“Managers may struggle to re-organise their operations to make the most effective use of adopted technologies.

“Firms with stronger management are more likely to make good decisions about whether or not to adopt new technologies and practices, and when and how intensively to adopt them.”

Those firms, the commission said, were also more likely to have the ability make the organisational changes needed to benefit from transformative technologies.

“Despite a huge appetite for digital transformation in many industries, skills and management capability gaps (and a lack of tailored information) has seen some firms lose out from adopting new digital technologies, reducing their willingness to pursue future productivity-enhancing innovation,” the commission said.

Grattan Institute chief executive Danielle Wood said international evidence showed Australian managers were less confident at identifying and adopting technology into workplaces, such as artificial intelligence.

“Technology change is the most important driver of productivity growth over time,” she said.

“Business always reminds us they are the drivers of the economy, so when productivity is not going well we should self-reflect on what business can do.”

SMEs struggle

The Organisation for Economic Co-operation and Development estimates that the productivity gains from upskilling managers could be three times higher than for upskilling workers.

A recent survey of 1500 Australian small and medium enterprises by accounting software provider MYOB found 59 per cent of surveyed firms reported that adopted digital solutions were hindering them in some way, suggesting that the firm had not successfully integrated the innovation into its existing processes.

Moreover, 42 per cent of surveyed businesses had given up on using some digital business solutions.

“This points to the risk that persistent gaps in management capability may lead some firms to ‘over adopt’, or fail to benefit from adopted technologies, potentially deterring future innovation,” the commission said.

“Moreover, limited management capability may mean firms fail to fully realise the benefits of their technology innovations, even when the firm is at or near the global technology frontier.

Management capability in Australian manufacturing lags behind global peers in the United States, Japan, Germany, Sweden, the United Kingdom and France, according to international research cited by the commission.

“There appears good scope for Australian firms to move closer to the best practice management frontier,” the commission said.

The survey excluded other sectors that Australia is internationally strong in, such as mining and finance.

“Government training support should focus on transferable skills that augment the absorptive capacity of firms, such as digital and management skills,” the commission recommended.