (10%).

1.2 Recent InnovationThe most recent innovation in the fi rm was the introduction of new forms of equipment in the snow. An example is the fun box, a concept derived from skateboarding. They are the only resort to introduce this in Australia. After a lot of research from international industry journals and listening to what skiers and boarders wanted, they introduced skateboarding concepts to the latest snowboarding sport including the half pipe, fun boxes, table tops and rails. Three levels were accommodated, for beginners, intermediate and advanced level snowboarding. This form of innovation was considered incremental in nature. However the design, development and introduction of the fun box in Thredbo was something radical for them. It involved a group of employees presenting their research and proposed product. This was headed by junior employees and fi nally collaborated with an advertising company. Other changes included a management restructure in the organisation two years ago. The parent company amalgamated recently with another company, bringing synergies for knowledge.




- Industry development advice- Business planning Advice- Marketing and Promotion- Accounting and Finance- IT services- E-commerce services- Research and product development- Training Services- Recruitment- Accreditation- Customisation of wholesale packages


A majority of the services are conducted in-house, but with some outsourcing. All the KISAs were rated as high importance to innovation in the fi rm. Industry development advice was sought from private sector organisations, industry associations, networks and clusters and overseas fi rms. The advice was used during the creation and maturing phase of their products and services, as well as in all stages of the business life cycle. Business planning was conducted mainly within the fi rm with some consultation from their informal networks and clusters. The planning was carried out during the maturing phase of the products and services and at all times of the business cycle.

Marketing and promotion services were also conducted both internally and externally with the help from industry associations, networks and clusters and overseas fi rms. It was mainly required during the creation of their products and services. Research and Development was conducted both internally and externally by using private sector organisations and industry associations throughout the whole business and especially during the introduction of new products and services.

Accounting and fi nance was important for the fi rm’s innovation and were carried out both internally and externally. They engaged professionals from government departments and informal networks and clusters. They were used in the maturing phase of their services. Information Technology and E-commerce Services were also a mix of internal and external sources employing private sector organisations, networks and clusters and overseas fi rms. They were used in all stages of the business life cycle except during the start up phase.

Training services were used during the start up and entrepreneurial stages of the market cycle only. It was also used during the standardisation phase of the products and services. External consultants for training included government departments, private sector organisations and industry associations. All accreditation was outsourced to government departments, research and technology organisations and industry associations. This was especially important at the entrepreneurial stage of the business and standardisation phase of the products and services.

The customisation of wholesale packages was conducted both internally and externally. Organisations included private sector businesses and overseas fi rms. It was used throughout the life cycle of the company except the start up phase. A summary of the use of KISA can be illustrated in the following table.

KISA InternalMix and MatchMatch

External




4. Research (including market research) and product development5. Accounting and fi nance services6. IT services7. E-commerce services

8. Training services (e.g. TAFE, industry courses)9. Recruitment

10. Accreditation


95AEGIS UWS


Creation phase Maturing phase Standardisation phasephasephasephase

- Research- Industry development advice- Marketing and promotion

- Accounting and fi nance- Industry development advice- Business Planning Advice

- Accreditation- Recruitment- Training




- Business planning Advice

- Marketing and Promotion

- Accounting and Finance


- Training Services- Recruitment


- Business planning Advice- Marketing and Promotion- Accounting and Finance- IT services- E-commerce services- Research and product

development- Training Services- Recruitment- Accreditation- Customisation of

wholesale packages




- Accounting and Finance

- IT services- E-commerce services- Research and product

development- Recruitment- Customisation of

wholesale packages




- Accounting and Finance- IT services- E-commerce services- Research and product

development- Customisation of

wholesale packages

It is diffi cult to differentiate the activities because most of them are needed in every phase, most of the time. This is because they needed to focus on new products and procedures every season.


3. Network KISA

3.1 Collaboration with other fi rmsThe fi rm engages in both formal and informal collaborations with various partners. They are summarised below.

