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Sectoral patterns of innovation taxonomy- Valutrics

Work of  Pavitt (1984) suggests a taxonomy of sectoral patterns of innovation. He argues that the rate and direction of technical change in any sector depends on the sources of technology, the nature of users’ needs, the possibility of appropriation by innovators of their activities, the technological trajectories, and the size and diversification of innovating firms.
Pavitt (1984)suggests a taxonomy including three categories  : Key definitions in Pavitt’s sectoral taxonomy
– Innovation: a new or better product or production process commercialized
– Nature of the technology produced in the sector: the importance of process and product
innovation may vary. Process innovations are defined as innovations that are used in the same
sectors as those in which they are produced. Product innovations are defined as innovations
that are used in different sectors from those in which they are produced or sold direct to final
– Sources of technology used in the sector: the technology used in a sector can come from
inside firms (R&D labs and production engineering departments) or from outside (suppliers of
production equipment and materials, users, and government financed research and advice).
– The nature of users’ needs: the nature of users’ needs vary. For standard structural or
mechanical materials, price is of major importance; for machinery and equipment, perform-
ance and reliability will be given more importance relative to purchase price. In other cases,
safety, quality, ergonomics, standardization may be also important user needs.
– Means of appropriation of the benefits of innovation: this refers to how innovators appropri-
ate a sufficient proportion of the benefitsof their innovative activitiesto justify expenditure on
them (e.g. secrecy for process innovations, technical lags in imitation for product innovations
such as aircraft and, patent protection for pharmaceuticals).
– Technological diversification of innovating firms: this can be vertical (as in equipment,
materials and components) or concentric (in related and unrelated product markets).


1. Supplier-dominated firms.

Supplier-dominated firms can be found mainly
in traditional sectors of manufacturing such as textiles and housebuilding
and in many services (see the next section for a more detailed classification
of services). They are generally small and have weak in-house R&D and
engineering capabilities. They appropriate less on the basis of a techno-
logical advantage than on the basis of professional skills, aesthetic
design, trademarks, and advertising. Their technological trajectories
involve cutting costs. They make only a minor contribution to their
process or product technology. Most innovations come from suppliers of   equipment and materials. A relatively high proportion of the process
innovations used in the sector are produced by other sectors (e.g. infor-
mation-intensive design, retailing, marketing, and logistics processes in
textiles), even though a relatively high proportion of innovative activities
are directed to process innovations (e.g. developments in spinning, weav-
ing, and knitting are all processes to which textile firms pay much atten-
tion and that can contribute to faster production and lower employment).

2. Production-intensive firms.

Production-intensive firms include those pro-
ducing standard materials and those producing durable consumer goods
and vehicles. Technological skills are used to exploit scale economies. Since
it is difficult to make scale-intensive processes work up to full capacity,
production engineering departments—one important source of process
technology in production-intensive firms—identify and solve technical
imbalances and bottlenecks. The other important source of process innov-
ations in production-intensive firms is small and specialized firms that
supply them with equipment and instrumentation, and with which they
have a close relationship. The way in which innovating firms appropriate
technological advantage varies considerably between the large-scale pro-
ducers and the small, specialized firms. For large-scale producers, techno-
logical leads are reflected in know-how or secrecy in their capacity to
design and operate continuous process or assembly systems, such as the
Xoat glass process developed by Pilkington in the late 1950s. Instead,
specialized suppliers such as mechanical engineering and specialized in-
dustrial machinery, where learning and interaction between users and
producers is the most important source of knowledge, concentrate instead
on continuous improvements in design, product reliability, and on the
ability to respond quickly to users’ needs.

3. Science-based firms.

Science-based firms are found in sectors such as
chemicals/pharmaceuticals and electronics. The main source of technology
is the R&D activities of firms in the sector, based on the rapid development
of the underlying sciences in universities. There are barriers to entry due to
the sophistication of the technologies and underlying sciences and dy-
namic learning economies in production. Firms appropriate technological
advantage through a variety of methods (e.g. patents in Wne chemicals and
natural technical lags in electronic components).


Pavitt (1991) revised this taxonomy and attempted to map the variety in the
nature of sources of technology, technological trajectory, and their implica-
tions for management. In this revised taxonomy, he added an
‘information intensive’ category, the key strategic opportunity for which
(together with production-intensive sectors) is the progressive integration
of radical technological advances into products and production systems, and in diversification vertically upstream into potentially productive production
technologies (e.g. CAD and CAM, robots, and software). The key strategic
tasks are ensuring the diffusion of best practice technology within the firm
and choices about the degree of internalization of production technology.
Thus, Pavitt shows that firms have constraints on choices regarding process
or product innovation and the breadth or specialization of their production.
This is because of the requirements of the particular technologies in each
the patterns of innovative activities described above can be seen as the result of
cumulative and differentiated diffusion amongst firms of four pervasive technological
systems, each with its distinctive skills and sources of technological competence:
(1) mechanical (design and production engineering); (2) chemical (R&D laborator-
ies); (3) electrical-electronic (R&D laboratories); and (4) software (systems depart-