The ability to innovate is essential in rapidly changing and competitive markets. It requires individual creativity, as well as organisational capabilities.

Overall, almost two thirds (63%) of the respondents reported some kind of innovation in the past three years, with a higher proportion in manufacturing than business services (66% versus 60%). See Figure 5.


We distinguish between two levels of innovation – that which is new to a firm but not the industry (firm-level innovation) and that which is new to both a firm and its industry (industry-level innovation). While the proportion of firm-level innovators was almost the same in both manufacturing and business services, industry-level innovators were more common in manufacturing (41% versus 34%), even higher in high-tech manufacturing (50%), but lower in conventional services (30%).

By size, a higher proportion of micro businesses (45%) were non-innovators than were small (29%) and medium-sized businesses (15%). Again, the proportion of firm-level innovators was similar, but there was a marked contrast in industry innovation – 29%, 43% and 61% respectively.

Figure 5: Type of innovator


Fast growing businesses were more likely to be industry-level innovators. 41% of the non-growing businesses were also non-innovators, compared with 37% of medium growth and 27% of fast growth businesses - demonstrating a strong link between growth and innovation.


We asked about five types of innovation: product, process, logistics, service product, and production and delivery of service product. Interestingly, innovation at the firm level was quite evenly distributed between the different kinds of innovation (29-32%), with the exception of logistics (16%), but at the industry level product innovation was significantly more prevalent than the others.

Product improvement

A different measure of innovation is the proportion of sales (in the last year) from products or services which are: 1) only marginally changed; 2) significantly improved, or; 3) new. The averages were 80%, 11% and 9% respectively. Again, there were lower levels of changed products among business services (especially conventional) and micro businesses, and higher levels among manufacturing (especially high-tech) and medium-sized businesses.


As for where the innovations were developed, over two thirds (69%) were developed within the firm or group, 15% were developed collaboratively, and 17% were adopted after development by other firms or institutions. Internally developed products and services were more common in manufacturing and medium-sized businesses, and those adopted after external development were conversely lower in these. The proportion developed collaboratively was highest in small businesses, suggesting a transition to internal innovation capabilities with growing size.


This picture is upheld by sources of information for innovation; more medium-sized businesses reported internal sources as very significant or crucial than did small or micro businesses (87%, 77%, 66% respectively). The same applies to fast growers relative to businesses with medium or no growth, and to high-tech relative to non-high-tech. Significantly, however, these categories – medium-sized, fast growers and high-tech – also rated information from customers more highly than the other groups, suggesting a balance between internal capabilities and customer-informed (if not customer-driven) innovation. These trends were also noticeable in industry-level innovators compared with business-level innovators. External collaboration will be taken up again below.