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DECEMBER 2010
UK Innovation Survey 2009
Contents
Contents ...................................................................................................................................i
Chapter 2. Indicators..............................................................................................................5
i
UK Innovation Survey 2009
Division ...............................................................................................................................64
ii
List of Tables and Figures
Tables
Table 2.1 Business objectives (percentage of all firms rating “high”).......................... 6
Table 2.2: Percentage of enterprises who were innovation active, by firm size and
type of activity ............................................................................................................. 8
Table 2.3: Percentage of enterprises who were innovation active, by sector and type
of activity................................................................................................................... 11
Table 2.4: Percentage of enterprises who were innovation active, by GOR and type
of activity................................................................................................................... 11
Table 2.5: Percentage of enterprises that were wider innovators, by firm size and
type of activity ........................................................................................................... 23
Table 2.11: Reasons for not innovating (percentage of non-innovative firms) .......... 37
Table 2.14: Shares of employees that hold a degree in Science or Other subjects by
business size ............................................................................................................ 42
Table 3.2: Percentage of enterprises who were innovation active in each survey
wave, by type of activity ............................................................................................ 46
Table 3.4: Transitions between innovation activity status (percentage of firms) ....... 50
Table 3.5: Persistence of product and process innovation (percentage of all firms) . 54
Table 3.10: Barriers to innovation (percentage of all firms rating “high”, “medium” or
“low”) ........................................................................................................................ 59
Table 3.11: Barriers to innovation by innovation activity (percentage of all firms rating
“high”, “medium” or “low”) ......................................................................................... 60
Table 3.12: Barriers to innovation by innovation activity (percentage of all firms rating
“high”) ....................................................................................................................... 60
Table 3.13: Effects/deciding factors (percentage of all firms rating “high”) ............... 61
Table 3.14: Reasons for not innovating (percentage of all firms rating “high”) ......... 62
Figures
Figure 2.1: Geographic markets by firm size (percentage of all respondents) ............ 6
Figure 2.4: Innovation active enterprises 2007 vs. 2009 by firm size (percentage of all
enterprises)............................................................................................................... 12
Figure 2.8: Development of Goods and Services (product innovators only) ............. 17
iv
UK Innovation Survey 2009
Figure 2.21: Formal protection methods by size (percentage of all businesses) ...... 36
Figure 2.22: Reasons for not innovating by sector (non-innovators only) ................. 38
Figure 2.23: Public support for innovation by size (percentage of all enterprises) .... 41
v
UK Innovation Survey 2009
Figure 3.12: Ongoing or failed projects with product or process innovation ............. 55
vi
UK Innovation Survey 2009
Chapter 1. Introduction
“Innovation will be one of the key drivers of the private sector led
economic growth that Britain so urgently needs” is the innovation
policy message from the Department for Business Innovation and
Skills (BIS). The UK Innovation Survey continues to provide the
data for the indicator and innovation measurement framework to
measure performance and feeding into the Annual Innovation
Report 1 and policy related research and analysis.
1.1 Introduction
This report presents some results from the UK Innovation Survey 2009 2 (UK IS 2009)
and aims to be a useful reference for policy and research purposes providing some
insights into the innovation process including: the factors that determine why firms
innovate and how they innovate; the information sources and partners they use; the
methods they use to protect their innovations; and the barriers they come across.
Some particular results have been drawn out, making comparisons with earlier years
where appropriate. Most analyses are split by size or industrial/commercial sector.
Regional characteristics are predominantly determined by the aforementioned, so are
less extensively discussed here. More detailed results including splits by region, firm
size and sector (as used in the sampling methodology) for all the survey questions,
are in statistical annexes which can be found on the Department’s website 3.
More details on innovation policy can also be found on the Department’s website and
will not be discussed further here 4.
· Product innovation - bringing to the market or into use by business, new and
improved products, including both tangible goods and the provision of
1 http://www.bis.gov.uk/policies/innovation/annual-innovation-report
2 Details about UK innovation surveys and research can be found here http://www.bis.gov.uk/policies/science/science-innovation-
analysis/cis
3 http://www.bis.gov.uk/assets/biscore/science/docs/u/10-p106-uk-innovation-survey-2009-statistical-annex.xls
4 http://www.bis.gov.uk/policies/innovation
5 http://www.oecd.org/dataoecd/35/61/2367580.pdf
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UK Innovation Survey 2009
· Process innovation, significant changes in the way that goods or services are
produced or provided, again differentiating between processes new to the
business only or also new to the industry.
· Categories of innovation directed investment such as: R&D, capital goods and
software acquisition, design activity, for implementing current innovations or
directed to future product or process changes
The manual also summarises as a guide to survey principles, other elements of the
innovation system, especially the ways that knowledge stocks and flows serve as
vital innovation inputs. The UK and other European innovation surveys, known
collectively as the Community Innovation Survey, take a broadly common form and
ask mostly the same questions, enabling some degree of cross nation comparisons,
within the limits of differing national systems, institutions and economic histories.
6 http://www.statistics.gov.uk/elmr/03_10/downloads/ELMR_Mar10_Robson.pdf
2
UK Innovation Survey 2009
The 2009 survey was the second to be conducted on the new biennial survey cycle.
As a result of the increased frequency, nearly half of the achieved sample are
common to both the 2009 and the 2007 surveys, referred to as the ‘Panel’ and 4
thousand businesses are common to the last 3 surveys (2009, 2007 and 2005).
Section 1 and 2 provide an analysis of this rich data set including direct comparisons
over time.
This volume also includes some general comparisons between the results of the
2009 surveys and the previous iteration in 2007 and occasionally 2005. The sectoral
coverage of the 2009 remained unaltered from the previous survey. The coverage of
the creative industries widened from the 2005 survey, but otherwise the sampling has
remained constant over the last three survey iterations. Throughout the report, in
order to make valid like-for-like comparisons with surveys conducted prior to 2007
the additional sectors are excluded from the analysis. As a result the indicator values
used in comparisons will not match other data published in this volume and existing
publications. See the Technical Annex for more details.
