Business Innovation. in the United States and the UK. Andy Cosh. Centre for Business Research University of Cambridge

Transcription

1 Business Innovation in the United States and the UK Andy Cosh Centre for Business Research University of Cambridge Not to be quoted without the author s permission. Further details about the conference and book can be obtained at:

2 Innovation 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.

3 Presentation Overview Various aspects of the innovation process: Purpose of innovation Innovation outputs Innovation inputs Innovation information sources Competition Innovation constraints Collaboration Government financial support

4 Presentation Structure 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 Make a matched sample comparison between UK and US companies.

5 Purpose of Innovation

6 Purpose of Innovation 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 much the same across the size groups.

7 The objectives of innovation activities (CBR 2002 Survey) % of firms reporting factor as very significant or crucial objective All Firms Hi-tech Manufacturing Conventional Manufacturing Hi-tech Services Conventional Services Increase market by: Replacing products being phased out ** ** 18.9 Extending product range ** 38.9 Gaining new markets or market share Lower production costs by: Reducing production lead times * Reducing labour costs Reducing materials consumption Reducing energy consumption * Other objectives: Improving production flexibility * Improving product quality Reducing environmental damage Fulfilling regulations/standards ** 33.9 a Means are calculated from scores on a scale of 1-5, w ith 1 = insignificant, 2 = slightly significant, 3 = moderately significant, 4 = very significant, 5 = crucial. **Differences across sectors significant at 5% level or better

8 The objectives of innovation activities by size of firm (CBR 2002 Survey) % of firms reporting factor as very significant or crucial objective Micro Small Medium Increase market by: Replacing products being phased out 19.1** Extending product range 38.3** Gaining new markets or market share 49.3** Lower production costs by: Reducing production lead times 23.6** Reducing labour costs 20.7** Reducing materials consumption 18.9** Reducing energy consumption 13.7** Other objectives: Improving production flexibility 26.6** Improving product quality 51.8** Reducing environmental damage 15.1** Fulfilling regulations/standards 29.1** Asterisks in the first column indicate statistically significant differences between the types of business grouped by size (* = significant at the 10% level, ** = significant at the 5% level or better).

9 Innovation Outputs

10 Product Innovation 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 hightech manufacturing and business services in 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.

11 Exhibit 3.1 Introduction of product innovations Manufacturing Business services Older Newer Micro** Small Medium Stable/Declining Medium growth Fast growth High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services Source: Cosh and Hughes (2007) Innovators Novel innovators All % of Firms

12 Introduction of product innovations - US companies All Small Medium Large Manufacturing Business services High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services Innovators Novel innovators Source: Cosh and Hughes (2007) % of Firms

13 Process Innovation 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.

14 Exhibit 3.2 Introduction of process innovations Manufacturing Business services Older Newer Micro Small Medium Stable/Declining Medium growth Fast growth High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services Source: Cosh and Hughes (2007) Innovators Novel innovators All % of Firms

15 Introduction of process innovations - US companies % of Firms 0 All Small Medium Large Manufacturing Business services High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services Innovators Novel innovators Source: Cosh and Hughes (2007)

16 Logistics Innovation 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.

17 Exhibit 3.3 Introduction of logistic innovations All Manufacturing Business services Older Newer Micro Small Medium Stable/Declining Medium growth Fast growth High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services Source: Cosh and Hughes (2007) Innovators Novel innovators % of Firms

18 Introduction of new supply chain methods or supply, storage or delivery methods - US companies All Small Medium Large Manufacturing Business services High-tech manufactu... Conventional manuf... High-tech business... Conventional busine.. Innovators Novel innovators Source: Cosh and Hughes (2007) % of Firms

19 Novelty of Sales 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.

20 Exhibit 3.4 Distribution of sales by novelty of product or service All Manufacturing Business services Older Newer Micro Small Medium Unchanged product or service Improved product or service New product or service Stable/Declining Medium growth Fast growth Conventional business services High-tech business services Conventional manufacturing High-tech manufacturing Source: Cosh and Hughes (2007) % of Firms

21 Exhibit 3.9The proportion of new products in total sales in 2004 and profitability New products as No. of firms % of sales Profit margin (median values) Median change All firms Low (<10%) ** 7.0 ** -0.7 High (>10%) Micro Low (<10%) ** High (>10%) Small Low (<10%) ** 5.1 ** -1.0 * High (>10%) Medium Low (<10%) * -1.2 High (>10%) Manufacturing Low (<10%) ** 5.1 ** -1.0 High (>10%) Business services Low (<10%) ** 9.7 ** -0.3 High (>10%)