PARTNERSPARTNERS

Form

al (

cont

ract

ed)

Info

rmal

(no

n-co

ntra

cted

)

Hig

h Im

port

ance

Med

ium

Impo

rtan

ce

Low

Impo

rtan

ce

1. Other fi rms within the same industrial group (Network)(Network)

2. Competitors

3. Customers






The fi rm has both formal and informal agreements with external providers. They are mainly of high importance for innovation. They have both formal and informal collaborations with their network or cluster groups, customers, industry associations and the regional and community organisations. Other organisations such as consultancy fi rms, government departments and research and technology organisations have purely formal contractual agreements. These are also highly important for their innovation.

They do not have any collaboration with multinational corporations at the moment. With regards to universities, they collaborate in terms of students undertaking research from the University of Technology, Sydney; Australia National University, Canberra; and Griffi th University in Brisbane. The students also go there to do some work that interest them. The fi rm believes in strategic planning to produce high quality products based on research.


41. Access and interaction with external KISA providersThe company sources external KISA providers through industry magazines and by networking. They provide a brief to some companies and work closely with them. External consultants were employed for service prevision because of their expertise and objectivity especially in the areas of research and development. The managers feel that this form of outsourcing does not disadvantage the fi rm because they do not lose their core knowledge or formula in their operations. Certain information such as those for research purposes are released when necessary. There were particular service areas which had to be outsourced because of the growing emphasis on

97AEGIS UWS

such areas as Occupational Healthy and Safety. They did not have the expertise and had to hire externally. The service providers usually performed up to expectations and provided good reliable services. They were evaluated based on timeliness and productivity.

The fi rm intends to develop certain expertise in-house such as fi nancial decision-making and management risk taking. The knowledge intensive services that are essential in the tourism industry are new designs and using new technologies. For example, one of the staff went to Japan to look at snow making technology. The manager believes government departments do not have suffi cient expertise and lack continuity and therefore lack knowledge of the industry and an ability to develop it in an effective way.

4.2 The effects of KISA on the fi rmThere are certain areas or services where the knowledge and information are not easily assimilated in the fi rm, because they require very specifi c skills and at a certain point in the project (such as market research). These knowledge and information were outsourced so as not to lose the objectivity of overall goals. All new knowledge is transferred to other employees at the responsibility of managers. They conduct executive meetings fortnightly to obtain feedback from different managers. Emails are also sent to senior managers advising of new ideas. In addition, they have very good recruitment and training processes where the training manual is upgraded every year. The effects of KISA on the fi rm are better research and marketing. The services gained from external providers assist the fi rm in product development and process innovation.


The capabilities that the fi rm currently posses are the business and management skills and the use of technology. These are conspicuous in the Snow making process and their effi cient reservation and booking systems. Other capabilities the fi rm wishes to possess are the management process of projects.


6.1 Integration of KISAThe integration of KISA is usually performed by the managers. They are skilled and professional about sourcing the expertise and services; and making sure they fi t in with business objectives. New staff is trained every season, as they increase from 250 staff in summer to 1500 staff in the winter. Emails and communication of ideas is generally at the level of management only. The fi rm tries to develop long-term relationships with their suppliers, but try not to be too dependent on them.



Barriers

- Great economic risk- High innovation costs- Lack of appropriate fi nancing possibilities- Organisational management resources- Strict standards and regulations- Management structure


The biggest challenge and opportunity to successfully innovate would be growth in the industry


Challenges


The methods used to protect the knowledge in the fi rm are by registering their design, establishing trademarks, patents and copyrights. Also more often, they engage in secrecy and speed to market.


The fi rm did not apply for any government programs because they had diffi culty in identifying or accessing such programs. The development of proposals alone was too time-consuming. The system is such that it is very diffi cult, complicated and time consuming.

99AEGIS UWS

Case E 1. Background information

Case E was established in 1999 and is currently in its entrepreneurial stage. It provides hospitality and horticulture services. The fi rm is a micro business with only 3 employees. Average annual turnover is around A$100,000.

