Washington, DC, May 11, 2006--That small business on the corner might appear to be just another little enterprise trying to make its way in the American marketplace, but it might also be creating something that could change our lives forever.
According to an National Federation of Independent Business Small-Business Poll devoted to innovation, between 5 percent and 15 percent of small firms are engaged in some type of innovative activity.
Defining innovation as the first-time introduction of something that has been developed through imagination, thought or experiment, researchers determined that one in 10 small businesses purposefully innovate or invent things to sell or lease. In more than one in five of these enterprises, innovations or inventions generate all sales, and in more than half of such businesses they account for 50 percent or more of sales.
“Small businesses produce a significant number of innovations,” said NFIB Research Foundation senior research fellow William J. Dennis. “Smaller enterprises appear particularly adept at major breakthroughs in contrast to more incremental or evolutionary changes.”
Even small businesses that are not deliberately attempting to discover innovations employ at least one person, including the owner, whose primary job is to develop new products, services or designs, the study found. Twenty percent say they have one or more people assigned in such activity, suggesting that the owners, whether themselves engaged thusly or not, consider the creative function to be valuable to the business.
This reflects other research by the foundation showing that small-business owners have confidence in their technological prowess. In an NFIB National Small-Business Poll about technology, more than one-third said they outpace their competitors technologically; more than half think they at least stay abreast of their rivals. Similarly, more than one in 10 entrepreneurs said they would attempt to be the first to try new ideas, while one-quarter confirm making a concerted effort to stay ahead of others.
In the innovation poll, three-fourths of those surveyed said they specifically encourage employees to suggest ideas for new products or services, or to seek better ways to produce and distribute what their company sells. More than half of those who do inspire workers to be innovative offer recognition, bonuses or both to those who succeed.
In the year leading up to this study, more than two-fifths (42 percent) of all small businesses surveyed reported introducing at least one new or significantly improved product, service, process or design into their sales inventory. Most often this was a product, 55 percent said, followed by a service, 29 percent; 8 percent offered a process; 7 percent created a design.
The ideas for these innovations came from within, one-third reported, while 42 percent said they upgraded or modified an idea after discovering it elsewhere. Nearly 12 percent confirmed that they are trying to license or sell the innovation. Within the past three years, nearly 4 percent of all small employers--or about 1 percent a year--have applied to a government agency for financial assistance to develop new innovations.
Design is a major innovative focus, the poll found. Twenty-one percent of small firms market design, which is profitable. Almost two-thirds (60 percent) of those marketing design said it generates half or more of their sales.
“Patents and copyrights often proxy for innovation in business,” Dennis said, noting that some 5 percent of small-business owners hold a patent (in their name or the firm’s name) that they actively use in their business activities. Manufacturers hold one-third of patents.
Copyrights are more common: 13 percent hold at least one. Data from the survey show that once small firms reach the 10-employee level, copyright acquisitions rise notably.