22 Exhibit 3.10 The proportion of new products as a % of sales in 2004 and growth New products as No. of firms % of sales Median employment growth Median turnover growth All firms Low (<10%) ** 11.6 ** High (>10%) Manufacturing Low (<10%) ** 8.5 ** High (>10%) Business services Low (<10%) ** 19.9 ** High (>10%)

23 Distribution of sales by novelty of product or service - US companies All Manuf acturing Business ser vices Smal l Medium Unchanged pr oduct or ser vi ce Lar ge I mpr oved pr oduct or ser vi ce New pr oduct or ser vi ce Conventional business ser vices High-tech business ser vices Conventi onal manuf actur i ng Hi gh-tech manuf actur i ng % 20% 40% 60% 80% 100% % of Fi r ms Source: Cosh and Hughes (2007)

24 Innovation Outputs in the UK and US We use samples matched by age, size and sector in order to directly compare UK and US companies. We find no differences in the intensity of product and logistics innovation between the two countries. However, process innovation and novel innovation of each type have a higher incidence in the US. The higher incidence of novel innovation in the US is particularly associated with the manufacturing sector. There is little overall difference between the countries in the proportion of sales represented by new products. The UK has higher novel sales in business services than found for the matched US sample.

25 Percentage of firms reporting innovations 80% 75% 75% 70% 60% 50% 40% 62% 56% 40% 40% 51% 46% 34% 30% 26% 20% 16% 13% 10% 0% Product innovation Process innovation Supply system innovation Novel product innovation Novel process innovation Novel supply system innovation Source: Cosh and Hughes (2007)

26 Companies reporting novel innovations by sector (%) Novel product innovation Novel process innovation Novel supply system innovation Sector UK US UK US UK US High-tech manufacturing Conventional manufacturing High-tech services Conventional services

27 Mean % of sales on account of new or significantly improved products or services by sector Total 36% 38% UK US Conventional services* 28% 37% High-tech services 51% 55% Conventional manufacturing 31% 33% High-tech manufacturing* 36% 40% 0% 10% 20% 30% 40% 50% 60% Source: Cosh and Hughes (2007)

28 Innovation Inputs

29 R&D Activity 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.

30 Exhibit 3.5 Proportion of firms engaging in R&D last year All 37.1 Manufacturing** 43.5 Business services 28.9 Older Newer Micro** 20.0 Small 41.6 Medium 55.5 Stable/Declining** 33.4 Medium growth Fast growth Non-innovators** 7.4 Innovators Source: Cosh and Hughes (2007) % of Firms

31 Proportion of firms engaging in R&D last year - US companies All 79.0 Manufacturing ** 83.9 Business services 67.4 Conventional business services ** 54.5 High-tech business services 84.3 Conventional manufacturing 80.6 High-tech manufacturing 88.1 Small ** 73.6 Medium 83.7 Large 92.2 Source: Cosh and Hughes (2007) % of Firms

32 Exhibit 3.6 Percentage of firms with staff engaged in R&D All Manufacturing Business services Older Newer Micro Small Medium Stable/Declining Medium growth Fast growth Non-innovators Innovators Full-time Full or part time Source: Cosh and Hughes (2007)

33 Percentage of companies engaged in R&D (%) 53 Conventional services UK US 55 High-tech services Conventional manufacturing* High-tech manufacturing* Source: Cosh and Hughes (2007)

34 Comparison of Innovation Inputs UK vsus Firms engaged in R&D (%) Average part time R&D staff (Median) Average full time R&D staff (Median) Average total R&D expenditure ( 000) Average R&D/Sales ratio (%) (Median) Average R&D Staff/total employee ratio (%) UK US

35 R&D sales ratio (%) * Number of employees Source: Cosh and Hughes (2007)

36 R&D sales ratio by sector (%) Conventional services UK US High-tech services Conventional manufacturing* High-tech manufacturing* Source: Cosh and Hughes (2007)

37 Innovation Information Sources

38 Information Sources 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.

39 Innovation sources of information 2002 Survey The relative importance of different sources of information for innovation by size of firm (% very significant or crucial) Sources Micro Small Medium Internal: Within the firm 50.3** Within the group 6.3** External: Suppliers of equipment, materials and components Clients or customers 31.3* Competitors in your line of business Consultancy firms Financiers Universities/higher education institutes Government or private non-profit research institutes Patent disclosures Professional conferences, meetings, professional journals Fairs/exhibitions Trade associations, chambers of commerce Computer-based information networks

40 Figure 1.6 Use of sources of knowledge for innovation All companies Internal knowledge within the company Clients or customers Suppliers of equipment, materials, components or software Knowledge within the group Competitors in your line of business Health and safety standards and regulations Fairs, exhibitions Technical/trade press, computer databases Technical standards or standard setting bodies Environmental standards and regulations Professional conferences, meetings Trade associations Consultants Public sector, e.g. Business Links, Gov't offices Universities/higher education institutes Commercial laboratories or R&D enterprises Government research organisations Private research institutes Source: Cosh and Hughes (2007) UK US

