Business Innovation - Centre for Business Research€¦ · Logistics Innovation • Innovation in supply, storage and delivery exhibit lower rates than for product, or process innovation.
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Centre for Business ResearchUniversity of Cambridge
Not to be quoted without the author’s permission.Further details about the conference and book can be obtained at: http://www.cbr.cam.ac.uk/news/20Feb07.htm
• Innovation questions have played a prominent part in the CBR surveys since 1995 with a consistent set of questions in the four subsequent surveys.
• This presentation focuses on the comparisons across our size groups and sectors over these years.
• It also draws on the CBR 2004 Innovation Benchmarking survey that compared UK and US companies.
• The analysis relates to the survivors in our survey panels, but we show elsewhere that the firms that were acquired were significantly more likely to have been growth-oriented, innovating, carrying out R&D and exporting.
Purpose of innovationInnovation outputsInnovation inputsInnovation information sourcesCompetition Innovation constraints CollaborationGovernment financial support
Wherever possible we will present the results following the structure below:
Review the findings about each aspect of innovation across size, sector etc.Establish whether these findings are robust over time based on our previous surveys.Examine size and sector differences amongst US companies drawn from the Innovation Benchmarking survey carried out by the CBR in 2004.Make a matched sample comparison between UK and US companies.
• This question was not used in CBR 2004 or IB surveys• Our previous surveys have found:
– The most important objectives are gaining new markets, or market share; improving product quality; and extending product range.
– These are scored more highly than various impacts on the elements of production costs.
– High-tech firms in both manufacturing and business services give significantly greater weight to replacing old products and to extending their product range.
– Although micro firms scored all objectives as less important than larger firms, the relative importance of the objectives was muchthe same across the size groups.
% of firms reporting factor as very significant or crucial objective Micro Small Medium
Increase market by:Replacing products being phased out 19.1** 28.1 33.2Extending product range 38.3** 50 60.2Gaining new markets or market share 49.3** 70.8 78.1Lower production costs by:Reducing production lead times 23.6** 40.1 42Reducing labour costs 20.7** 37.7 43.4Reducing materials consumption 18.9** 27.3 32.1Reducing energy consumption 13.7** 20 17.9Other objectives:Improving production flexibility 26.6** 43 39.4Improving product quality 51.8** 64.5 64.2Reducing environmental damage 15.1** 19.9 14.2Fulfilling regulations/standards 29.1** 36.6 36.1
The objectives of innovation activities by size of firm (CBR 2002 Survey)
Asterisks in the first column indicate statistically significant differencesbetween the types of business grouped by size (* = significant at the 10%level, ** = significant at the 5% level or better).
• Product innovation, both diffusion and novel, is more prevalent amongst larger SMEs and growing firms.
• Manufacturing has a higher incidence of product innovation overall, but not novel innovation.
• Both types of product innovation are higher amongst high-tech firms, but no difference is found between high-tech manufacturing and business services in 2004.
• These findings are supported in each of our previous surveys.
• The findings for US companies in 2004 show the same pattern as those for our UK samples.
• A lower proportion of firms report process innovations.• Process innovation rises with firm size and is higher for
growing firms.• It is higher for manufacturing and this is accounted for by
the significantly lower process innovation amongst conventional business services firms.
• These findings are supported by the previous CBR surveys.
• US companies show a similar pattern in relation to firm size, but conventional manufacturing firms exhibit higher rates of process innovation than their conventional counterparts.
• Innovation in supply, storage and delivery exhibit lower rates than for product, or process innovation.
• Manufacturing, older, larger and growing firms have higher rates of introduction.
• Novel logistics innovation does not show any distinct pattern except that medium-sized firms have higher incidence of this from of innovation.
• These findings are supported by our previous surveys.• In the US the same picture emerges in relation to size.• However, although manufacturing has a higher rate of
logistics innovation overall, it is lower than US business services in terms of novel innovation and this is due to the higher rate amongst conventional business services.
• Newer, growing, larger and high-tech firms have a higher proportion of their sales accounted for by new, or significantly improved products or services.
• High-tech business services show a particularly high proportion of novel product sales.
• These findings are generally supported by our previous surveys except that the relationship with firm size is not consistent.
• We show for the CBR 2004 sample that the novelty of sales is positively related to firm growth, but negatively related to profitability.
• We find no difference between sizes and broad sectors in the US, but high-tech companies have higher novelty.
• Whether we measure the proportion of firms engaged in R&D activity, or with R&D staff, we find that larger, manufacturing, growing and innovative firms are more likely to be R&D active.
• These findings are supported by our previous surveys.• The pattern is very similar amongst US companies.• Using the matched sample comparison we find a higher
level of activity in the US in terms of the proportion of firms engaged in R&D, expenditure on R&D, its ratio to sales and the ratio of R&D staff in total employment.
• The differences in incidence are stronger in manufacturing.
• This question was not used in the CBR 2004 survey and has not been used consistently in the past.
• The findings of the CBR 2002 survey were:– Sources internal to the firm were most commonly used.– Customers were the most important external source, but less so
for micro firms.– Suppliers were the next most important external source.– Firms in the same line of business were also important.– Universities and HEIs were rarely regarded as important.
• The matched sample comparison suggests that UK firms were more active users of most sources.
• A different picture emerges when we look at the importance of the information source.
