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 lowtech sectors. This chapter deals with firms from these sectors, their role in the economy, innovation strategies and recent trends. The term 'lowtech 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. Lowtech 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 hightech 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 hightech sectors only account for about 6%. Logically, the role of R&D is much smaller. In the EU15, R&D investment in mediumlow and low tech sectors account for about 11% of all manufacturing R&D in 2002, while hightech sectors account for about 48%. Looking at the relative role of R&D and other innovation activities in lowtech 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, hightech sectors can be seen as suppliers of technology. Lowtech sectors are therefore not less innovative, but spend the money on readytouse technology acquisition rather than on research. Three main trends can be identified in the lowtech sectors. Firstly, innovation in lowtech sectors does not stop at R&D. Although nonR& 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 lowtech sectors. Thirdly, firms have become important generators of new technologies by developing new materials and highend products in order to respond to lowwage competition.