41 Figure 1.7 Sources of knowledge for innovation regarded as highly important by users of that source - % UK companies relative to the US Competitors in your line of business Know ledge w ithin the group Clients or customers Fairs, exhibitions Internal know ledge w ithin the company Health and safety standards and regulations Technical standards or standard setting bodies Suppliers of equipment, materials, components or softw are Technical/trade press, computer databases Environmental standards and regulations Trade associations Professional conferences, meetings Universities/higher education institutes Consultants Commercial laboratories or R&D enterprises Private research institutes Public sector, e.g. Business Links, Gov't offices Government research organisations Source: Cosh and Hughes (2007) % UK companies relative to US

42 Competition

43 Competition by Sector 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.

44 Exhibit 3.12 Distribution of firms in high-tech and conventional sectors by number of serious competitors in 2004 Percentage distribution of firms by number of serious competitors Median >99 High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services

45 Distribution of firms in high-tech and conventional sectors by number of serious competitors in US Percentage distribution of firms by number of serious competitors Median >99 High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services

46 Importance of overseas competitors as a proportion of all competitors in 2004 Distribution of firms by proportion of serious overseas competitors Mean share of serious overseas competitors 0 1<50 50<75 75 % High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services All

47 Importance of overseas competitors as a proportion of all competitors in 2004 US companies Distribution of firms by proportion of serious overseas competitors Mean share of serious overseas competitors 0 1<50 50<75 75 % High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services All

48 % of companies with fewer than 5 competitors % of companies UK US UK US UK US Company size - number of employees Source: Cosh and Hughes (2007)

49 % of companies with less than one quarter of their competitors overseas % of companies UK US UK US UK US Company size - number of employees Source: Cosh and Hughes (2007)

50 Innovation Constraints

51 Constraints on Business Objectives 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.

52 Exhibit 3.16 Significant constraints on ability to meet business objectives over past three years (Manufacturing) Increasing competition Overall growth of market demand Skilled labour Availability and cost of finance for expansion Marketing and sales skills Management skills Availability and cost of overdraft finance Access to overseas markets* Difficulties in implementing new technology Acquisition of technology Availability of appropriate premises or site Source: Cosh and Hughes (2007) % very significant or crucial Conventional manufacturing High-tech manufacturing

53 Significant constraints on ability to meet business objectives over past three years (US Manufacturing) Increasing competition Overall growth of market demand Skilled labour ** Availability and cost of finance for expansion Marketing and sales skills Management skills High-tech manufacturing Conventional manufacturing Availability and cost of overdraft finance Access to overseas markets Difficulties in implementing new technology Acquisition of technology Availability of appropriate premises or site** Source: Cosh and Hughes (2007)

54 Exhibit 3.17 Significant constraints on ability to meet business objectives over past three years (Business services) Marketing and sales skills** Availability and cost of finance for expansion** Overall growth of market demand** Skilled labour Management skills Increasing competition Availability and cost of overdraft finance** Difficulties in implementing new technology Availability of appropriate premises or site Acquisition of technology Access to overseas markets Source: Cosh and Hughes (2007) % very significant or crucial Conventional business services High-tech business services

55 Significant constraints on ability to meet business objectives over past three years (US Business services) Increasing competition Overall growth of market demand Skilled labour ** Availability and cost of finance for expansion** Marketing and sales skills Management skills Availability and cost of overdraft finance Access to overseas markets Difficulties in implementing new technology Acquisition of technology High-tech business services Conventional business services Availability of appropriate premises or site Source: Cosh and Hughes (2007)

56 Business Constraints UK vs US 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).

57 Constraints on business objectives (%very significant or crucial) Increasing competition Skilled labour Overall grow th of market demand Marketing and sales skills Management skills Availability and cost of long-term finance Availability and cost of short-term finance Difficulties in implementing new technology Access to overseas markets Acquisition of technology Availability of appropriate premises UK US Source: Cosh and Hughes (2007)

58 Barriers to innovation (%very significant or crucial) Innovation costs too high Lack of appropriate sources of finance Pay-off period too long Legislation, regulations, standards, tax Lack of skilled personnel Innovation costs hard to control Lack of customer responsiveness Company's innovation potential too small Innovation too easy to copy Lack of information on technologies Lack of technological opportunities Source: Cosh and Hughes (2007) UK US

59 Lack of sources of finance Barriers to Innovation (% rating the factor as very significant or crucial) Innovation costs too high Innovation too easy to copy Company's innovation potential too small Lack of customer responsiveness UK UK >1000 US >1000 US Pay-off period too long Legislation, regulations, standards, tax Innovation costs hard to control Lack of skilled personnel Source: Cosh and Hughes (2007)

60 Barriers to innovation (%very significant or crucial) Innovation costs too high Lack of sources of finance Pay-off period too long Legislation, regulations, standards, tax Lack of skilled personnel Innovation costs hard to control Lack of customer responsiveness Company's innovation potential too small Innovation too easy to copy UK High-tech serv US High-tech serv UK Conv serv US Conv serv Source: Cosh and Hughes (2007)

61 Collaboration

62 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.

