Innovation in the business enterprise sector, 2004

The reported innovation activity for the period 2002 - 2004 is a little lower than for the previous comprehensive innovation survey for the period 1999 - 2001. Manufacturing and service enterprises are for the main part stable in their innovation activity. Within other industries, including extraction of oil and natural gas as well as electricity , gas and water supply and construction , there is a decline in innovative activity.

Large enterprises more often innovative

The innovation activity in Norwegian enterprises varies to a large extent with the size of the enterprise. The largest enterprises are by far more often innovators than the smaller enterprises. Within business and industry as a whole, 62 per cent of the enterprises with more than 500 employees introduced new or significantly improved products or processes in the period 2002 - 2004. Only 20 per cent of the enterprises with between 10 and 19 employees did the same. This may stem from various reasons. Larger enterprises often have greater resources to be used for innovation purposes, both in terms of economy and knowledge. Furthermore, large enterprises also tend to have a wider range of products and more processes than smaller enterprises, and thus have greater opportunities for innovation in at least one area.

The difference between large and small enterprises is more pronounced within manufacturing than within services. As many as 77 per cent of the largest manufacturers were innovators, while only 26 per cent of the smallest enterprises stated the same. Within service industries, 50 per cent of the largest enterprises introduced new or improved products or processes, while 24 per cent of the smallest enterprises created the same results.

Few new products to the market

The majority of the innovative enterprises have introduced new or significantly improved products for the enterprise - 21 per cent declare this. Far fewer, only 11 per cent, have also introduced products that are new also to the market. A 16 per cent share of the enterprises can be called process innovators as they have introduced new or significantly improved production technology, and new or improved methods of production or delivery. There is a tendency, however, that the same enterprises are both product and process innovators.

The majority of the innovative enterprises state that they for the main part develop their own innovations. Product innovators were particularly self-reliant in innovation activities - 71 per cent declare that the enterprise developed innovations independently. While 22 per cent of the product innovators developed their innovation in cooperation with others, only 8 per cent let other parties develop the products. Among the process innovators the differences are less pronounced, but also here the self-reliant enterprises make up the majority - 51 per cent developed the processes within the enterprise.

Some industries stand out

Manufacturing enterprises are more innovative than enterprises within the service industries, which has been the case also for previous surveys. While 37 per cent of the manufacturing enterprises have introduced new or improved products or processes, only 28 per cent of the service enterprises can say the same. Some industries stand out as particularly innovative, and these are industries that have shown themselves as more innovative than the average in past surveys as well. The single most innovation intensive industry is manufacture of radio , television and communication equipment and apparatus , in which 73 per cent of the enterprises are innovative. There is a high share of innovators also in manufacture of chemicals and chemical products (63 per cent), manufacture of basic metals (58 per cent) and manufacture of medical , precision and optical instruments (58 per cent). Among service enterprises, computers and related activities and telecommunications stand out, with a share of innovative enterprises of 61 and 51 per cent, respectively.

Co-operation on innovation activities

A successful innovation project often requires the enterprise to co-operate with other parties, and 33 per cent of the innovative enterprises had such co-operation agreements. Suppliers are most frequently cited as partners. A share of 72 per cent of the enterprises co-operating with others report they have this form of co-operation agreement, while 29 per cent assess that co-operating with suppliers is vital to their innovation project. Customers are almost as frequently used as partners in such agreements - 70 per cent report this - and co-operation with customers is the form of agreement most frequently reported as vital to the project, 42 per cent state this.

Consultants are cited as partners by 51 per cent, while government and private research organisations are reported by 48 per cent and universities and higher education institutes are reported by 44 per cent. Shares of 11, 14 and 12 per cent, respectively, assess these co-operation arrangements as vital to the enterprise’s innovation project.

There are, however, some differences between enterprises of different sizes, when it comes to choosing partners for co-operation agreements. While consultants are reported as partners by roughly half of all enterprises, regardless of size, research organisations and universities and higher education institutes are much more frequently used by the larger enterprises. Among enterprises with more than 500 employees, 73 per cent cite the former as a partner, while 70 per cent co-operate with universities and higher education institutes.

Internal information most important

The enterprises gather information needed for successful innovation from various sources. Internal sources are the most important - 51 per cent state they gather the necessary information from sources within the enterprise. Clients and customers provide information to 35 per cent of the enterprises. Suppliers, which were the most frequently reported co-operation partner, are only utilized as a source of information by 22 per cent.

Competitors, consultants and commercial laboratories/R&D enterprises are used to a lesser extent as information sources, only by 9, 4 and 3 per cent of the enterprises, respectively. Nor are universities and higher education institutes (3 per cent) or research institutions (4 per cent) common sources of information.

Positive effects

The result of innovation activities may cause several positive effects for the enterprise. Improved quality of goods and services and an increased range of goods and services are the effects that most enterprises report as important, by 28 and 26 per cent, respectively. A share of 16 per cent reported an increased market share as the result of the innovation activities.

Different enterprises report to a greater extent the same effects of innovation activities, than has been the case in previous surveys. The various effects are present with relatively small variations, regardless of size or industry.