Sources Micro Small MediumInternal:Within the firm 50.3** 69.4 76.2Within the group 6.3** 11.9 23.8External:Suppliers of equipment, materials and components 26.5 31.1 25.6Clients or customers 31.3* 37.8 38.5Competitors in your line of business 11.6 13.4 14.7Consultancy firms 2.8 4.2 4.8Financiers 1.2 2.1 1.5Universities/higher education institutes 2.3 2.9 4.8Government or private non-profit research institutes 1.9 1.3 1.5Patent disclosures 0.7 1.7 2.6Professional conferences, meetings, professional journals 5.6 4 3.7Fairs/exhibitions 7.7 8.7 10.3Trade associations, chambers of commerce 3.7 4 3.7Computer-based information networks 9.5 8.2 6.2
2002 Survey The relative importance of different sources of information for innovation by size of firm (% very significant or crucial)
• Business service firms, particularly conventional, show higher proportions with little competition and higher proportions with intense competition than manufacturing.
• This is not found in the US sample where business service firms simply face greater competition than manufacturing, particularly high-tech manufacturing.
• In the matched sample US companies have fewer competitors amongst small firms, but more competitors for larger firms than their UK counterparts.
• Overseas competition is greater for manufacturing and high-tech firms in both the UK and US samples.
• Overseas competition is greater for UK companies in each size group compared with the matched US firms.
• UK manufacturing SMEs in 2004 put increasing competition, demand growth and skilled labour as their three principal constraints.
• The differences between conventional and high-tech firms in manufacturing were small, but high-tech pointed up the access to overseas markets more strongly.
• Business service firms give far less weight to the competition constraint, but more weight to marketing and sales skills.
• The constraints are generally rated higher by the US manufacturing sample, but the top three constraints are in the same order. US business service firms also give the highest weight to marketing and sales skills.
• Constraints on meeting business objectives were rated more highly in the US and the same is the case for barriers to innovation (largely due to small firms).
• The ranking of the innovation barriers is broadly the same but, perhaps surprisingly, the finance and skilled personnel constraints are particularly high relative to the UK.
• The finance constraint on innovation, the lack of skilled personnel and the difficulty of controlling innovation costs are felt strongly by smaller companies relative to larger businesses, particularly in the US.
• Constraints due to regulations and legislation are felt more strongly by small companies (even in the US).
Collaboration by UK SMEs• Collaborative arrangements are more common in
business services, larger, newer, fast growth and innovative firms.
• The most common collaborative partners were firms in the same line of business for micro firms and vertical supply chain linkages for larger firms.
• The most important reasons for collaboration were to help expand the range of expertise and products, to assist in the development of specialist services and products required by customers, to help keep current customers, to provide access to markets, to improve financial market credibility and to share R&D.
• These findings are supported by our previous surveys.
• Conventional business service firms are less likely than others to collaborate with customers and suppliers.
• Manufacturing firms are less likely to collaborate with firms in the same life of business.
• High-tech businesses are more likely to collaborate with Universities and HEIs.
• The US sample shows the same characteristics as those listed above, but also shows higher collaboration with firms in the same line of business in each of the sectors.
• UK firms are more likely to have collaborated with universities/HEIs than US firms.
• High-tech were more likely to cite the development of specialist services or products than were conventional firms, particularly those in business service.
• The desire to share R&D was most frequently cited as a reason for collaboration by high-tech manufacturing firms.
• Defensive reasons associated with keeping current customers were most likely to be cited by conventional manufacturing and conventional business service firms.
• Gaining access to overseas markets was more likely to be cited by high-tech firms both in manufacturing and business services.
R&D Tax Credits• We find a reasonably high level of penetration of
awareness and use of the R&D tax credits scheme, which was introduced in April 2000.
• Although the high-tech manufacturing firms show a somewhat higher awareness of the tax credit, there is no significant difference in the extent to which high-tech business services and high-tech manufacturing actually claim tax credit or relief under the scheme. Both have higher awareness and a significantly greater use of the scheme than conventional firms.
• Around a third felt that the use of R&D tax credit had increased their R&D expenditure to a limited extent and 16% felt that it had increased it to a great extent – so about half who had used the scheme did not feel that their R&D had increased.
Financial Support for Innovation• The Innovation Benchmarking survey examined financial assistance
for their innovation activities from government. This assistance is found to be more widespread in the UK where 20% had received financial support of this kind compared with 12% of US companies.
• The difference in proportion is less for large companies.• Whilst only half as many small business in the US receive
government financial assistance for innovation, the amount they receive is on average five times larger than that received by UKcompanies. It also represents a proportion of their R&D spending(38%) that is over three times greater than that for UK firms (11%).
• Therefore government financial support for innovation amongst companies with less than 1,000 employees is not less in the US, but is more concentrated.
• The figures for large business show similar proportions of both those receiving support and the ratio of that support to their R&D spending – though the absolute level of support and of R&D spending are higher in the US sample of large companies.
• Innovation output is associated with larger, growing, innovating and high-tech firms.
• Innovation intensity is positively associated with growth, but negatively with profitability.
• R&D is associated with manufacturing, larger and growing firms, but innovative activity is not necessarily dependent only on R&D spend.
• Increasing competition was a higher constraint for manufacturingfirms, whereas high-tech business service firms pointed to the lack of sales and marketing skills.
• Customers and suppliers remain the most important external sources of innovation information and collaboration, but high-tech businesses are using HEIs more frequently.
• High-tech firms do not have higher profitability, but do have a higher risk profile than conventional firms.