The Fruit Flies of Innovation: a Taxonomy of Innovative Small Firms

Taxonomies of patterns of innovation give a dominant role to large firms, and are often based on empirical studies that exclude micro firms. This paper proposes an empirical taxonomy of the innovative firms at the bottom of the size distribution, based on a new survey of 1,234 small firms and micro firms in the Netherlands, in both manufacturing and services. These firms differ not only in their innovative activities, but also in their business practices and strategies – such as management attitude, planning and external orientation – that they use to achieve innovation. The taxonomy identifies four categories of small innovative firms: science-based, specialised suppliers, supplier-dominated and resource-intensive. It suggests a more diverse pattern of innovation of small firms than in Pavitt’s (1984) taxonomy, a pattern that is shared by both manufacturing and services firms. Finally, the research shows that taxonomies can be effectively used to map differences in the rates, sources and nature of innovation, with the differences in the business strategies of innovative firms.