1.1 CustomersTheir clients are the general public. 80% of their sales are attributed to tourists in the Snowy mountains region. The rest of their clients are locals living in the area. The relationships with their customers are long term. Their high returns are based on good service and 7-day a week operations.

1.2 Recent InnovationThe most recent innovation in the business derives from the hospitality area. They have introduced a country cuisine as part of the menu. This is considered as an incremental innovation to increase their sales. Another area of innovation is the introduction of a town walk in the remote and small population town of Dalgety. They have also recently adopted Occupational Health and Safety procedures due to its importance in the cuisine partnership.




- Marketing and Promotion- Research and product

development- Accounting and Finance

- Industry development advice- Business planning Advice- IT services- Training Services- Recruitment- Accreditation

- E-commerce services- Customisation

of wholesale packages

The fi rm used all the knowledge intensive service activities identifi ed except for industry development advice, e-commerce services and customisation of wholesale packages during the entrepreneurial stage of the business which is at current. Industry development advice was considered of medium importance for innovation in the fi rm. Business planning was also medium in importance for innovation and was sourced from government departments. This was used mainly at the start up of the fi rm. The marketing and promotion services however were considered highly important and used during the creation phase of their products and services. All marketing promotion was conducted by the business internally. Research and Development was considered very important and was sourced from government departments and their informal networks and clusters. Accounting and fi nance was important for the fi rm’s innovation and were carried during the creation phase of their products and services. This was conducted internally within the fi rm. Information Technology services was medium in importance and was conducted in-house. The fi rm was currently establishing a webpage for increased sales. E-commerce services were of low importance and not conducted at all. Training services were of medium importance and provided by government departments. All recruitment activities were conducted by the fi rm and


were considered of medium importance. All accreditation was done by the government and considered to be medium in importance. These services can be depicted in the following table.

KISA InternalMix and Match

External





5. Accounting and fi nance services5. Accounting and fi nance services6. IT services7. E-commerce services


9. Recruitment

10. Accreditation







Start-up EntrepreneurialProfessional Management

Expansion






- IT services - Training services- Recruitment- Accreditation

101AEGIS UWS

3. Network KISA

The fi rm believes in doing things the old fashioned way, to be in touch with historic values. They provide services 7 days a week. Their motto is heritage tourism, and they have contributed to the growth of the town and kept the community alive. As a result, there is a sense of place and community in the Dalgety region.

3.1 Collaboration with other fi rmsThe fi rm engages in both formal and informal collaborations with various partners. They are summarised below.

PARTNERSPARTNERS

Form

al (

cont

ract

ed)

Info

rmal

(no

n-co

ntra

cted

)

Hig

h Im

port

ance

Med

ium

Impo

rtan

ce

Low

Impo

rtan

ce


2. Competitors

3. Customers

4. Consultancy Firms (KIBS) 5. Government Departments

6. Universities and Colleges (RTOs)7. Industry Associations


Case E

School

Australian Post

Other businesses

Tourism Snowy

Mountain Chamber

Commerce

Council

Suppliers

Local Residents (Surrounding Towns)

TAFE

Tourists

Ski Resort (Thredbo)


The fi rm considers all their external partners important for innovation. Most of them are through informal collaborations such as with their customers, government departments and regional or community organisations. However, there are some regional or community organisations which do have formal contractual relations with them.


4.1 Access and interaction with external KISA providersThe fi rm sources external services through being involved in committees. They also faced problems with outsourcing because of the high costs, and these service providers did not have a full understanding of their business operations. There is a need for more training and accreditation in the area of horticulture, and also updated training in Occupational Health and Safety. The managers expressed concerns that government should invest more in training being made available for small businesses.


The capabilities that they currently possess are research and knowledge of the place. They would like to receive more training.



