Focusing on one capability at a time: patterns in the use of innovation activities and implications for young firms

Informed by the perspective of innovation capabilities, we examine innovation activities performed by firms on a continuous basis. Many firms are encouraged to use innovation activities, but young firms tend to have less experience and fewer resources to coordinate multiple innovation activities than established firms. We analyse 535 small and medium-sized service enterprises in the USA and the UK. We find that young and established firms tend to use similar types of innovation activities involving research and development, information technology, training, market analysis, and product design. Yet, young firms that are more productive tend to focus on a single innovation activity, rather than multiple innovation activities. Innovation activities may compete for firm resources and thus serve as substitutes, instead of complements, among young firms.