Below are definitions to key terms used in this Arts Data Profile.

Business Establishment

An establishment is a single physical location at which business is conducted or services or industrial operations are performed. It is not necessarily identical with a company or enterprise, which may consist of one or more establishments. When two or more activities are carried on at a single location under a single ownership, all activities generally are grouped together as a single establishment. The entire establishment is classified on the basis of its major activity and all data are included in that classification.

For more information about business establishments, please see the U.S. Census Bureau, Statistics of U.S. Businesses.

Rural/Urban

While there are a number of definitions of “rural” and “urban,” in this Arts Data Profile, urban refers to metropolitan statistics areas and rural is non-metro.

Metropolitan statistical areas (metro areas) are geographic entities defined by the U.S. Office of Management and Budget (OMB) for use by Federal statistical agencies in collecting, tabulating, and publishing Federal statistics. A metro area includes one or more counties containing a core urban area of 50,000 or more people, together with any adjacent counties that have a high degree of social and economic integration (as measured by commuting to work) with the urban core.

All counties outside of metropolitan areas are defined here as “rural.” Rural includes OMB-designated “micropolitan statistical areas,” which are urban areas with at least 10,000 but no more than 50,000 people.

For more information about varying definitions of rural, please see the Economic Research Service, Identifying Nine Rural Definitions.

Tradable Sectors

The 2014 Rural Establishment Innovation Survey (REIS) polled business establishments in non-agricultural tradable sectors. These included: manufacturing (NAICS 31-33); mining and extraction (NAICS 21); wholesale trade (NAICS 42); transportation and warehousing (NAICS 48-49); information (NAICS 51); finance and insurance (NAICS 52); management of companies and enterprises (55); professional, scientific, and professional services (NAICS 54); and arts and entertainment (NAICS 71).

The non-tradable sector consists of locally-provided services such as construction (NAICS 23); healthcare (NAICS 62); retail trade (NAICS 44-45); and education (NAICS 61).

Innovation Classification

Using REIS responses to an array of questions pertaining to innovation, the Economic Research Service conducted latent class analysis to categorize establishments as: substantive innovators; nominal innovators; and non-innovators.

While non-innovators fail to meet an initial threshold of having the rudiments of a continuous improvement program, establishments classified as nominal innovators meet this minimum.

Substantive innovators not only meet the initial threshold of having the rudiments of a continuous improvement program, but they also report engaging in practices consistent with far-ranging innovation.

For example, nearly 56 percent of substantive innovators report protection of trade secrets; 72 percent say they have left incomplete or have abandoned innovation activities in the past. Having an incomplete or abandoned innovation project indicates that an establishment recognizes the value of initial failures in the trial and error process of innovation.

The REIS shows that 30 percent of non-agricultural, tradable business establishments are substantive innovators.

Design Orientation

The Economic Research Service also used latent class analysis to classify establishments into three categories of design use: (1) no systematic use of design; (2) “design last finish”; and (3) design- integrated.

On the design ladder, the phrase “no use of systematic design” refers to establishments that did not indicate using in-house or contracted design services; they also did not apply for patents or register trademarks or pursue other intellectual property protections.

“Design last finish” refers to establishments that reported use of in-house or contract design services, but which used few, if any, intellectual property protections.

The highest rung on the design ladder is “design-integrated,” which refers to establishments that use in-house or contracted design services and that use several types of intellectual property protection. Such firms also reported they are likely to borrow funds for intangible investments such as branding or design.

For example, nearly 97 percent of establishments classified as design-integrated reported holding a registered trademark, and 86 percent produced materials eligible for copyright.