Foreword	4
	Table of Contents	6
	Executive Summary	8
	Measurement challenges	9
	Software innovation processes	11
	The software sector innovation environment	14
	Emerging trends, changing environment and growing challenges	16
	References	22
	Issues for Policy Makers and Industry to Consider	24
	Skilled human capital remains the most crucial factor for software innovation	24
	Technical infrastructure and environment	27
	Recognising networking and spillovers	28
	Policy coherence	29
	Framework conditions for SMEs	30
	Improving measurement and data collection	31
	The Economic Processes of the Software Sector	32
	Introduction and main findings	32
	The nature of software	34
	Software innovation: key features	52
	Notes	67
	References	72
	R&D and the Market Environment in the Software Sector	78
	Introduction and main findings	78
	R&D investment in the software sector	79
	R&D and software-related patents	86
	The market environment for R&D	89
	Globalisation: shaping the market environment for innovation in the software sector	93
	National case studies: policy frameworks and R&D	105
	Notes	120
	References	125
	User Perspectives on Software Functionalities	132
	Introduction and main findings	132
	Software functionalities and user perspectives	133
	Notes	163
	References	166
	Annex A - Review of Studies on Market Penetration Rates	170
	General survey-based studies	170
	Census-like surveys	171
	Country-focused studies	173
	Notes	178
	References	178
	Annex B - Beyond the Traditional Software Sector: The Role of Businesses as Software Developers and Users	180
	Implications at company level	180
	Implications for industries	183
	Notes	186
	References	186