Businesses that take a strategic approach to design are up to eight times more likely to develop innovative products than those that don't, according to a study by scientists from Penn State's College of Agricultural Sciences.
Published today (June 18) in the Journal of Innovation and Entrepreneurship, the study found that the link between design and innovation exists in both rural and urban businesses. This offers insights into how to support rural economies, said Luyi Han, a postdoctoral researcher with the Northeast Regional Center for Rural Development, based in Penn State's College of Agricultural Sciences, and a co-author on the study.
"Many rural economies depend on a range of businesses and industries that compete in the innovation economy. In this study, we were interested in understanding how to support these rural entrepreneurs and boost innovation, which is critical to business success and thriving rural areas," Han said. "This study is the first to definitively examine the role of design in business innovation, and our findings suggest a causal link between design and innovation, regardless of where a business is located."
Design in this context refers to the practice of integrating aesthetic, style and cultural considerations with the more tangible aspects of technology in product development. Design-driven companies, which seek to understand customer needs, often are more innovative. But whether design enables innovation or simply reflects an already innovative business has been unclear, according to Timothy Wojan, an Oak Ridge Institute for Science and Education Established Scientist Fellow at the National Center for Science and Engineering Statistics (NCSES) within the U.S. National Science Foundation (NSF) and the study's lead author.
Using a federal dataset known as the Annual Business Survey (ABS), the researchers were able to examine the range of design approaches adopted by U.S. businesses and to isolate any innovation-enabling effects of design.
In 2022, the survey - which is conducted jointly by the U.S. Census Bureau and NCSES, and provides detailed data on U.S. firms - included a 14-question module aimed at understanding how individual firms approach design. For example, business owners were asked whether they have dedicated design staff or a budget to support design processes, and how strongly design factors into directing their firm's work.
The researchers used a "design ladder" framework to rank businesses on their design approach. Those without a systematic design strategy are on the bottom rung, followed by approaches of design as styling - meaning how the product or service looks - with design integrated into product development, and businesses that include design as a core strategic element on the top two rungs.
The researchers found that nearly 85% of firms, regardless of their rural-urban status, reported taking an unstructured, ad-hoc approach to design, placing them on the bottom rung of the design ladder. Firms approaching design as styling were the second largest group, followed by those pursuing a functional approach. Firms pursuing a strategic design approach were the rarest, but they were notably present throughout the nine county types in the rural-urban continuum, ranging from completely rural to large metro counties.
The team also compared the incidence of novel product innovations, across each of the four rungs of the design ladder, and across each of nine rural-urban county types. Moving from urban to rural businesses, the researchers found slightly fewer incidences of innovation. However, the differences were far greater when comparing the businesses on the bottom rung of the design ladder with those at the top. "Design active" firms - those approaching design as a structured, creative process - were four to eight times more likely to report a new product innovation than those on the bottom rung of the design ladder. This finding held across the nine county types, the researchers said.
To establish whether design enables innovation, or merely indicates an innovative business, the researchers performed an additional analysis using propensity score matching - a statistical technique that helps assess the impact of a specific variable - to compare firms that are similar in respects other than their design approach.
"By matching companies that are alike in salient aspects other than their design strategy, we can more confidently attribute observed differences in innovation activity to their design approach," Han said. "We found that the functional approach to design, which is associated with the third rung of the design ladder, had the largest effect on the likelihood of reporting new product innovation."
The researchers also found that a styling approach, associated with the second rung of the design ladder, had the smallest effect relative to firms with no systematic approach to design.
"These findings demonstrate that an intentional approach to design matters more to innovation than rural or urban status, and they refute a commonly held belief that design and inventiveness can only be found in big cities," Wojan said. "This finding is especially relevant to those interested in increasing the competitiveness of rural areas. For example, integrating 'design thinking' - how designers incorporate empathy, collaboration and experimentation - into technical and extension education offerings, could be a low-cost way of boosting the innovative output of rural areas, with a faster turnaround than efforts focused on technological innovation."
Zheng Tian, assistant research professor at Penn State, and Stephan J. Goetz, professor of agricultural economics and regional economics at Penn State and director of the Northeast Regional Center for Rural Development (NERCRD), also contributed to this research.
The NERCRD at Penn State is one of the nation's four Regional Rural Development Centers that work in partnership with the land-grant university system to address crucial needs in the United States' rural communities. The NERCRD serves the 12-state region from Maine to West Virginia and the District of Columbia.
This research was supported in part by the U.S. Department of Agriculture's National Institute of Food and Agriculture and Multistate/Regional Research and Extension Appropriations and the Oak Ridge Institute for Science and Education.
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