Does private versus public corporate ownership matter for R&D service firms’ innovation performance? Evidence from the UK

The role of R&D service firms (RDSFs) in innovation process is often understood as that of innovation intermediaries and R&D contractors. However, R&D service firms (RDSFs) themselves are significant innovators. The UK Innovation survey 2021 indicates that 62.5% of RDSFs’ employees have science and engineering backgrounds, 58% invest in internal R&D activities for cutting-edge knowledge and technologies, and 17.2% file patents to protect their intellectual properties, surpassing the averages for all industries, with 9%, 16% and 1.2% respectively. Partnering with these firms allows clients to access expertise and technologies, accelerating their own products’ time-to-market and enhancing both client productivity and overall economic growth. Nevertheless, RDSFs face financial constraints despite their innovative contributions. As predominantly fast-growing high-tech SMEs, they must seek additional funding sources to boost their own innovation performance, including exploring the option of capital markets. In this paper, we conduct an empirical analysis utilizing patent data to compare the innovation performance of privately held and publicly traded RDSFs in the UK. Through investigating their patenting behaviour, we find that private RDSFs demonstrate a greater ability to generate patents with greater technological value. Additionally, these firms exhibit greater efficiency in conducting innovation activities compared to their public counterparts. Despite their financial constraints, private RDSFs engage in more exploration activities to generate new knowledge and produce a higher quantity of exploratory innovations.