Barriers- Great economic risk- High innovation costs- Lack of appropriate fi nancing possibilities- Lack of skilled personnel- Lack of time

The biggest challenge is dealing with bureaucracies. There is constant frustration and lack of enthusiasm. They have attempted to put up signs and promote heritage recognition, but government approval was not granted.

7. Access to Government ProgramsThe fi rm attended training programs in computer training related to GST, which were funded by the government. The also found that there were not many programs available to them. They did not source or apply for other programs or assistance because of time constraints.

103AEGIS UWS

Case F World net1. Background Information

World.Net was established in 1997 as a result of a merger two computing based travel companies. Its primary activities commenced primarily as corporate and government applications and R&D company in the travel industry. For about 3 years since its establishment the fi rm worked mainly R&D through self and government aided fi nance through contracts. In the fourth year they were able to develop products, which have put the fi rm in business at the world level. The fi rm has a turnover of $ 4 million and employs about 65 people in its three offi ces in Australia, Malaysia and Britain. 95% of the revenue of the fi rm is generated through exports.

1.1 CustomersThe three largest customers or clients of World.Net are: Wales Tourism Board; Marketing Birmingham (both in U.K) and Reliance Group, Malaysia. Relations with these clients are long term and now entering almost 5 years. The relationships with these clients have been quite crucial in providing inputs to the process of innovation at the R&D unit at World.Net. During the last three years the fi rm extended its main customers to Yorkshire Tourism Board, U.K., Central Coast and Hunter Valley, NSW, Australia, and a fi rm in U.S.A.

1.2 Recent InnovationThe recent innovation includes MICE which is an integration of a product management suite through a MXL engine that includes a marketing database. This was given to a fi rm in Birmingham. This product serves events, conventions and bookings. The fi rm moved into an internet based space where individual small hotel operators can manage their own product and manage booking information. Closely linked to this is also the development of Website Management System, which was developed and designed internally. The software based products developed can be characterised as incremental innovations.

2. The Importance and Use of KISAHigh Importance Medium Importance Low Importance

IT consulting activitiesResearch and DevelopmentManagement Consultancy for products Engineering Consultancy for productStrategic and Business PlanStrategic and Business Plan

Marketing Employment AgencyService Development

IP related

The fi rm places considerable importance to R&D and different types of consulting such as engineering and management including IT for generating KISA. However, the consulting inputs can be seen only as marginal inputs compared to the internal innovation infrastructure and skills through personnel. The fi rm began as an R&D based fi rm through the grant of 2.0 AU$ million from Austrade, R&D and ICT related grant programs. The fi rms has become self reliant over the years to generate products and services for different clients and customers. The fi rm uses external inputs but not for generating KISA but to aid its administrative and managerial skills in obtaining grants and interacting with government and other offi cials.


2.1 KISA in the Product Life CycleIn the product life cycle the inputs to KISA that were indicated are shown as follows:

Creation Phase Maturing PhaseS t a n d a r d i s a t i o n Phase

R&DIT consulting Engineering consultancy (all for product development)

R&D is most important R&D

In all the three phases in-house R&D capabilities are seen as being crucial in providing inputs for KISA.

2.2 KISA in the Market Life CycleStart-up Entrepreneurial Professional Mgt Expansion

IT consulting IT consultingMarket relatedR&D

Market relatedR&D

R&D

As evident from the responses in 2.1 and 2.2, the fi rm places high importance to R&D and consulting for developing products both in terms of product and market life cycle. While R&D is given high importance, it is the market and the demand pattern emerging in the travel and tourism industry and its structure, which is seen to be driving the innovation process.

3. Network and Informal Basis for KISAAs the table bellow shows the fi rm places high importance to personal and friendly mode informal relations with other fi rms, competitors, KIBS, industry associations and with personnel in government departments. The only formal relations the fi rm indicates is with customers. The fi rm operates from Sydney but much of its customer and market expansion base is outside Australia in Malaysia, U.K and to lesser extent in USA. Even though the fi rm operates in a network space interacting with a variety of clients and customers in the travel industry and tourism boards of governments in UK and Australia, ,much of the sustenance of company and its marketing success is some how related to the leadership of the fi rm and his/her network of informal relationships.

