5.4. Non-R&D innovators

This section provides a preliminary summary of a forthcoming thematic paper on non-R&D innovators [1]. Until recently R&D has been synonymous with technology and innovation in many discussions on science, technology and innovation. Most support measures for innovation on the national and the EU level are for R&D activities. The Lisbon strategy, which aims to build Europe by 2010 the most competitive and dynamic knowledge-based economy in the world, incorporates a policy goal that the R&D expenditure in the European economies should reach 3 percent of GDP by 2010. As emphasized in the Lisbon strategy, R&D intensity is extensively used by scholars and policy makers as a benchmark for measuring the innovativeness of a firm, an industry, a region and a country.

There is no doubt about the importance of R&D: it is the source of many productivity enhancing innovations; it is essential to competitiveness in fast-growing high technology industries such as pharmaceuticals, it is critical to the absorptive capacity of a firm or an industry and is associated with terms of trade advantages of a country; and R&D activities create demand and supply for high skilled people which give impetus to the development of the education system in a country.

However, although R&D is vital for many innovation activities of firms and the competitiveness of an industry and a country, the Community Innovation Survey shows that almost half of the European innovators do not conduct intramural or in-house R&D (Figure 11). Such non-R&D innovation includes the purchase of advanced machinery and computer hardware specifically purchased to implement new or significantly improved products or processes, the purchase of rights to use patents and non-patented inventions, licenses, know-how, trademarks and software, internal or external training activities for firm’s personnel aimed at the development or introduction of innovations, and internal and external marketing innovations aimed at the market introduction of new or significantly improved products [2]. The shares of non-R&D innovators tend to be higher in the new Member States. Breaking down the data of non-R&D innovators by sector, we find that non-R&D innovators are concentrated in low technology manufacturing and service sectors. The distribution of these non-R&D innovators is also skewed towards small and medium sized firms (or SMEs).

Table 4 Differences between Non-R&D and R&D innovators

Non-R&D and R&D innovators are similar and dissimilar. The effect on innovation activities on the performance of the enterprise is not that much different (Table 4), but non-R&D innovators do consider universities and government research institutes as less important sources of information for their innovation activities. Non-R&D innovators also introduce less products which are also new to their market and the share of non-R&D innovators receiving public support from their central government or the EU is less than half that of the R&D innovators. Both non-R&D and R&D innovators face almost the same barriers to innovation and share similar objectives of innovation. The fact whether or not a firm engages in R&D is still an extremely important firm characteristic from a policy perspective as R&D performers are the target of most policy actions. A failure to differentiate between non-R&D and R&D innovators reduces the effectiveness of both (academic) analyses of innovative firms and the effectiveness of public policies to stimulate innovation.

Given that a significant number of firms innovate without any R&D, non-R&D innovation activities should have drawn considerable attention from academics and policy makers. In fact, the Oslo Manual provides a broad definition of innovation in recognition of the facts that diffusion is crucial to realizing the economic benefits of innovation and that R&D only covers a part of all of the different methods that firms use to innovate. However, there is lack of systematic studies on other means that firms use to innovate and through research that links different types of innovation to performances of firms.

The Community Innovation Survey (CIS) collects only a limited amount of information on precisely how non-R&D innovators innovate. In order to provide more statistical information on how these firms innovators, the Innobarometer (IB) 2007 survey was performed to delve further into the methods used by non-R&D performing firms to innovate and to see if one of the methods is based on ‘user driven’ innovation. The forthcoming EIS thematic paper on non-R&D based innovation provides results based on an econometric analysis of the IB data.