Low-tech Innovation

Shedding light from various research perspectives on the phenomenon of non-R&D-performing and non-R&D-intensive innovators is the aim of this anthology. A variety of different empirical approaches ranging from macroeconomic considerations to microeconomic analysis address open questions related to the role of non-R&D-performing and non-R&D-intensive sectors as well as firms in developed economies like Germany. The editorial highlights the research motivation of this anthology and outlines the structure of every book chapter.

This paper deals with an industrial sector that will be referred to as “low-technology” or non-research-intensive and that comprises mostly mature industries. In recent years, a growing body of innovation literature has dealt with the relevance and prospects of low- and medium-technology (LMT) in advanced economies. This research focus is above all motivated by criticism of the mainstream of innovation debate with its high-tech focus. However, LMT research can instructively show that non-research-intensive industries are surprisingly innovative and play an essential role for the development of modern economies. Following the literature, the industrial LMT sector holds forward-looking innovation potential based on both the intelligent modification of available technologies and existing knowledge and their combination with new high-tech components. Therefore, the research findings outlined here culminate in the thesis that “hybrid” innovations open up promising development perspectives for traditional industries. Hybrid innovations are understood to be innovations based on distinct market-oriented modifications of available technologies and of existing knowledge as well as especially on their combination with new high-tech components. The methodological base of the argumentation is a systematic analysis of LMT industry research results from approximately the last 10 years.

This book chapter focuses on non-R&D-intensive industry sectors and analyses their economic importance for Germany. Therefore we compare non-R&D-intensive industry sectors with R&D-intensive-industry-sectors and service sectors regarding R&D activities, domestic value added and import intensity, production, employment and skills. In order to not only include direct effects for these indicators we also analyze indirect effects via input-output (I/O) analysis by simulating the potential effect additional 1 billion euros demand impulse in the various sectors. On the one hand, our results show that the dynamics of non-R&D-intensive industries is less than that of the R&D-intensive industrial sectors. Moreover, R&D-intensive industries are found to contribute more to the employment of highly skilled professionals. On the other hand, our potential analyses show that non-R&D-intensive industries are of significant economic importance to Germany. This importance is evident based on a number of macroeconomic indicators: non-R&D-intensive industries are associated with strong indirect employment effects that also include qualified personnel. Overall, the analysis shows that the consideration of indirect macroeconomic effects is important to con-ducting an appropriate analysis of the role of non-R&D-intensive industries. Non-R&D-intensive companies have profound effects on upstream economic sectors through their spending on intermediate inputs (including business-related services and engineering). Policymakers should consider those linkages in determining an adequate selection of measures.

Intellectual property protection via patenting can be regarded as an indispensable means to stay competitive at the national and international levels, also in non-R&D-intensive technology areas. As patents can be used as output indicators of innovation, we aim to shed light on the technological output of non-R&D-intensive sectors with the help of in-depth patent analyses. In addition to investigating the absolute numbers and shares of patent filings compared with the high-technology areas, we examine the positioning of non-R&D-intensive sectors within the innovation chain and assess their internationalisation trends within Germany over the last decade.

The results of our analyses, which are based on the “EPO Worldwide Patent Statistical Database” (PATSTAT), show that the non-R&D-intensive technology areas are an integral part of the development of research and technology within the world economy. Patents from the non-R&D-intensive areas constitute approximately 40 % of worldwide transnational filings, although the size and importance of the non-R&D-intensive technology areas is highly dependent on national idiosyncrasies and industrial structures. The internationalisation trends reveal that the non-R&D-intensive technology areas are even more strongly targeted toward international markets than high-level technologies, although technologies from non-R&D-intensive are largely positioned at the end of the innovation chain, providing rather downstream or market-oriented inventions.

In the course of changes within the economic structure in many modern economies, there has been a trend towards more knowledge-, research- and innovation-intensive sectors. These changes were very much in favour of highly skilled employees, while the share of employment of less qualified personnel has decreased. Within this chapter, we aim to provide empirical evidence for the structural changes in the German economy that have occurred since the mid-1990s and try to shed some light on the current and future demand for highly qualified labour, especially in non-R&D-intensive sectors.