Partners Formal Informal High importance

Medium importance

Low importance

Other fi rms

Competitors

Customers

KIBS

Govt.Depts.

Universities


105AEGIS UWS

In many cases, the acquisition of knowledge has been through an informal process of engagement with other fi rms and not through formal contractual arrangements. It is in this engagement that the fi rm is able to customise the knowledge to its own needs and to successfully transfer and integrate it into the fi rm’s innovation processes. This aspect of informal processes playing an important role is also substantiated through the case studies. For instance, the CEO of World.Net, explained that the main reasons for overseas expansion to Malaysian markets was triggered by friendly relations there:

‘We went into the market on the basis that we know people. The Chairman and Managing Director of Reliance Travel (Malaysia) was somebody that I had known for over 20 years. He is a personal friend of mine. He came down looking for a consultant and I built the piece of software that has become what they now have. Then, as a result of doing that, we expanded to other companies and countries. And we did it by just going there and attending trade shows and knowing people. In the end, we got enough that we thought, ok, we will open up an offi ce. So we opened up an offi ce there (Malaysia)’.

Another feature of importance for Network KISA for World.Net is that it has been partnering with Australia Hotel Association, Tourism Wollongong, Coolangatta Tourism in Australia for developing technology through federal grants. The other partners with whom the fi rm had developed partnerships are the Tourism boards in UK and Malaysian government.

4. KISA mix and match processMuch of the inputs to KISA is generated internally but as the fi rm is involved in marketing of tourism related and travel related software, it is interacting with a variety of clients and customers. What is the mechanism or organisational style that the fi rm adopts for generating KISA has led to the following observation:

“… We have a group called OVER SIGHT in the fi rm consisting of senior members from commercial area, management area and particularly the CEO. They are basically the custodians of our products and services. Any area that comes up with an idea with regard to the product has to go through that group. We also have a project manager linked to this group co-ordinating client related activities and development related activities for products”.

It is clear that there is an organisational form consisting of CEO or head of the fi rm and a managerial team that is responsible for absorbing and assimilating crucial inputs to generate KISA.

5. Challenges to InnovationIn terms of the challenges to innovation process the fi rm identifi es high innovation costs and lack of market information as the major barriers. From the perspective of future challenges the fi rm identifi ed the following:

• Continue to hire the right people to maintain client confi dence in the company’s competence and as well as retaining key staff;

• Product development to cope with competitors. As the company is expanding its business operations in Malaysia the fi rm has to now compete for the important market opened up by Malaysia’s super IT city. Developing products for the global level is a big challenge as seen by the fi rm.


• Staff training is seen as very important as the rate of technology obsolescence is increasing and as technology is advancing very fast.

6. Government ProgrammesGovernment programmes have been very critical and important in the case of World. Net both in terms of establishing its R&D base through grants, as mentioned earlier, and through partnering with local and state government tourism bodies for technology and product development. The during the last two years has been interacting more with U.K and Malaysian governments and their respective tourism departments.

107AEGIS UWS

Case G Tourism Snowy Mountains Inc.1. Background information

Tourism Snowy Mountains Inc. is a regional tourism organisation covering fi ve shire areas. As a regional tourism organisation it works with minimal resources to try to foster product development and market the region. The organisation is funded by the NSW Government (70%), by local councils (25%) and by the local tourism operators (5%).

The dilemma facing Tourism Snowy Mountains Inc. is how to economically survive over the next fi ve years. The state government would like to see the regional tourism organisations become self-supporting, and has decreased their funding over time. Tourism Snowy Mountains is working with local Councils and Stakeholders to develop avenues for increased funding, though several barriers exit e.g. relatively small council areas contain a low rate payer base providing limited scope for increased funds; and in marketing terms, private business obviously see increased advantages in investing marketing dollars to promote their own business over providing funds to enable the marketing of the generic region.

