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Innovation Data from the 2020 Annual Business Survey

NSF 23-310

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December 28, 2022

Of the estimated 4.9 million for-profit companies with at least one employee, a quarter (25%) introduced an innovation during 2017–19 (table 1). Eleven percent of these for-profit companies introduced one or more product innovations, and 22% introduced one or more business process innovations.

Data are from the Annual Business Survey (ABS), which provides a comprehensive view of business innovation in the United States. ABS survey questions are based on the Oslo Manual (2018 edition), developed by the Organisation for Economic Co-operation and Development (OECD) and Eurostat (the Statistical Office of the European Union). The manual provides internationally recognized definitions and guidelines for measuring innovation. In the Oslo framework, innovation is “the introduction of new or improved products (goods or services) or business processes that differed significantly from the business’s previous products or processes.”

This InfoBrief provides findings from the third year of the ABS and, when appropriate, comparisons to the previous years of data collection. The ABS was developed and is cosponsored by the National Center for Science and Engineering Statistics within the National Science Foundation and by the Census Bureau.

Product and business process innovating companies, by industry and company size: 2017–19

(Number and percent)

na = not applicable; r = relative standard error > 50%.

NAICS = 2017 North American Industry Classification System.

Note(s):

Detail may not add to total because of rounding or unavailable NAICS detail for select records beyond the 4-digit industry classification. Industry classification based on dominant establishment payroll. Statistics are representative of companies located in the United States.

Source(s):

National Center for Science and Engineering Statistics and Census Bureau, 2020 Annual Business Survey: Data Year 2019.

Additional ABS 2020 Findings

By Industry

Substantial differences in innovation incidence exist between manufacturing and nonmanufacturing industries. Although rates of companies reporting innovation generally are higher for manufacturing companies than for nonmanufacturing companies, the absolute number of companies reporting innovation is larger in nonmanufacturing industries. In 2017–19, 34% of the companies classified in manufacturing industries reported any kind of innovation, compared with 25% of companies classified in nonmanufacturing industries. Sixteen percent of manufacturing companies reported product innovations, compared with 11% of nonmanufacturing companies. For business process innovation, 29% of manufacturing industries and 21% of nonmanufacturing industries reported this type of innovation.

Company Ownership by Sex, Race, and Ethnicity

There were no significant differences in innovation incidence between female- and male-majority–owned companies. A nearly identical proportion of female-majority–owned companies and male-majority–owned companies were product innovators (12% versus 11%) or process innovators (22% versus 23%) (figure 2).

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Innovation incidence rate, by type of innovation and sex of majority owners: 2017–19

(Percent)
Type of innovation Female-majority owned Equally owned by male and female Male-majority owned
Product or business process innovation 27 24 25
Product innovation 12 11 11
Business process innovation 23 21 22
Source(s):

National Center for Science and Engineering Statistics and Census Bureau, 2020 Annual Business Survey: Data Year 2019.

However, the differences in innovation rates with respect to the race and ethnicity of the company’s owners are statistically significant. Thirteen percent of companies that were primarily owned by minority owners (any racial or ethnic combination other than White, not Hispanic) and 10% that were primarily owned by nonminority owners (White, not Hispanic) were product innovators. Over a quarter (26%) of companies that were primarily owned by minority owners and a fifth (21%) that were primarily owned by nonminority owners were business process innovators (figure 3).

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Companies with product or business process innovation, by firm classification of race and ethnicity of majority owners: 2017–19

(Percent)
Race and ethnicity of owner Product or business process innovation Product innovation Business process innovation
Minority 30.3 13.4 26.3
Underrepresented minority 30.4 12.9 26.6
Equally minority and nonminority 30.3 15.3 24.9
Nonminority 24.0 10.2 20.5
Note(s):

Companies may be included in one or more race and ethnicity categories. Companies classified as minority are those companies classified as any race and ethnicity combination other than White, not Hispanic. Underrepresented minority groups include Hispanic or Latino, Black or African Americans, and American Indian or Alaska Native.

Source(s):

National Center for Science and Engineering Statistics and Census Bureau, 2020 Annual Business Survey: Data Year 2019.

By State

For the most part, there were only small differences in the percentage of companies that reported innovation among the fifty states and the District of Columbia. Nineteen states and the District of Columbia were estimated to have 25% or more of the companies reporting innovation, whereas only four states had 20% or less of companies reporting innovation (table 6). Examining product innovation among companies, only Hawaii had 13% or more of companies reporting innovation, and seven states and the District of Columbia showed 12% reported innovation. For business process innovation, only Rhode Island and Delaware had more than 25% of companies reporting innovation, and California had at least 24% reporting innovation.

Companies with product or business process innovation, by state: 2017–19

(Number and percent)

NAICS = 2017 North American Industry Classification System.

Note(s):

Detail may not add to total because of rounding. State is based on the physical location of the business (or the mailing address if the physical location is missing). Firms with establishments operating in more than one state are tabulated as undistributed and counted only once in state and national totals.

Source(s):

National Center for Science and Engineering Statistics and Census Bureau, 2020 Annual Business Survey: Data Year 2019.

Product Innovating Companies and Partners

Seventy percent of product innovating companies indicated that they had at least one partner. Three-quarters (75%) of manufacturing companies and 69% of nonmanufacturing companies indicated they had innovation partners (table 7).

Product innovating companies and partners, by company size: 2017–19

(Number and percent)

na = not applicable; r = relative standard error > 50%.

Note(s):

Detail may not add to total because of rounding. Statistics are representative of companies located in the United States.

Source(s):

National Center for Science and Engineering Statistics and Census Bureau, 2020 Annual Business Survey: Data Year 2019.