Innovation in Scotland: analysis of the Community Innovation Survey 2009

This report presents an analysis of the Scottish results of the 2009 UK Innovation Survey. The UK Innovation Survey 2009, covering the period from 2006 to 2008, is conducted by the Office for National Statistics (ONS), on behalf of the Department for Business, Innovation and Skills (BIS). This UK survey feeds into the Europe-wide Community Innovation Survey (CIS), which assesses business performance across European Union countries. This report focuses on Scottish innovation trends over time and provides comparisons with the UK as a whole, by business size band. The report considers innovation activity indicators and innovation 'inputs' and 'outputs', and compares performance differences between innovation active and inactive businesses. Data at sector level is also assessed to explore the relationship between Scotland's overall performance and the structure of its business base.

The methodology consisted of an assessment of government policy reports on innovation and business and an analysis of ONS statistical microdata (using research datasets which may not exactly reproduce National Statistic aggregates). The CIS collects a range of information from businesses on: the types of innovation they are involved in; their motivation for innovation; business spending on a range of innovation activities beyond research and development (R&D); collaboration and linkages between businesses or with public research organisations; and data on sales from product innovations. In Scotland, 2,393 enterprises were surveyed and 1,184 questionnaires were returned (a response rate of around 49 per cent). Analysis of the main innovation and broader indicators in this paper are based on weighted data from BIS (which allows spatial understanding of innovation activity).

The report finds that innovation activity among businesses in Scotland in 2009 was lower than in 2007, probably due to the cost of the economic downturn. Scotland's business innovation performance lags behind the UK as a whole for most innovation indicators. Large firms in Scotland outperform those in the UK as a whole across most innovation indicators. However, given that small businesses have the largest share of the Scottish business base while large firms have the smallest, the tendency for smaller firms to be less ‘innovation active’ in Scotland than the rest of the UK will have some impact on Scotland’s overall results. The report finds that traditional manufacturing firms had the most intense levels of activity against most of the main indicators. Financial and business services was Scotland's highest performing sector, next to manufacturing. The construction sector in Scotland performed relatively well compared to other UK regions, while medium or large firms seem to be driving performance in the hotels and catering industry (just above UK average). However, Scotland's smaller manufacturing base and larger retail base have contributed to relatively lower levels of innovation activity in Scotland, compared to the UK. The report suggests that innovation investment may be one of the reasons why the productivity gap between Scotland and the top quartile of OECD countries has improved in recent years. Scottish businesses invest more of their innovation expenditure in 'non-technological' innovation than UK firms, they are more likely to 'buy in' technology and least likely to invest in their own R&D (compared to other UK firms). 'Return on innovation investment' in Scotland is higher than for the UK as a whole. The report suggests that industry structure is the main influence on differences between the UK and Scotland's innovation performance and that this has implications for Scotland's future competitiveness and overall prosperity.

The report suggests that, because the service sector is growing in importance across OECD economies, and because of the relatively poor levels of performance in wholesale and retail in Scotland, support programmes could be adapted to be more relevant for the service sector.