The layout of the 2009 survey questionnaire differs in parts from previous surveys.
The order of questions about to innovation activities and strategic or wider innovation
was changed. Respondents were asked about innovation activities during the period
2006 to 2008 and then about any wider innovation behaviour, previously included
towards the end of the questionnaire. New routing and the removal of a filter
question before the question on cooperation has had a significant impact on the
results. This prohibits a direct comparison of some of the results from a sub-section
of the questionnaire (named ‘Context for Innovation’) with previous findings. Other
amendments are highlighted at the relevant results and discussion points.
· There were increases in the shares of firms with a product innovation and an
increase in the shares of firms with a process innovation during the 3 year
period 2006 to 2008 compared with the period 2004 to 2006
· Smaller businesses are narrowing the gap with large firms on levels of
engagement across a range of innovation related behaviours
· More firms were cooperating on their innovation projects than has previously
been recorded 7.
3
UK Innovation Survey 2009
Chapter 2 summarises a selection of results from the many variables and sets of
relationships between them, concentrating on the shares of business in a range of
size groups and industrial sectors and UK regions, who are engaged in innovation
related activities including networking with external sources. The results are
presented in the order they are presented in the layout of questionnaire.
Chapter 3 brings out some properties of the panel as defined briefly above. The main
indicators presented in Chapter 2 are revisited for the 4000 businesses that
responded to the 2009, 2007 and 2005 surveys together with investigation of the
changes over time.
4
UK Innovation Survey 2009
Chapter 2. Indicators
This Chapter provides summaries of the main survey results by
means of a range of indicators, giving a broad picture of innovation
in the UK. The survey sought information on the nature of the
business activities involved in innovation as well as the effects of
product and process innovation on market position, internal
processes and costs. There is also some inquiry into the nature of
demand for new and improved products and into the linkages,
through knowledge acquisition and co-operation, with other
enterprises and institutions such as the research base. The results
are presented mainly as shares of businesses grossed up to
nationally representative levels by appropriate survey weights.
(Technical details of the UK Innovation Survey are provided in
Annex A.)
5
UK Innovation Survey 2009
UK regional
All
UK national
Large (250+)
· Profit margins on sales was the most important objective for all firms, but more
so for medium sized firms
6
UK Innovation Survey 2009
· Growth in sales and turnover was ranked important by half of all respondents,
regardless of business size.
· Around a quarter of large firms were motivated by market share compared with a
fifth of medium and a tenth of small firms.
· Growth in exports was ranked ‘high’ by less than ten per cent of all firms
· On comparison with the previous survey, this represents a fall of five percentage
points when in 2007, 63 per cent of UK enterprises were innovation active.
· The shares of product and process innovators were 24 per cent and 13 per cent
respectively, both higher than recorded in the 2007 survey.
7
UK Innovation Survey 2009
Table 2.2: Percentage of enterprises who were innovation active, by firm size
and type of activity
· The share of enterprises that are innovation active tends to increase with
business size. However, the 2009 survey found smaller firms are catching up
with medium sized firms in terms of the share of innovation active businesses
[and engaging in more innovation related activities than larger enterprises.]
· We speculated in the report on the 2007 survey that enterprises may be investing
in preparing for future innovation and it appears, based on these results, to have
been the case. An increased number of both product and process innovations
were recorded relative to the previous period. The shares reporting goods and
services innovations are pictured below (figure 2.2).
Goods 8% Services
14% 18%
8%
8
UK Innovation Survey 2009
· At 50 per cent, the primary sector records the lowest share with innovative
propensity. However, nearly one fifth of these businesses introduced a new
process over the period. Of these, half were new to the industry.
Figure 2.3 has a split of sector behaviour over the last two survey periods. Here we
see that all of the broad sectors below have lower shares of innovation activity than
in 2007. These differences over time and between sectors reflect persistent
innovation patterns and product and process renewal and replacement cycles across
industries.
The gap between the most and least innovative sectors is closer in the 2009 survey,
perhaps indicating a lower limit or a minimum level of innovation is always necessary
– a basal rate of innovation?
9
UK Innovation Survey 2009
Knowledge-intensive 2007
services
2009
Other Manufacturing
Engineering-based
Manufacturing
Construction
Primary sector
Other services
10
UK Innovation Survey 2009
Table 2.3: Percentage of enterprises who were innovation active, by sector and type of activity
Table 2.4: Percentage of enterprises who were innovation active, by GOR and type of activity
Yorkshire
North East West East of South South Northern North
Type of activity and The London Wales Scotland
West Midlands Midlands England East West Ireland East
Humber
Innovation active 56.3 60.7 55.5 58.7 59.1 55.8 63.3 57.8 58.6 54.8 54.8 59.5
Product innovator 22.7 24.1 24.5 25.1 23.6 22.9 27.8 25.6 24.4 21.3 16.8 21.0
Process innovator 10.6 13.1 11.9 12.9 13.7 13.2 14.2 11.2 13.1 12.5 10.6 11.7
Abandoned
innovation 2.5 2.8 3.2 2.9 4.5 5.2 4.0 3.1 3.3 2.5 2.7 3.1
projects
On-going
innovation 4.9 4.5 5.7 4.4 6.5 6.9 6.6 5.5 4.4 5.3 4.3 4.3
projects
Activities related
53.0 57.1 50.0 55.5 57.3 53.5 59.9 52.6 55.6 53.1 53.2 56.0
to innovation
11
UK Innovation Survey 2009
Figure 2.4: Innovation active enterprises 2007 vs. 2009 by firm size (percentage
of all enterprises)
100%
80%
2007 2009
60%
40%
20%
0%
Small (10-49 employees) Medium (50-249) Large (250+)
· We have already noted the fairly broad measure of innovation – the share of
businesses who record innovation investment or outcomes, has decreased
across all enterprises. Figure 2.4 above illustrates that the effect varied across
business size where for large firms (250+ employees) ‘innovation active’ rates fell
by 13 percentage points.
