Do Small Innovating Firms Outperform Non-Innovators?

The paper considers the relative performance [along a number of parameters] of a sample of 228 small manufacturing firms categorised by level of innovation. Whilst innovators appear no more likely to have experienced some form of sales or employment growth, they are significantly more likely to have grown more. In other words, the innovators' growth rate distributions are highly negatively skewed. With regards to export intensities, profitability and productivity levels, the findings are less clear. On the whole, the results reported here are similar to those of other small firm studies, yet vary markedly from large firm equivalents; suggesting that the nature of the returns to innovation may be contingent, at least in part, upon firm size. Moreover, the high levels of variation in firm performance should caution us against proffering innovative imperatives. If we are to counsel firms to "innovate at all costs", we must be clear about, and clearly demonstrate, the nature of the returns they may reasonably expect and the processes through which these may be optimised.