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Driving Innovation,driving growth


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Presentation to ERC State of Small Business Britain Conference 2017 by Stephen Roper

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Driving Innovation,driving growth

  1. 1. Driving innovation, driving growth Stephen Roper @steverop State of Small Business Britain Conference, September 2017
  2. 2. Innovation is … …‘the design, invention, development and/or implementation of new or altered products, services, processes, systems, organisational structures or business models for the purpose of creating new value for customers and financial returns for the firm’. (Advisory Committee on Measuring Innovation in the 21st Century Economy 2008, p. i). New-to-the-firm (NTF) innovation In the CIS survey: ‘…products/ services new to your firm but previously produced by one of your competitors or another firm’ AKA: incremental innovation, imitation. New-to-the–market (NTM) innovation In the CIS survey: ‘… products/services introduced to the market before your competitors’ AKA: breakthrough innovation, disruptive, radical, initiation
  3. 3. Innovation and productivity (adapted from the OECD) Growth at the global frontier Growth at the national frontier Growth of non-frontier firms Diffusion of NTF innovation Diffusion of NTF innovation NTM innovation Aggregate Productivity Growth
  4. 4. Innovation in the UK – benchmarks
  5. 5. Innovation in the UK: EU context (% of innovating firms) UK NTM NTF
  6. 6. Innovation across LEP areas (% of innovating firms) 0 5 10 15 20 25 30 35 40 South East Midlands Northhants Oxfordshire Gtr Cambs. Cov and Warwick Gloucestershire Solent Manchester South East D,D, N. N London Leicester NTM NTF
  7. 7. Innovation in the UK – how effective is current policy?
  8. 8. Some new evidence on UK policy effectiveness • UK policy delivered through InnovateUK and the other research councils (particularly EPSRC) focuses on ‘supporting excellence’, i.e. primarily supporting NTM innovation • Key instruments are grants for R&D and innovation along with R&D tax credits. But do they work in stimulating growth and productivity? • For the first time we have been able to match data on grants with data on business performance over the 2006-16 period • This covers grants provided to over 15,000 firms and we compare the performance of these firms to a closely matched control group • So what do we find? Source: Vanino, E Roper, S and Becker, B (2017) ‘Assessing the business performance effects of engagement with publicly funded science’, ERC Research Paper 61 (to be published 7th September 2017)
  9. 9. UK innovation policy: does it work? • The headline result is very positive: • Firms in receipt of grants from UK Research Councils (including Innovate UK) – grew their turnover and employment 5.8-6.0 per cent faster in the three years after the grant than similar firms which did not receive support. – and 22.5-28.0 per cent faster in the six years after the grant. • The net effect is a 6.2 per cent productivity boost after 6 years. • The size of these growth effects is very similar whether support is for more basic research (EPSRC) or more applied R&D (Innovate UK)
  10. 10. And, where are the impacts greatest ….. (Medium-term, turnover growth effects, %) 0 10 20 30 40 50 60 All firms Manuf - HT Manuf - LT Services - KI Services - NKI Micro Small Medium Large Top Quartile 2nd Quartile 3rd Quartile 4th Quartile
  11. 11. But where do we allocate the bulk of grant spending? …. over half of current grants by value go to firms in the top two deciles of the productivity distribution
  12. 12. Final reflections • We need to do more: the UK’s innovation performance remains only middling • Our new research suggests we have some effective instruments for NTM innovation but we may want to rethink our targeting of support to maximise additionality • Historically, we have done little to support diffusion and NTF innovation: There is an opportunity here with potentially significant productivity benefits