The Competitive Characteristics of US Firms in the Industrial Design Sector: Empirical Evidence from a National Survey

Abstract

This paper examines the technological and business characteristics of US companies in the industrial design sector. Evidence from a survey of 85 design consultancies suggests that this sector has become increasingly export-active, technologically innovative and research-oriented. The vast majority of design firms are small-to-medium-sized enterprises (SMEs) that employ fewer than 20 workers. These firms supply critical innovation inputs to their clients. Potential benefits to users include reduced defect rates for new products, optimized ergonomics, aesthetic superiority, ease of manufacture and improved product performance. However, at least two problems can be anticipated for this sector over the next few years. First, domestic service vendors may soon experience significant foreign competition. Second, the de-industrialization of the US manufacturing base suggests that foreign export markets will eventually become important to the survival of US design firms. Our data suggest that export-oriented design companies exhibit stronger business performance than their domestically-focused counterparts, notably in terms of sales growth, employment creation, research spending and profitability. Most importantly, business performance is associated with investment in human capital, technology upgrades and the provision of contract R&D services.