· Small firms continued to innovate at fairly similar levels to the previous survey.
· But, an intriguing result is that the share of medium sized firms involved in some
form of innovation in 2009 is slightly higher than shares for large firms. This is
predominantly due to a higher share of medium sized business engaging in some
innovation related activities, more specifically, acquisition of computer hardware
and software and changes to marketing methods (see Figure 2.5 below).
12
UK Innovation Survey 2009
Computer software
Computer hardware
Training
Intramural R&D
Changes to product or service design
Changes to maketing methods 2007
Advanced machinery 2009
Launch advertising
Market research
All forms of design
Acquisition of external knowledge
Extramural R&D
8 Investment analyses are notoriously variable given the quality of responses to this question. Any results should be used with caution.
13
UK Innovation Survey 2009
their total expenditure in major business areas such as capital, training and
marketing is directed towards current or future product and process innovation.
Figure 2.6 shows the breakdown of total innovation directed investments by type of
expenditure 9. Much analysis and a range of government policy initiatives are
focused on R&D, because of the breadth and depth of new knowledge it entails. But
intramural (within the firm) R&D is just one part of the overall innovation investment
picture and accounts for around a third of relevant expenditures. Despite lower
overall levels of investment, this represents a continued investment in R&D during
less favourable economic conditions. This was also apparent from the relatively
strong 2008 Business Expenditure on R&D (BERD) figures. Extramural (contracted
out) R&D accounts for 11 per cent of total innovation investment, while acquisition of
capital including advanced equipment, computers and software, is the largest
proportion at one third of all expenditure. This can be equated to acquiring embedded
technology including information and communications technology developments and
shows the importance to national innovation performance of the diffusion of technical
change. Expenditure on market preparation, in connection with innovation is a far
smaller component than expected, based on earlier results from 2006, indicating
businesses have had to retrench on marketing and distribution expenditures while
committed to funding R&D along with design where shares of expenditure in 2008
remained at the same level as 2006 at five per cent. Spending on innovation related
training remained low.
9 Innovation investment expenditure analyses are based on data weighted by employment rather than business weights.
14
UK Innovation Survey 2009
This pattern shows some significant variation across business size (figure 2.7 below).
Smaller firms spend a greater proportion of their innovation expenditures on
acquisition of machinery, equipment and software and a higher proportion on
training. Sixty per cent of large firms’ innovation expenditures are on internal and
external R&D.
15
UK Innovation Survey 2009
100%
Acquisition of external
R&D
Market introduction of
60% innovations
Acquisition of external
knowledge
40%
Training for innovative
activities
Acquisition of capital
0%
Small (10-49 Medium (50-249) Large (250+)
employees)
16
UK Innovation Survey 2009
100%
Goods Services
80%
60%
40%
20%
0%
This business or enterprise This business with other Other business or
group businesses or organisations organisation
17
UK Innovation Survey 2009
2.9%
9.2%
25.6%
This business with other
businesses or
organisation
Other businesses or
organisation
Not mentioned
62.3%
18
UK Innovation Survey 2009
Product innovators
The intensity of product and process innovation also emerges from the survey. One
indicator is the share of product and process innovations that are said to be new to
the market or to the industry respectively. Just under half of all product innovations
were also new to market or ‘novel’, while just short of a third of process innovations
were new to the industry (Figure 2.10 and 2.11)
19
UK Innovation Survey 2009
Primary sector
Engineering-based
Manufacturing
New to market
Retail & distribution products
New to industry
Other Manufacturing processes
Knowledge-intensive
services
Other services
Construction
· From figure 2.12, in most sectors 10, more than forty per cent of product
innovative enterprises are also novel product innovators, introducing goods or
services new to their market, rather than follower innovators, trying to catch up
with the competition, they are pro-actively keeping ahead of the competition.
· Process innovation is more complex and likely to involve more extensive change
but, on average, around a third of process innovative enterprises were novel
process innovators with around two fifths of process innovations in the
knowledge-intensive services sector new to the industry.
· The life cycles of goods and services and of the processes to produce them
seem part of the explanation of these patterns across time.
10 There are only small numbers of primary sector firms that were product and/or process innovators resulting in exceptionally higher
20
UK Innovation Survey 2009
The intensity of innovation can also be measured through the shares of business
turnover due to different degrees of product innovation
100%
80%
Products that were significantly improved
Products new to business but not new to market
Products new to the market
60%
40%
20%
0%
All Small (10-49 Medium (50-249) Large (250+)
employees)
· The shares of innovative sales are marginally higher for smaller firms, reflecting
their smaller range of products.
· Small firms attributed six per cent of their turnover in 2008 to novel product
innovations they had introduced during 2006-08.
· Across all firm sizes, around 20 per cent of turnover was reported to be in novel,
new or improved products.
21
UK Innovation Survey 2009
100%
Goods Services
80%
60%
40%
20%
0%
This business or enterprise This business with other Other business or
group businesses or organisations organisation
17
UK Innovation Survey 2009
The following paragraphs report the basic facts about innovation through
organisational and management change, taken as distinct forms and also in
conjunction with other forms of innovation directed activities and outcomes.
Overall, 27 per cent of enterprises (Table 2.5) adopted one or more such changes
during 2006 to 2008. As expected, the share of strategic innovators increases with
business unit size, with 39 per cent of large firms reporting one or more types against
25 per cent of smaller firms.
However, these proportions are slightly lower than the levels during 2004 to 2006.
Shares of larger firms engaging in these practices have fallen and are nearer the
levels of medium sized businesses.
Table 2.5: Percentage of enterprises that were wider innovators, by firm size
and type of activity
23
UK Innovation Survey 2009
Knowledge-intensive
services
Primary sector
Major changes to
Engineering-based
organisational structure
Manufacturing
Other Manufacturing
Changes to marketing
concepts or strategies
Other services
Construction
24
UK Innovation Survey 2009
The intensity of innovation can also be measured through the shares of business
turnover due to different degrees of product innovation
100%
80%
Products that were significantly improved
Products new to business but not new to market
Products new to the market
60%
40%
20%
0%
All Small (10-49 Medium (50-249) Large (250+)
employees)
· The shares of innovative sales are marginally higher for smaller firms, reflecting
their smaller range of products.