63 High-tech Collaboration - extent 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.

64 Percent of firms collaborating in the past 2 years by type of collaboration UK companies % of firms collaborating by type of collaboration Manufacturing Business services High-tech Conventional High-tech Conventional Collaboration with % % % % Suppliers 56.2 ** Customers 59.0 ** Higher education institutes 33.3 ** Firms in the same line of business 45.7 ** Private research institutes/consultants Others

65 Percent of firms collaborating in the past 2 years by type of collaboration US companies % of firms collaborating by type of collaboration Manufacturing Business services High-tech Conventional High-tech Conventional Collaboration with % % % % Suppliers 47.5** Customers 55.1** Higher education institutes Firms in the same line of business 72.9** Private research institutes/consultants 22.3** Others 64.4**

66 Figure 1.13 Engagement in collaboration or partnership arrangements in the past three years by type of partner Firms in your line of business Customers Suppliers Other enterprises within the parent group Universities Private research Institutes and technology organisations/consultants Early stage technology-based companies Public sector research and technology organisations/labs Other higher education institutes Other Source: Cosh and Hughes (2007) UK US

67 High-tech Collaboration - purpose 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.

68 Exhibit 3.15 Purpose of collaborative arrangements made by high-tech and conventional firms Purpose of collaborative arrangements High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services % % % % Share R&D 62.9 ** Expand range of expertise or products Assist in management of staff development Improve financial and market credibility Development of specialist services/products 76.2 ** Gain access to new equipment 26.7 ** Keep current customers 47.6 ** Provide access to domestic markets 35.2 ** Provide access to overseas markets 51.4 ** All firms entering into collaborative arrangements 47.5**

69 Purpose of collaborative arrangements made by high-tech and conventional firms US companies High-tech Conventional High-tech Conventional Purpose of collaborative arrangements manufacturing manufacturing business services business services % % % % Share in-house research 61.0** Jointly contract out r&d 37.0* Develop specialist services/products Gain access to specialized equipment 34.9** Gain access to specialized information 37.5** Jointly purchase materials 25.1** Develop licensing activities 26.9** Support spin-off activity All firms entering into collaborative arrangements 61.0**

70 Government Financial Support

71 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 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.

72 Tax Credit Scheme - awareness No. of firms All Business services Older Newer Manufacturing Noninnovators Innovators High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services Aware that tax credit/relief is available to small firms 2, ** ** ** ** Claimed tax credit/relief 1, ** ** ** Micro Small Medium Stable/ Declining Medium growth Fast growth Aware that tax credit/relief is available to small firms 49.1** ** Claimed tax credit/relief 10.2** **

73 Impact of R&D tax credit scheme on R&D spend Use of R&D Tax credit/relief led to increase in R&D expenditure No. of firms All Business services Older Newer Manufacturing Noninnovators Innovators High-tech manufacturing Conventional manufacturing High-tech business services Conventional business services Not at all ** ** To a limited extent To a great extent Total responses Use of R&D Tax credit/relief led to increase in R&D expenditure No. of firms All Micro Small Medium Stable/ Declining Medium growth Fast growth Not at all To a limited extent To a great extent Total responses

74 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 UK companies. 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.

75 % of companies receiving government financial support for innovation % of companies UK US UK US UK US All Source: Cosh and Hughes (2007) Company size - number of employees

76 Employment size Amount received ( 000) Amount received as a % of R&D spend UK US UK US % 38% % 39% > ,667 6% 5% All cos % 28%

77 Sector % receiving support Amount received ( 000) Amount received as a % of R&D spend UK US UK US UK US High-tech manufacturing % 29% Conventional manufacturing % 20% High-tech services % 27% Conventional services % 42%

78 Summary UK SMEs 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 manufacturing firms, 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.

79 Summary UK vs US companies US companies display higher process innovation and higher novel innovation of each type. US companies exhibit a higher level of activity in terms of the proportion engaged in R&D and R&D spending. UK firms face greater overseas competition. The ranking of innovation barriers is broadly the same, but US small companies score the finance and skilled personnel constraints highly relative to the UK. UK firms were more frequent users of most information sources, but less likely to regard them as important. UK government financial support for innovation is more widespread than in the US, but more thinly spread.