Innovators, Non-innovators and Venture Firms: What Is the Nature of Firms in Research and Development Services Industries? - ARCHIVED

Results from the Survey of Innovation 2003 raised some interesting questions. First, an unexpected one-third of establishments in R&D services were not innovative. According to the guidelines of the Oslo Manual, innovative establishments are those that introduced a new or significantly improved product or process on to the market or into production, within a specified interval. Second, many of these non-innovative establishments indicated that satisfying existing customers was irrelevant to their firms success. This was very different response from all other types of firms.

This working paper provides a potential explanation of these unexpected results, as well as an overview of available information on establishments in R&D services (NAICS 5417) in the context of professional services generally. The paper assembles descriptive data to show that non-innovative establishments in R&D services differ significantly from other non-innovative establishments and, while not innovative, they are nevertheless highly inventive. It presents some evidence to suggest that they are venture firms (firms relying on infusions of investment capital rather than revenues from sales to sustain their operations) and proposes a specific set of indicators that would facilitate resolution of the nature of firms in this industry group.