· Small firms attributed six per cent of their turnover in 2008 to novel product
innovations they had introduced during 2006-08.
· Across all firm sizes, around 20 per cent of turnover was reported to be in novel,
new or improved products.
21
UK Innovation Survey 2009
100%
80%
20%
0%
Corporate Management Organisation Marketing
strategy techniques change strategies
· Organisational change was the method most used in combination with any of the
others. Over 60 per cent of businesses also re-organised and restructured when
they adopted new management techniques or a new corporate strategy.
· The next section of the questionnaire took ‘strict’ innovators through a series of
questions on factors influencing their innovation behaviour, information sources
utilised and any partners they collaborated with.
26
UK Innovation Survey 2009
2.6.2 Determinants
Enterprises were asked to rate a number of motivations for innovating on a scale
from no importance, through low, medium, and high. Figure 2.18 summarises the
“high importance” responses for all innovation active enterprises and by size of
enterprise.
27
UK Innovation Survey 2009
· Large firms tended to be influenced more than SMEs by process factors, such as
reducing costs per unit produced or provided and improvements to health and
safety,
· Large firms also appear to be more prone to innovate in order to gain greater
market share, than entering new markets, while SMEs rated the two factors
similarly.
28
UK Innovation Survey 2009
Table 2.6: Innovation determinants by sector (percentage of innovative firms rating “high” in each sector)
Engineering- Knowledge
Primary Other Retail &
Determinants based Construction -intensive Other
sector manufacturing distribution
manufacturing services
Increase range of goods 35.3 38.7 43.3 23.1 40.8 38.9 31.5
or services
Entering new markets 32.3 38.3 33.1 21.1 27.1 31.1 22.8
Reduce environmental 30.8 18.1 22.3 25.4 17.6 12.2 19.4
impact
Replace outdated 27.1 26.6 24.9 18.6 19.0 18.5 23.4
products or processes
Increase market share 32.3 36.6 32.9 21.4 35.2 32.9 31.3
Improve quality of 48.1 56.1 51.5 44.7 52.9 51.1 49.4
goods or services
improve flexibility for 26.3 34.8 30.1 24.4 23.8 25.8 21.8
producing goods or
services
Increase capacity for 26.3 30.4 25.0 23.7 21.3 20.5 22.8
producing goods or
services
Reducing costs per unit 30.1 41.0 40.7 23.7 31.0 21.8 23.5
produced or provided
Improve health and 38.3 27.8 26.1 41.9 20.8 12.1 24.8
safety
Meet regulatory 37.6 32.0 29.0 37.2 29.5 30.7 31.7
requirements
Increase value added 36.8 38.9 38.9 30.8 34.5 39.4 33.6
29
UK Innovation Survey 2009
· Improving quality of goods and services was a highly motivating factor for around
half of all businesses in all sectors
· Reducing environmental impact was more relevant to the primary sector followed
by the construction sector.
30
UK Innovation Survey 2009
2.6.5 Cooperation
A range of studies have indicated that cooperation arrangements can enhance
innovation and deliver improved businesses performance. There is significant policy
interest in deriving economic and social benefits from the outputs of the world ranking
UK research base. This can, in some circumstances, be enabled through direct co-
operation between business and HEIs, as well as through other forms of knowledge
transfer.
Enterprises that innovated in the strictest sense are asked whether they have
cooperation arrangements 11 and with what type of cooperation partner and their
location. The information tabled below shows the shares for each type of cooperation
partner.
A large proportion of these firms collaborated on their innovation projects during the
latest survey period. Nearly three fifths (59 per cent) of all strictly innovative
enterprises had co-operation arrangements. A direct comparison with the previous
survey is not possible, due to amendments to the survey question, but it seems
reasonable to say, questionnaire changes aside, that a higher share of firms are
collaborating for innovation The most frequent partners for co-operation were clients
or customers (45 per cent of strict innovators, see Figure 2.19). Around 15 per cent
of innovators included universities among their partners.
11 Changes to the routing within the 2009 questionnaire, including the removal the filter question on cooperation ‘did your business
cooperate on any innovation projects Y/N’ is likely to have contributed to the increased shares of innovators cooperating in this round of
the survey
31
UK Innovation Survey 2009
100%
80%
60%
40%
20%
0%
Clients or Suppliers of Other Competitors Consultants, Universities Government
customers equipment, businesses or other commercial or other or public
materials, with your businesses in labs, or higher research
services or enterprise your industry private R&D education institutes
software group institutes institutions
· On the whole there was little variation by size of enterprise in the proportion of
enterprises collaborating on innovation projects and by type of partner. Although
higher shares of large firms were collaborating with ‘other businesses within your
enterprise group’ and ‘Consultants, commercial labs, or private R&D institutes’.
Whereas shares of SMEs that collaborate with ‘Competitors or other businesses
in your industry’ were higher than for large firms.
· The location of partners varied more across business size groups. Perhaps not
surprisingly, larger firms collaborate more both nationally and (especially)
internationally than SMEs.
· At Regional level, Table 2.8 shows that the East of England had the highest
share of enterprises with some form of collaboration.