Although there has been a shift in employment towards the service sectors over the years, 22 % of the German workforce remains in the manufacturing sectors, with the majority of people being employed within non-R&D-intensive parts of the industry. Employment in non-R&D-intensive manufacturing industries has slightly decreased over the years, while there has been increasing demand for highly qualified personnel, which is especially true for university graduates. The non-R&D-intensive sector is increasingly dependent on highly skilled workers to maintain or even increase its innovative potential, which is critical with regard to its competitiveness.

Following the analysis of the specific characteristics of non-R&D-intensive industries on the macroeconomic level in the previous chapters, the next three chapters provide a detailed analysis of non-R&D-intensive firms on the microeconomic level. This chapter examines firm-level data on the market and competitive environment of non-R&D-intensive firms. The aim is to locate these firms within their industrial competitive environment, clarify their structural characteristics, and obtain information about their most relevant competitive factors and future expectations.

This chapter focuses on the innovation ability of firms with different levels of R&D intensity. Using the latest available firm-level data from Germany, we analyse the product and process innovation activities and the innovation performance of firms with different levels of R&D intensity on both the descriptive and the multivariate level. Based on a holistic understanding of firm-level innovation, the input and output activities of non-R&D-performing and non-R&D-intensive firms are highlighted across different innovation fields.

In times of increasing technological complexity and innovation dynamics, firms are no longer willing or able to have all the necessary knowledge and competences available within their enterprises. It is becoming increasingly more important for firms to explore and exploit external sources of knowledge and innovation impulses if they follow an open innovation approach. Based on novel empirical firm-level data, this chapter examines the types of external sources of knowledge and innovation impulses on which firms with different levels of R&D intensity rely and the types of external partners with which they interact in innovation collaborations. The findings show that both non-R&D-performing and non-R&D-intensive firms succeed in tapping into external sources of innovation knowledge but that they are more oriented towards practical and implicit stocks of knowledge coming from partners along their value chains or markets compared with R&D-intensive firms. As a result, both types of firms have large unused potential with regard to their collaboration activities, especially those with external R&D organisations.

This chapter analyses and compares different dimensions of non-R&D-intensive and very R&D-intensive manufacturing firms’ absorptive capacity (AC). The empirical analysis is based on firm level data obtained by a telephone survey in early 2010 among more than 200 non-R&D-intensive firms and 88 firms with a high R&D-intensity in the German manufacturing industry. The results show that there is surprisingly little difference in the level of AC between R&D-intensive and non-R&D-intensive firms – if the firm specific relevance of such external impulses is being taken into consideration. This is a surprising finding in so far, as it indicates that R&D intensity might not be a limiting factor for firm’s ability to recognize and implement scientific knowledge per se. Thereby, the findings presented in this chapter underline the necessity to further improve and supplement the measurement concept of firms’ AC beyond their mere R&D intensity by taking into account the strategic importance of different types of external knowledge.

The findings on the innovation capabilities and practices of non-R&D-performing and non-R&D-intensive companies have implications for German science and technology policy. The goal of this chapter is to outline those potential implications. The chapter begins with an assessment of the current role of non-R&D-intensive (“low-tech”) industries in German innovation and technology policymaking. Based on the shortcomings identified in this book, this chapter outlines how the frequently overlooked innovation potential of non-R&D-intensive industries and firms could increasingly attract the attention of policy makers to support more comprehensive policies that promote and strengthen innovation in German industries

This book has attempted to look inside the “black box” of non-R&D-intensive sectors and firms to investigate their economic relevance, competitiveness, and innovativeness. Given that non-R&D-intensive sectors and firms used to be neglected both as innovators and innovation drivers by the mainstream innovation literature, this anthology reflects the latest research from different collaborative projects at Fraunhofer ISI. Although the presented research focuses on the German manufacturing industry, the results are broadly relevant, as they reflect economic and structural patterns that are likely present—to varying degrees—in other industrialised countries. For instance, other industrialised countries within and beyond the EU even have higher shares of non-R&D-intensive firms and industries than Germany. Starting with an overview of the research from the past decade (Chap. 2), which has shown that non-R&D-intensive sectors and firms play an important role in national competitiveness and innovativeness in developed economies, eight chapters have provided details from different analytical angles on the six leading research questions stated in the editorial of the book.