Innovation and Technology in the Knowledge-based Economy

1. Innovation and Technology in the Knowledge-based Economy Thomas TANG • Executive Director, • Hong Kong Productivity Council • Hong Kong

2. XVI World Congress of Accountants Workshop 2

3. Innovation and Technology in the Knowledge Based Economy and their Implications for Accountants THOMAS TANG Executive Director Hong Kong Productivity Council (HKPC) November 19, 2002

4. HKPC Key Drivers of Productivity Growth: • Innovation • Technology

5. HKPC Enabler of Innovation and Technology Development • Information Technology • Applications for • Manufacturing • Service Processes • Communication and Information Systems

6. HKPC Why Innovative Accounting Techniques: • To meet changing client needs: particularly in Cost and Management Accounting

7. HKPC Innovative Accounting Techniques in Order of Popularity: • Product Life Cycle Analysis • Activity Based Management • Activity Based Costing • Target Costing (from Study by Askarany and Malcolm Smith)

8. HKPC Low Application Rate of Innovative Accounting Techniques, according to Recent Studies: e.g. Activity Based Costing (ABC) • 14% in UK and Australia • 10% in USA (from “Innovation Diffusion” by Malcolm Smith)

9. HKPC Reasons for Not Adopting Innovative Techniques • Lack of suitable software programs • Cost of system setup and its implementation • Cost of maintaining and collecting cost information • Lack of information on available costing techniques

10. HKPC Reasons for Not Adopting Innovative Techniques • Lack of appropriate accounting skills • Low benefit coupled with high cost • Lack of confidence in the ability of new accounting techniques • Employee resistance

11. HKPC Implementation – Culture of Innovation – Successful Diffusion Education and Training toEstablish the Credibility of Accounting Innovations • Breaking down the Barriers or Employee Resistance to Change • On all levels: Individual, Group, Intergroup and Organizational • Empowerment of Employees

12. HKPC Implementation – Culture of Innovation – Successful Diffusion Alignment of Incentives • Incentives Aligned with Programme Objectives • To Facilitate, Reward and Reinforce Effective Change

13. HKPC Implementation – Culture of Innovation – Successful Diffusion Internal Sponsorship • Key Individuals within the organization to demonstrate the Management’s Understanding and Commitment • Clear Communication of Goals and Strategies • Visionary Leadership

14. HKPC China’s Accession to WTO In its WTO accession, China made substantial concessions on foreign investment in the services economy, covering • Partnership limited to CPAs licensed by Chinese authorities • Affiliation between foreign and Chinese accounting firms • Recognition of foreigners’ CPA qualification • No mandatory localization requirement • Expansion of Services: taxation and management consultancy

15. HKPC China’s Accession to WTO Capitalizing on these Opportunities: eXtensible Business Reporting Language (XBRL) • Automatic Exchange and Reliable Extraction of Financial Information • Across All Software Formats and Technologies • Internet

16. HKPC China’s Accession to WTO Capitalizing on these Opportunities: Online Experts and Virtual Teams • China’s Geographical Spread • Cross-Border Business Activities • Internet

17. HKPC Conclusion: • Innovative Accounting Techniques generally have Low Adoption Rates • The Nurturing of an Innovative Culture and Incentive Programmes are Means to Promote a Wider Adoption • Innovation and Technology are Productivity Tools for Accountants in Today's Knowledge Based Economy

18. HKPC THANK YOU !