· The North East of England had the highest share of collaborations with the
research base
32
UK Innovation Survey 2009
Suppliers of Other
equipment, businesses Competitors or Consultants, Universities or Government or
materials, with your other commercial other higher public
Clients or services or enterprise businesses in labs, or private education research
GOR Any customers software group your industry R&D institutes institutions institutes
East of 65.6 46.3 41.6 30.4 18.9 20.7 15.5 13.7
England
Scotland 62.1 43.2 42.8 30.7 21.1 20.5 13.5 13.8
North West 60.7 47.9 41.5 35.5 23.4 18.5 16.3 15.4
Yorkshire 60.6 46.1 39.7 24.4 17.4 15.5 12.2 11.7
and The
Humber
South East 59.9 42.9 39.8 33.8 22.0 17.7 16.3 15.5
Wales 59.8 50.7 39.8 29.5 22.3 19.8 15.3 13.8
North East 59.2 48.4 41.1 32.1 24.6 22.9 19.6 17.0
London 58.1 46.8 37.6 31.3 21.2 19.1 16.1 17.4
West 57.1 46.3 36.8 27.0 19.4 18.3 14.0 10.6
Midlands
East 56.5 43.6 40.6 25.9 15.2 18.6 15.4 13.0
Midlands
South 53.4 37.2 35.0 24.3 17.4 14.8 9.7 10.6
West
Northern 50.5 37.2 33.0 24.9 14.3 16.5 11.9 11.0
Ireland
All 59.1 44.7 39.2 29.8 20.0 18.3 14.8 14.0
33
UK Innovation Survey 2009
100%
80%
All UK regional All UK national All other Europe All other countries
60%
40%
20%
0%
North East
South East
London
North West
South West
East Midlands
Scotland
East of England
West Midlands
Wales
Yorkshire and The
Northern Ireland
Humber
· Scotland had the highest share of business that collaborated at the regional level
followed by the North West and Northern Ireland.
· Northern Ireland and the South East had the largest share of European
collaborations. London and the East of England had the largest share of
enterprises collaborating with partners outside of Europe.
34
UK Innovation Survey 2009
Other Suppliers of
businesses equipment, Competitors or Consultants, Universities or Government
within your materials, other commercial other higher or public
enterprise services, or Clients or businesses in labs, or private education research
Sector Any group software customers your industry R&D institutes institutions institutes
Retail &
60.1 45.3 46.1 35.7 25.1 20.1 16.8 17.0
distribution
Primary sector 57.1 44.4 39.8 27.1 24.1 33.8 14.3 14.3
Other services 52.5 39.6 33.3 27.6 19.6 17.8 13.6 14.4
Other
63.6 46.8 43.0 26.9 16.7 17.3 14.7 10.0
manufacturing
Knowledge-
intensive 61.9 47.4 36.2 30.4 20.3 17.5 15.5 14.9
services
Engineering-
based 67.6 53.1 42.6 30.6 18.7 20.8 15.4 12.1
manufacturing
Construction 52.2 38.2 39.4 24.8 15.3 15.8 10.6 12.1
All 59.1 44.7 39.2 29.8 20.0 18.3 14.8 14.0
35
UK Innovation Survey 2009
Produce materials
eligible for copyright
Large (250+)
Medium (50-
Register a trademark 249)
Small (10-49
employees)
All
Register an industrial
design
36
UK Innovation Survey 2009
Produce Register
materials Apply an
eligible for Register a for a industrial
Sector copyright trademark patent design
Knowledge-intensive services 11.3 6.1 3.6 1.0
Engineering-based manufacturing 7.6 5.7 8.6 3.1
Other manufacturing 6.8 7.3 4.3 2.2
Retail & distribution 5.1 7.0 3.2 1.5
Other services 3.1 3.3 1.0 0.6
Primary sector 2.1 4.3 2.1 1.6
Construction 0.4 1.4 0.4 0.4
A similar pattern to that found in previous surveys is apparent. Just under half of all
non innovators said ‘No need due to market conditions’ when asked why. The actual
share (quoted by 46 per cent of firms) was a little down though on 2007 results (52
per cent). Around a third gave the reason ‘no need due to previous innovations’ and
twenty seven per cent chose ‘factors constraining innovation’. The majority of non-
innovators in the periods covered by successive surveys appear to take that decision
in the light of their market and internal circumstances, while around a quarter report
facing insuperable constraints.
37
UK Innovation Survey 2009
100.0%
80.0%
60.0%
40.0%
20.0%
.0%
Manufacturing
Manufacturing
Construction
Primary sector
Knowledge-
distribution
Other services
Engineering-
intensive
Retail &
services
based
Other
· All sectors report ‘No need due to market conditions’ as the most common
reason for not innovating.
· Less innovative sectors during the period such as construction and other
services tended to report “other constraining factors” as a reason for not
innovating, rather than there being no need to due to previous innovations.
· The variability across sectors for not innovating during the period emphasizes
again the differences in product life cycles.
38
UK Innovation Survey 2009
Constraint Not
important Low Medium High
Excessive perceived economic
26.2 20.2 27.6 20.3
risks
Cost factors Direct innovation cost too high 29.4 18.1 25.8 21.1
Cost of finance 27.6 22.7 22.2 22.3
Availability of finance 29.8 25.5 19.0 20.4
Lack of qualified personnel 32.1 31.8 22.5 8.4
Knowledge Lack of information on
36.2 39.9 15.5 3.3
factors technology
Lack of information on markets 35.9 38.9 16.2 3.3
Market dominated by
33.5 30.7 20.1 10.4
established businesses
Market factors
Uncertain demand for
32.4 28.5 24.5 9.1
innovative goods or services
Regulatory UK Government regulations 41.3 29.1 13.5 10.4
factors EU regulations 46.2 28.3 10.9 8.8
· Consistent with other surveys, cost factors, including direct resource costs, risks
and finance were reported as of some importance with greater frequency than
other forms of constraint. And, they were reported with more importance by a
higher share of firms than in the previous survey.
39
UK Innovation Survey 2009
Constraint Not
important Low Medium High
Excessive perceived economic
61.3 8.1 9.8 8.9
risks
Cost factors Direct innovation cost too high 62.9 7.2 7.9 9.9
Cost of finance 61.0 8.4 8.9 10.1
Availability of finance 61.3 9.7 8.0 9.3
Lack of qualified personnel 64.0 12.5 7.2 4.3
Knowledge Lack of information on
66.2 13.6 6.0 2.3
factors technology
Lack of information on markets 66.7 13.6 5.5 2.0
Market dominated by
62.5 10.5 8.5 6.4
established businesses
Market factors
Uncertain demand for
63.7 9.6 8.9 5.8
innovative goods or services
Regulatory UK Government regulations 67.2 11.2 5.1 4.5
factors EU regulations 69.4 10.3 4.7 3.5
· Non innovators rating of the barriers is almost a mirror image of the results for
innovators with ‘not important’ the predominant response and only a quarter
rating constraints as ‘high’.
