Co-authored by C J Isom and David R. Jarczyk, This paper investigates various drivers of innovation within small businesses, as well as the role that innovation plays in creating value in small businesses.

The analysis suggests that additions in employee headcount increase innovation while growth in sales does not increase innovation. The analysis also finds that increases in research and development (“R&D”) expenditures enhance small business value in certain industries, but not uniformly and not in all the industries investigated. Finally, the paper finds that the number of patents owned by a small business is not a good indicator of a firm’s value.

  • March 2009 of SBA Office of Advocacy