R&D service firms: The hidden engine of the high-tech economy?

R&D service firms are highly innovative knowledge-intensive businesses. They constitute an important component of the knowledge economy, but one that is often in the shadow of the role normally attributed to universities and other public research organisations in the growth of high tech clusters and, more broadly, innovation systems. In this paper we present evidence from an in-depth analysis of the strategy, practice and impact of a sample of R&D service providers long active in the Cambridge area, the leading science and technology cluster in the UK. Based on an extensive programme of interviews with companies’ CEOs and managers, we analyse: the main features of the R&D contract and the way in which this allows firms to de-risk the uncertain process of early technology development and to meet customer's needs; the services’ typical organisational features and development stages; the variety of observed growth paths. We provide evidence of the significant direct and indirect contribution to innovation of these service firms and conclude by discussing the implications of this original model of technology development in relation to the early-stage financing and university-led growth debates.