40
UK Innovation Survey 2009
10%
8%
5%
3%
0%
Large (250+)
Small (10-49
Medium (50-
All
employees)
249)
12The coding of the skills question results has made it impossible to remove missing values from the analysis. This is likely to have
lowered the average proportion of all graduates within this analyses.
41
UK Innovation Survey 2009
· Innovative active enterprises have more than double the share of employees
educated at degree level in science or other subjects than their non-innovative
equivalents.
· Overall, Innovative business have around five per cent of science graduate
employees and 8 per cent of other graduates against one per cent science and
three per cent other graduates in non-innovative business. This were lower than
the proportion of employees with a graduate (or above qualification) in 2006.
20%
15%
10%
5%
0%
Manufacturing
Manufacturing
Total
Construction
Primary sector
Knowledge-
distribution
Other services
Engineering-
intensive
Retail &
services
based
Other
42
UK Innovation Survey 2009
43
UK Innovation Survey 2009
3.1 Introduction
This sort of panel data is very useful for the deeper analysis of innovation. Not only
does it allow like-with-like comparisons to be made over a period of time, it can also
help to answer questions about behaviour and dynamics of change that individual
cross sections cannot explain.
In this section we present the main results from our analysis of this panel. However,
it is important to note that these results are not statistically representative of all
businesses in the UK, although there is a reasonable degree of similarity in their
innovation characteristics. We present these finding with the purpose of
understanding better the nature of innovation over time. The analyses that follow are
based on 4,054 unweighted responses that the panel comprises.
44
UK Innovation Survey 2009
We show the composition of the panel – in terms of business size, location and
industry – below in Table 3.1. Perhaps not surprisingly there has been very little shift
in the geographical locations or the industry these businesses operate in. However,
businesses in our panel do appear to have grown in size.
45
UK Innovation Survey 2009
The prevalence of innovation activity in our panel for each of the surveys is shown in
Table 3.2. This table also shows the proportion of businesses that engaged in the
various modes that our definition captures, which are covered in more detail later in
the chapter.
Table 3.2: Percentage of enterprises who were innovation active in each survey
wave, by type of activity
Table 3.2 reveals that innovation activity among businesses has fluctuated during the
lifetime of the panel. As a result of a rise in the proportion of firms investing in
activities related to innovation, the share of innovation active businesses increased
by 11 per cent between the 2005 and 2007 surveys. However, innovation activity
then decreased by 15 per cent between 2007 and 2009, through lower shares with
innovation investments.
This pattern of change in innovation activity within the panel is broadly inline with that
seen in each of the cross-sectional surveys. However, we see here that the
proportions of innovation active businesses for each survey are higher than their
cross-sectional equivalents, due to the compositional differences between the panel
and cross-sectional datasets.
The only exception to this was in the South East region where activity did not change
between the 2005 and 2007 surveys.
46
UK Innovation Survey 2009
100%
80%
60%
40%
20%
0%
EM E SW Scot Y&H Wal SE NE NI NW WM Lon
The greatest change in innovation activity occurred in East Midlands, with an 18 per
cent increase between the 2005 and 2007 surveys, then more than offset by a 28 per
cent per cent fall between the 2007 and 2009 surveys. Northern Ireland saw the
smallest changes.
100%
80%
60%
40%
20%
0%
Large
Medium
Small
In terms of businesses size (Figure 3.2) there is also little difference. In the 2005 and
2007 surveys, medium and large firms in our panel were more active than small
firms. However, whereas activity in small firms has changed little between surveys,
47
UK Innovation Survey 2009
the large and medium-sized businesses have seen greater swings and the gap has
narrowed, as we discussed looking at the general indicators in section 2.
There are, however, greater differences when it comes to sectors (Figure 3.3). In
this case, not only do certain sectors appear to be more active than others, but there
is more variation in activity levels from one survey to next.
In particular, the manufacturing sectors (Engineering based and other) and the
knowledge-intensive services have higher shares of innovation activity than the other
sectors. But the level of activity varies little between surveys in these sectors –
suggesting some degree of persistence in the inter-sectoral patterns of innovation
behaviour.
In contrast, we find that the distribution, services and construction industries are less
active and display a greater change in activity from one survey to the next. Indeed,
the greatest change in innovation activity occurred in Other Services and
construction where shares with activity increased by 30 per cent and 26 per cent,
respectively, between 2005 and 2007, and then fell 22 per cent and 24 per cent,
respectively, in the following period.
100%
80%
60%
40%
20%
0%
Knowledge-
Construction
Manufacturing
Manufacturing
Other services
Primary sector
distribution
intensive
Engineering-
services
Retail &
Other
based
48
UK Innovation Survey 2009
proportion of businesses that were always active, never active, or intermittently active
across the surveys.
Always Never
innovation innovation
active, 40% active, 10%
Sometimes
innovation
active, 50%
Here we find the vast majority (some 90 per cent) of businesses in our panel were
innovation active at some stage. This comprised 40 per cent of businesses that were
persistently active, i.e. innovation active in every survey, and 50 per cent of
businesses who innovate irregularly, i.e. active on one or two but not all three
surveys. Just ten per cent of businesses in the panel were never innovation active.
We have already seen that innovation activity various somewhat across different
sectors, and we can also see how persistent innovation activity is among the sectors.
This is shown in Table 3.3.
49
UK Innovation Survey 2009
From Table 3.3 we see that manufacturing industries have the highest proportion of
businesses that are always innovation active. In fact, the majority of firms in this
sector are always innovation active – some 56 per cent. Furthermore, they also have
the lowest proportion of businesses that never innovate. Again, we noted in section1
there appears to be a minimum level (likely sector dependent) of innovation which
firms need to achieve in order to survive.
