Moderate increase in Norwegian innovation expenditure

In-house research and development (R&D) is the largest expenditure category (NOK 29.5 billion), followed by acquisition of machinery, equipment, software & buildings (NOK 18.7 billion). Enterprises invested NOK 8 billion in the purchase of external R&D and NOK 2.5 billion in the acquisition of other existing knowledge, according to new figures from the statistics Innovation in the business enterprise sector.

Other expenditure, including training for innovative activities, market introduction of innovations and design activities, were reported at a total of NOK 6.1 billion.

More innovators changes the mix of innovation activities

The period from 2014-2016 has shown a relatively large increase in the number of enterprises reporting that they had product and/or process innovation activities compared to the previous survey which covered 2012-2014. This increase in the number and share of innovators also appears to have changed the composition of the different innovative activities covered by the survey.

As a percentage of innovation active enterprises, a lower share of innovators now report having engaged in knowledge-related innovation activities, such as in-house and external R&D and the acquisition of other (non-R&D) existing knowledge. Conversely, the share of innovators reporting having engaged in other innovation activities such as the acquisition of machinery, equipment, software & buildings; training for innovative activities, and design have increased compared to the previous survey.

Large expenditure variations between different enterprises and industries

The reported innovation expenditure among the Norwegian enterprises is highly skewed, with the majority of enterprises giving relatively small amounts for all expenditure categories. However, some enterprises report having sizable innovation expenditures, both compared to the overall numbers and to other enterprises in the same industries. As such, results for the detailed industry breakdowns may be dominated by individual enterprises and one-off investments more so than showing overall trends. Some care should therefore be taken not to over-interpret changes from one survey to the next on an industry level.

Some trends are, however, still discernible: among the most innovation-intensive industries in the manufacturing sector we typically find enterprises in industries that are supplying relatively high-tech products and which are also typically in direct competition with foreign enterprises. In services, the most innovation-intensive enterprises are generally found in ICT and related industries along with knowledge-intensive industries.

In addition “Scientific research and development”, where most of the turnover is reported as innovation expenditure, includes industries such as:

• Manufacture of computer, electronic and optical products
• Architectural and engineering activities; technical testing and analysis
• Computer programming, consultancy and related activities
• Manufacture of pharmaceutical products and preparations
• Publishing activities (including computer software)

In all these industries, roughly 6-11 per cent of the total industry turnover was reported as invested in innovation activities for introducing new products or processes.

At the other end of the innovation intensity spectrum, we generally find the Norwegian industries that are the largest in terms of turnover:

• Wholesale trade, except motor vehicles and motorcycles
• Mining and quarrying
• Financial and insurance activities
• Construction

While not alone in having low innovation intensities, these four industries all spend less than one per cent of their turnover on innovation, significantly less than the overall average for all industries. Together they account for 55 per cent of the overall turnover as covered by the survey, while having less than 21 per cent of the innovation expenditure. Of course, with such large turnover, even a low percentage amounts to sizable innovation investments in absolute terms, totalling almost NOK 1.2 billion even in construction, which is the least innovation-intensive industry in the survey.

Increase in the share of turnover coming from innovations

In view of the amount Norwegian enterprises spend on developing and introducing their innovations, it is also interesting to get a picture of the return on these investments, if any. When dealing with process innovations, these are generally thought to be able to reduce costs, increase efficiency, or supply other ongoing and/or incremental benefits. However, such effects are difficult for enterprises to quantify and measure.

Hence, the innovations survey only has outcome indicators for product innovations, where enterprises are asked to stipulate how much of their turnover in the past year came from products introduced to the market during the previous three-year period. The respondents are also asked to differentiate between innovations that were new to their market and innovations that were new only to the enterprise.

Compared to the previous survey, the share of total turnover that came from product innovations increased from 5.9 to 6.8 per cent. As a share of the product innovators’ turnover only, the increase was slightly higher, from 11 to 12.6 per cent. Relative to turnover, innovations have thus become more important to Norwegian enterprises in 2016 than in 2014.

Overall, it was mainly product innovations that were new to the enterprise but not new to the market that saw an increase. This applies to service industries in particular, but is also true for other industries including oil and gas. Among the manufacturing industries, new-to-enterprise innovations were stable compared to two years ago, while a reduction in new-to-market innovations caused a slight overall decline.

As with innovation expenditures, turnover from product innovations also varies greatly. Time to market, market longevity, and the timing from the introduction of a new product until the time it generates any substantial revenue can differ considerably, both between and within industries. The overall economic climate may also impact these figures, both in terms of overall revenue and in terms of market susceptibility for new goods or services. For instance, we note a tendency towards lower investments and lower turnover among enterprises in oil and gas extraction and related industries. At the same time, many enterprises in these industries have reported a higher share of their revenue coming from innovations.