Economic factors most frequently barriers

A considerable number of enterprises reported that their innovation activities were limited or hampered in the period 2002 - 2004. Primarily, economic factors obstruct innovation activities. A share of 17 per cent of the innovative enterprises report that too high innovation costs hampered their innovation activities. The lack of external or internal funding is cited as the obstructing factor by 12 and 13 per cent, respectively. Relatively few enterprises consider internal factors such as lack of qualified personnel, or lack of information about technology or market as substantial obstacles to their innovation activities. Nor is there a widespread view that demand uncertainties or the dominance of other enterprises significantly hampers innovation.

Few applies for patent

The enterprises use different methods to protect their innovations. A share of 17 per cent applied for a patent within the period 2002 - 2004. During the same period 22 per cent used trademarks and 12 per cent used copyright to protect their inventions and innovations. Among strategic methods, 39 per cent made use of a lead-time advantage on their competitors, while 26 per cent relied on secrecy.

There are some differences between the sectors when it comes to methods of protection. Patent applications are more frequent in manufacturing (21 per cent) than in services (14 per cent), while trademark and copyright are used more commonly in services (28 and 16 per cent, respectively) than in manufacturing industries ( 20 and 10 per cent, respectively).

Moreover, across industries, methods of protection are more frequently employed in large enterprises, as is expected, seeing that larger enterprises more frequently are innovative. There is, however, some variation across industries in this case.

Organisational and marketing innovations

The innovation survey 2004 contains more information about organisational and marketing innovation, than has been the case for past surveys. Of all enterprises, 22 per cent have carried through organisational alterations of a kind that can be called organisational innovations. Among these enterprises, 73 per cent have altered the management structure or organisational structure, while 52 per cent have new knowledge management systems to better use or exchange information.

Of all enterprises, 20 per cent have carried through marketing innovations during the period 2002 - 2004. Among these, 74 per cent have found new client bases or market segments, while 46 per cent have significantly altered design or packaging of a good or service.

The survey shows that organisational and marketing innovations are primarily introduced by enterprises engaged in product or process innovation. Moreover, large enterprises are much more often engaged in these types of innovation as well, than are smaller enterprises.

Positive effects also from organisational and marketing innovations

The enterprises experience different effects of the organisational and marketing innovations. Among the effects of organisational innovations, increased capacity stands out - 29 per cent report this effect. A percentage of 27 state their enterprise has increased its profitability, and 26 per cent have had quality improvements in the enterprise’s goods and services. A share of 21 per cent experienced reduced rates of employee turnover or improved employee satisfaction as a result of organisational innovations.

Enterprises engaged in marketing innovation experience positive effects as well. Of all marketing innovators, 68 per cent report increased sales, and 48 per cent have also increased their profitability as a result of the marketing innovations.

The innovation survey is carried through every four years. Its purpose is to map the extent of innovation in Norwegian business and industry, and to map factors important to the innovation process. The survey is part of Eurostat’s fourth Community Innovation Survey (CIS4). Extended results including comparisons with other EEA countries will be published at a later date.

Tables:

• Table 1 Enterprises with innovation. Per cent of population. 2002-2004
• Table 2 Enterprises with innovation. Per cent of population. 2002-2004
• Table 3 Innovative enterprises. Per cent of population. 2001, 2003 and 2004
• Table 4 Who developed the enterprise's products and processes during the period 2002-2004
• Table 5 Who developed the enterprise's products and processes during the period. 2002-2004
• Table 6 Effects of the innovation activity. The share of enterprises that report the effect in question to be of great importance during the period 2002-2004
• Table 7 Effects of the innovation activity. The share of enterprises that report the effect in question to be of great importance during the period 2002-2004
• Table 8 Sources of information for innovation activities. The share of enterprises reporting the source in question to be of high importance during the period 2002-2004
• Table 9 Sources of information for innovation activities. The share of enterprises reporting the source in question to be of high importance during the period 2002-2004
• Table 10 Co-operation partnerson for innovation activities during the period 2002-2004. Per cent of enterprises co-operating on innovation
• Table 11 Co-operation partnerson for innovation activities during the period 2002-2004. Per cent of enterprises co-operating on innovation
• Table 12 Factors hampering innovation activities for units with innovation. The share of innovative enterprises reporting the factor in question to be of high importance, during the period 2002-2004
• Table 13 Factors hampering innovation activities for units with innovation. The share of innovative enterprises reporting the factor in question to be of high importance, during the period 2002-2004
• Table 14 The use of patents and other methods of protection during the period 2002-2004. Per cent of innovative enterprises
• Table 15 The use of patents and other methods of protection during the period 2002-2004. Per cent of innovative enterprises
• Table 16 Organisational and marketing innovations carried through during the period 2002-2004
• Table 17 Organisational and marketing innovations carried through during the period 2002-2004
• Table 18 Effects from organisational and marketing innovations during the period 2002-2004. The share of enterprises reporting the effect in question to be of high importance
• Table 19 Effects from organisational and marketing innovations during the period 2002-2004. The share of enterprises reporting the effect in question to be of high importance