Within the remaining sectors there is evidence of much more churn. Here, the
majority of firms move in and out of innovation activity irregularly.
3.3.2 Transitions
As an overall indicator of movements between states of innovation activity, we can
use transition matrices to look at change. These matrices show the proportion of
businesses moving between different states of activity between any two consecutive
years.
50
UK Innovation Survey 2009
76 per cent of innovation active businesses will be innovation active the following
period.
At the start of the panel period, 30 per cent of businesses said they introduced a new
or significantly improved product, which then fell to around 25 per cent in the last two
surveys.
There is a similar picture with process innovation where the proportion of businesses
developing new or significantly improved processes fell from 22 per cent in the first
survey to around 15 per cent in both the subsequent periods. We can see from the
Figure 3.5, below, just how the proportions have changed.
100%
90%
80%
70%
60%
50%
40%
30%
Product
20% Innova ti on
Proces s
10% i nnova ti on
0%
2005 2007 2009
51
UK Innovation Survey 2009
We also see how product and process innovation varies according to business size,
location and industry in Figures 3.6-3.11. For ease of comparison, these are
presented side-by-side.
In terms of business size (Fig 3.6 & 3.7) we see that there are substantial falls in the
proportion of product and process innovation across all business sizes between the
2005 and 2007 surveys. However, from this point, differences do occur in our panel.
For instance, there is an increase in product innovation within large and small-sized
firms between the 2007 and 2009 surveys, addressing to some degree the decline
seen in the previous period. Yet at the same time process innovation within large
and small firms decreased further.
In terms of sectors (Fig 3.8-3.9), there is also evidence of different product and
process innovation behaviour. In sectors with typically high levels of product
innovation, such as manufacturing and the knowledge-intensive services, the picture
is almost cyclical. But in sectors with generally lower product innovation, the pattern
is less clear. With process innovation we see a mixed picture with continual declines
in process innovation in some sectors (namely manufacturing and the primary sector)
and a combination of declines and increases in others.
52
UK Innovation Survey 2009
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
Large Medium Small Large Medium Small
Figure 3.8: Product innovation by sector Figure 3.9: Process innovation by sector
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
Engineering-
Knowledge-
Other services
Primary sector
distribution
Construction
Manufacturing
Engineering-
Knowledge-
Other services
Primary sector
distribution
Construction
intensive
Manufacturing
Retail &
intensive
Retail &
based
Other
based
Other
Figure 3.10: Product innovation by GOR Figure 3.11: Process innovation by GOR
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
EM
WM
SE
NE
EM
WM
Y&H
SE
NE
NI
Lon
NW
SW
Scot
Y&H
NI
Lon
NW
SW
Scot
Wal
Wal
53
UK Innovation Survey 2009
Across the regions, the picture is also unclear (Fig 3.10-3.11). Again, with product
innovation the outlook is almost cyclical where the proportion of innovation
decreased sharply between 2005 and 2007 but then rose between 2007 and 2009;
and with process innovation we see a gradual decline in most regions.
It appears then that product and process innovation is much less persistent that
innovation activity – that is, that there is an underlying pattern of innovation
investment with more occasional introductions into the market or into use of specific
new or improved goods, services or processes for their production and supply.
In Table 3.5 we show the proportion of businesses in our panel that persistently,
occasionally, or never product or process innovate.
This Table reveals that the majority of businesses did not bring any new or
significantly improved products or processes to the market at any time during the
panel’s duration. Half (52 per cent) of the businesses in the panel never
implemented new or improved products and just under two-thirds (65 per cent) never
innovated in process.
Nonetheless, there is still a sizeable proportion (32 to 38 per cent) of businesses that
did bring new or improved products and process to the market, albeit on an irregular
basis, and a small proportion (4 to 10 per cent) that innovated persistently. The
evidence from these surveys suggests that that product and process life-cycles are,
on average, considerably longer than the reference period (three years) of the
surveys, with the irregularity of innovation a reflection of the varying life spans of
different products and processes, and the time they take to develop. These patterns
of innovation over time may be taken to be useful additional indicators of UK
business propensity to product and process innovation.
54
UK Innovation Survey 2009
Table 2.6 reveals that in 2005 and 2007 only 12 per cent of businesses reported
ongoing or failed innovation projects, which decreased to eight per cent in 2009.
This proportion is fairly small but some 20 per cent of firms have reported ongoing or
failed projects at some stage, and two per cent of businesses persistently had
projects in the pipeline or abandoned.
The outcome of these projects are not known, however there is evidence to suggest
that many businesses have these projects running alongside new or significantly
improved products or process brought to the market.
For example, Figure 2.12 shows that in the 2009 survey 84 per cent of businesses
with ongoing or incomplete innovation had introduced a product or process to the
market in the same period. An indication that some businesses are already
preparing for future innovation projects as current innovations hit the market.
100%
80%
60%
Product or process
Product or process
innovator, 84%
innovator, 83%
Product or process
innovator, 71%
40%
20%
0%
2005 2007 2009
14 The survey changed from one question on ongoing and abandoned to two separate questions in 2009
55
UK Innovation Survey 2009
Over the three surveys we see that a large proportion of businesses in our panel
have invested in some form of activity related to innovation 15. At the start of the
panel period, 63 per cent of businesses reported investment. This rose to 72 per
cent in 2007, largely through increased machinery, equipment and software
purchasing, before falling to 59 per cent in 2009 as purchasing decreased again.
The high levels of investment propensity from survey to survey suggest that there is
some persistency in investment. Table 2.8 summarises the proportion of businesses
that always invest, intermittently invest or never invest in different types of innovation
activities.
In all, we find that some 37 per cent of businesses in the panel persistently invested
in some form of activity related to innovation. And a further 52 per cent have
invested at some stage during the panel lifetime.
15The survey changed from one question each for Acquisition of machinery, equipment and software and Market introduction of
innovations to separate questions for each component in 2009.
