R&D in low-tech sectors

The 3% Action Plan of the Lisbon Agenda was adopted with the aim of making Europe more innovative through increases in both private and public R&D spending. R&D forms an important part of innovation activities, but ignores many other activities. However, the policy focus on R&D investment means little attention for firms that perform little R&D, but innovate in other ways, specifically firms from low-tech sectors. This chapter deals with firms from these sectors, their role in the economy, innovation strategies and recent trends. The term 'low-tech sectors' is widely used and often refers to a wide range of mature sectors, such as textiles and wood. These sectors form an important part of the EU economy. Low-tech sectors are important for employment, economic growth and knowledge formation in European economies. Firms (and the products produced) in these sectors are very often the key to the innovative ability of other firms and for the design, fabrication and application of various high-tech products, through innovation spillovers. The importance of these sectors can be seen by their share of value added. In the EU15, the low tech sectors account for about 32% of total value added of the whole manufacturing sector, while the high-tech sectors only account for about 6%. Logically, the role of R&D is much smaller. In the EU-15, R&D investment in medium-low and low tech sectors account for about 11% of all manufacturing R&D in 2002, while high-tech sectors account for about 48%. Looking at the relative role of R&D and other innovation activities in low-tech sectors, we see that the acquisition of machinery, equipment and software plays a very important role. R&D and the acquisition of knowledge play a much less important role. As such, high-tech sectors can be seen as suppliers of technology. Low-tech sectors are therefore not less innovative, but spend the money on ready-to-use technology acquisition rather than on research. Three main trends can be identified in the low-tech sectors. Firstly, innovation in low-tech sectors does not stop at R&D. Although non-R&D innovation also plays a role in high tech firms, this type of innovation is especially important for low tech firms. Secondly, R&D inputs from other sectors to contribute more and more to the innovative power of low-tech sectors. Thirdly, firms have become important generators of new technologies by developing new materials and high-end products in order to respond to low-wage competition.