Tourism Snowy Mountains has successfully used public relations, email marketing and has leveraged neighboring region’s campaigns to implement strategies that have contributed towards growing the non-peak season visitation to the region.

2. Innovative Tourism Companies

From a regional tourism perspective, the role of Tourism Snowy Mountains Inc. is to increase the number of people who visit in spring, summer and autumn. In the Snowy Mountains there are huge seasonal curves. During the four winter months, they receive 75 percent of their total visitors. During the non-peak seasons some businesses close down, either because business is slow, or because profi table winter seasons enable an extended holiday over summer. Increasing public liability insurance costs has also been a problem for some businesses. In non-peak times visitor services decrease e.g., the number of restaurants open and facilities. The region is now right at that point where summer activities have started to increase.

One of the most successful and innovative companies in the Snowy Mountains is Kosciuszko Thredbo. This is a major winter ski resort, but it has also has been able to market and develop summer products. They have re-packaged products giving than a new twist. For example guided trekking to Kosciuszko (the highest mountain in Australia) at sunrise or sunset

Another innovative resort in the Snowy Mountains, which also has been able to market and develop summer products is Novotel. They have for example packaged a summer product called ‘Kosciuszko Alpine Walks’. This company has invested in buying fi ve-star tents and hiring qualifi ed guides, so tourists can camp by in the alpine environment during the off peak season. The product was launched in 2004. Several other operators have invested in product development and new options are being offered to tourists that are of international standard.

Another company, Perisher Blue focuses on winter tourism. Innovation in their fi eld is directed solely to their ski resort operations in winter. The most popular snow sport activity is skiing, but there has been a huge growth in snow boarding. They have also tried to target people that are not primarily interested in skiing or snow boarding by marketing activities like snow-shoeing and cross country skiing.


These companies run multi-million dollar marketing campaigns to attract people to their business. Consequently all the small businesses benefi t from the marketing they do.

3. Network of Tourism Organisations

Companies in the Snowy Mountain do not work in isolation. If one of the ski resorts spends money on going to a trade show, they would not go there separately. They communicate with other companies as a united front. One of these companies, for example, has a business development manager whose job is to communicate with all the smaller operators to make sure that everyone knows what is happening from their side.

Tourism Snowy Mountains Inc.’s main form of communication with the industry is through monthly emails that updates on the happenings and opportunities in the region. Other forms of communication are through meetings and phone calls. The local papers are not as effi cient in getting the word out as using the network.

Tourism Network at Snowy Mountains

Tourism Snowy Mountains Board

Development Project

Marketing Project

Business Committee

Tourism NSW

Chambers Commerce Local Tourism Assoc.

Firms/Org

Snowy River

Cooma Monaro Tumbarumba Tumut

Kosciuszko Thredbo

Novotel Snowy Hydro

Perisher Blue

SMEs Natural Parks & Wildlife Services

109AEGIS UWS

4. Government Programs

A positive strategy for Tourism Snowy Mountains Inc. is “See Australia”, a government and industry-driven program developed to encourage domestic tourism. The government spent approximately one million dollars on researching the tourism industry through this program. Before there was almost no research available but now Tourism Snowy Mountains Inc. has access to a concrete body of information to draw on.

Tourism Snowy Mountain recently obtained a ½ million-dollar grant from AusIndustry in cooperation with Canberra and capital country. Instead of The Snowy Mountains and Canberra going out and marketing themselves separately they are now working on joint marketing campaigns together, research and product development. Working together means a combined force the offering to market is much stronger. Part of the grant is looking at research and includes going out and surveying the people who visit the region. The project will fi nd out what segments of the market they fi t into, and which products are available. From that research, a marketing campaign will be designed. A very important part of this project is to implement a product development perspective to try to attract investment to the region using gap analysis.