56
UK Innovation Survey 2009
However, we also find that some areas of investment receive more persistent
investment than others. For instance, we find that 23 per cent of businesses always
invest in machinery, equipment and software, and a further 59 per cent invest
intermittently. We also find a sizeable proportion persistently invest in internal R&D,
the market introduction of innovations (which includes market research) and training
for innovative activities, all of which can thought of as on-going activities necessary
to support current and future innovations.
Not all types of activities receive the same commitment to investment. Activities such
as design, acquiring external R&D and external knowledge are far less persistent as
the majority of businesses never invest in these areas. Between 27 and 32 per cent
of businesses intermittently invest in these activities – perhaps to meet the needs of
new product or process innovations.
The proportion of wider innovators in our panel is summarised in Table 3.9, which
also shows the reported proportions of businesses that reported engaged in the
various types of activity that collectively define “wider” innovation.
57
UK Innovation Survey 2009
On the whole, wider innovation in the panel is relative low. Over the life time of the
panel, the proportion of wider innovators has declined steadily from 39 per cent in
2005 to 30 per cent of businesses in 2009, with similar patterns of reducing shares of
businesses reporting each of the four categories of wider innovation.
Furthermore, we see from Figure 2.13 that wider innovation is something that is more
occasional than regular. Whilst 39 per cent of businesses in the panel reported no
wider innovation, the majority (49 per cent) of business did report such changes at
some point. Twelve per cent of firms were wider innovators through all three surveys.
Persistent wider
innovator, 12%
Occasional wider
innovator, 49%
No wider
innovation, 39%
58
UK Innovation Survey 2009
Looking at Table 2.10 we can see that cost factors (including excessive risk, high
costs, cost and availability of finance) and market factors (including uncertain
demand and market domination) tend to be considered by many businesses to be a
constant constraint. Particularly in 2005 and 2007 when over a half of all
respondents in the panel perceived these as obstacles.
When we look at how perceptions have changed over time, Table 2.10 reveals that
there is not a great deal of difference between the 2005 and 2009 surveys; cost and
market factors are marginally up while knowledge and regulatory factors are down
slightly.
However, there was a marked drop in the share of panel firms perceiving barriers in
the 2007 survey (i.e. for 2004 to 2006) which coincided with a marked rise in
innovation activity at the same time.
Indeed, comparing the pattern of innovation activity and perceptions of barriers, there
appears to be some correlation: higher proportions of innovation appear associated
with a softer view on constraints, whereas lower innovation activity is correlated with
more businesses perceiving constraints as obstacles.
59
UK Innovation Survey 2009
Typically, we find that firms that are innovation active are more likely to report
obstacles than those that aren’t (this can reasonably be taken to reflect that
constraints are experienced during the innovation process). Table 2.11 shows the
shares of businesses reporting constraints, depending on whether they were
innovation active or not (for ease, related barriers have been grouped together).
Here, as an example, we see that 80 per cent of innovation active business in 2005
said cost was a constraint, compared to just 30 per cent of non-active businesses.
Table 2.11 does not distinguish between the firms ranking barriers “high”, “medium”
or “low”. To present the changes in the number of businesses that see certain
constraints as being particularly tough, Table 3.12 has been constructed to show the
proportion of businesses ranking constraints as “high”.
This table shows a slightly different picture to Table 3.11 with more businesses
reporting knowledge factors as a “high” constraint to innovation than cost. The cost
of innovation still features highly but for innovation active businesses these are
perceived as less of barrier now than what they were in 2005, despite the 2009
survey capturing the early stages of the recession)
60
UK Innovation Survey 2009
the same businesses each time, we can be sure that any changes reported are real
and do not arise as a result of any compositional differences in the survey samples.
However, because the survey was not originally designed to be longitudinal this does
not hold true for the all indicators. Certain questions are directed at specific groups
of respondents (for instance innovators only) and so as the businesses in these
groups changes from survey to survey, it means we no longer have the
compositional consistency we desire. For completeness, we include the results for
these indicators, but it should be noted that these do not necessarily represent real
changes within the same businesses.
Businesses are asked to rank various factors behind their decision to innovate.
These factors are presented in Table 2.13, along with the proportion of innovative
businesses that rated them as being “high”.
Generally, the drivers of innovation shift somewhat from survey to survey, possibly as
a result of the having different businesses in each period. However, there may be
evidence of the onset of recession having an effect on decisions to innovate.
Compared to 2007, the 2009 survey showed a marked increase in the share of
businesses with the objective to innovation to reduce unit costs and increase value
added.
Conversely, the survey also asks the businesses that did not innovate why they did
not. Here, the trend is clearer with the majority of firms in each survey citing market
conditions as the main reason. This doesn‘t appear to have changed much in the
last two surveys, although increasing proportions of non-innovators are remaining so
due to previous innovations and other factors constraining innovation.
61
UK Innovation Survey 2009
Table 3.14: Reasons for not innovating (percentage of all firms rating “high”)
62
UK Innovation Survey 2009
The survey was voluntary and conducted by means of a postal questionnaire. A copy
of the questionnaire used can be found on:
http://www.bis.gov.uk/policies/science/science-innovation-analysis/cis/cis6-
questionnaire
The results in this article are based on weighted data in order to be representative of
the population of firms. The responses were weighted back to the total business
population of those in the IDBR. On average each respondent represents 13
enterprises in the population.
63
UK Innovation Survey 2009
Division
Enterprises are defined by the Standard Industrial Classification of Economic
Activities – SIC(2003). SIC(2003) is a hierarchical five digit system. Each division is
uniquely defined at the two digit level. Division are broken down into groups (3 digits).
Then into classes (4 digits) and, in several cases, into subclasses (5 digits).
· Division 45 Construction
· Division 60 to 63 - Transport
64
UK Innovation Survey 2009
Sectors of industry
Enterprises were clustered into seven sectors of industry. Those sectors are defined
as followed by their SIC(2003) codes:
· Engineering-based manufacturing 28 to 35
· Construction 45
65
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