Footnotes

1 Recipients of the grant are the Australian Expert Group in Industry Studies (AEGIS) of the University of Western Sydney in partnership with the Department of Industry, Tourism and Resources (DITR) and the Department of Communications, Information Technology and the Arts (DCITA).2 http://aegis.uws.edu.au/KISA/main.html3 Sections 1.1 and 1.2 of this introduction are common to the other 2 reports of the KISA project on the software and mining technology services industries.4 Recipients of the grant are the Australian Expert Group in Industry Studies (AEGIS) of the University of Western Sydney in partnership with the Department of Industry, Tourism and Resources (DITR) and the Department of Communications, Information Technology and the Arts (DCITA).5 http://aegis.uws.edu.au/KISA/main.html6 http://www.oecd.org/sti/innovatio http://www.oecd.org/sti/innovatio http:// n (Sectoral Case Studies on Innovation). 7 http://www.atdw.com.au/home.asp8 Our statistical analysis indicated these categories as the most representative of the Tourism industry.9 SPSS was used for the statistical analysis10 Extracted from Organisation for Economic Development (OECD), Commission of the European Communities, United Nations and World Tourism Organisation, (2001) Tourism Satellite Account: Recommended Methodological Framework, OECD, United Nations Publications and World Tourism Organizations, p. 1.11 Businesses employing four or less persons12 Businesses employing between 5 and 19 persons13 Businesses employing 20 or more persons14 Extracted from the ABS catalogues No. 5249.0, ‘Australian Tourism Satellite Account’, Fact Sheet, 2002-2003.15 Ibid, p. 5.16 Gross value added, also known as gross product, is the value of goods and services produced by an industry minus intermediate inputs, commodity taxes and subsidies. 17 Extracted from the ABS catalogues No. 5249.0, ‘Australian Tourism Satellite Account’, Fact Sheet, 2002-2003.18 Australian Government Tourism White Paper, Department of Industry, Tourism and Resources, 2003, p. 12.19 ABS (2003) Australian National Accounts: Tourism Satellite Account 2001-2002, 5249.0, p. 6.20 Extracted from the ABS catalogues No. 5249.0, ‘Australian Tourism Satellite Account’, Fact Sheet, 2002-2003.21 Extracted from ABS (2003) Australian National Accounts: Tourism Satellite Account 2001-2002, 5249.0, p. 8.22 Extracted from the ABS catalogues No. 5249.0, ‘Australian Tourism Satellite Account’, Fact Sheet, 2002-2003.23 Extracted from the ABS catalogues No. 5249.0, ‘Australian Tourism Satellite Account’, Fact Sheet, 2002-2003.24 Extracted from the ABS catalogues No. 5249.0, ‘Australian Tourism Satellite Account’, Fact Sheet, 2002-2003.25 Bureau of Tourism Research, Tourism Snapshot – International, http://www.btr.gov.au/service/datacard/international.pdf26 ATEC, International Tourism Index. http://www.atec.net.au/resources/International_Tourism_Index.pdf27 The scheme supports a wide range of industry sectors and products, including inbound tourism and the export of intellectual property and know-how outside Australia. In the 2002-03 fi nancial year, AUD $143.9 million was paid to 3843 businesses. For grants relating to the 2001-02 grant year, the average grant was AUD $36,280. Over two-thirds of businesses receiving EMDG reported annual income of AUD $5 million or less. http://www.austrade.gov.au [19.05.04]28 Award coordinators for the 2003 ceremony were Strata Consultants in WA.29 Less than 6 months old30 Between 6 months and 2 year old31 More than 2 years in operation32 More complex structure, diversifi ed markets, decentralisation33 Includes market research34 This refers to the number of times the fi ve case studies deployed them for the provision of KISA35 The network ‘maps’ that appear in this section were drawn by the interviewees and represent their understanding of the position of their company/organisation within the Snowy Mountains Tourist Hub

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Phone: (02) 8255 6200Fax: (02) 8255 6222Email: [email protected]: http://aegis.uws.edu.au/KISA/main.html

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