Sustaining Growth for Innovative Enterprises: Transatlantic Comparisons and Implications for the UK. Presentation by Philip Shapira toWorkshop on Innovation and Local Growth Workshop Business WBS at the Shard, May 28th 2015

1. Sustaining Growth for Innovative Enterprises:
Transatlantic Comparisons and Implications for the UK
Philip Shapira
Workshop on Innovation and Local Growth
Enterprise Research Centre, Warwick Business School
WBS at the Shard, London
May 28, 2015
1Email: pshapira@mbs.ac.uk | Twitter: @philipshapira

2. Sustaining Growth for Innovative Enterprises:
Transatlantic Comparisons and Implications for the UK
1. About the project (=1)
2. Methodological innovations (=2)
3. Descriptors (=3)
4. Key findings (=4)
5. Insights and implications (=5)
Download presentation, reports and papers from:
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3. 1. Project - Snapshot
• Probes growth strategies of innovative small and
medium-size enterprises (SMEs).
• Focus: emerging green goods firms who manufacture
outputs which benefit the environment or conserve
natural resources
• International comparative element: UK, US, and China
Enterprise
research
focus
• Sustaining Growth in Innovative New Enterprises
• Sponsor: Economic and Social Research Council*
• Innovation Co-Lab: Manchester Institute of Innovation
Research, Manchester Business School plus Georgia
Institute of Technology (USA) and Beijing Institute of
Technology (China)
The
project
1. About the Project Sustaining Growth in Innovative Enterprises
*ESRC grant number ES/J008303/1, 2012-2014. Project team includes: P. Shapira, A Harding (Liverpool), M.
Sensier, A. Gok, E. Klochikin, A. Waterworth; J. Youtie (GT), S. Arora (GT), Y. Li (GT); J Ren (BIT).
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4. Two Methodological Innovations
2.1. Key word search strategy: Green goods manufacturing
• 26 green goods sectors under broad categories of environmental,
renewable energy, emerging low-carbon, and general
• 100+ search terms, building on BIS sectoral and other related
definitions (applied to “line of business” fields)
• Key words for each sector, see example in the Air Pollution sector
2.2 Web mining
• Web mining (UK, US, CN) – current and archived sites
• Topic-based activity keyword search. Groups include:
manufacturing strategy, products, R&D (see example), investment
& finance, university links, partnerships, policy influence
• Enterprises starting as an SME; founded in or before 2007*
• Combine with structured data on patents, publications, business
data (UKFame, Experian; USDun & Bradstreet), government
awards (UKTSB, USSAM) & cases (UK)
References: Shapira, Gök, Klochikhin, Sensier (2014). Probing “green” industry enterprises in the UK: A new identification approach,
Technological Forecasting and Social Change. Gök, Waterworth, Shapira (2015) Use of web mining in studying innovation,
Scientometrics. Arora, Youtie, Shapira, Li. (2015) Using the Wayback Machine to mine websites in the social sciences: A
methodological resource, Journal of the American Association for Information Science and Technology
ACTIVITY SEARCH:
R&D KEYWORDS
(Research and development) AND
R&D AND lab* AND scientist* AND
research AND researcher AND
scientist* AND (product
development*) AND (technology
development*) AND (development
phase) AND (technical
development*) AND (development
program*) AND (development
process*) AND (development
project*) AND (development
cent*) AND (development facilit*)
AND (technological development*)
AND (development efforts) AND
(development cycle) AND
(development research) AND
(research & development) AND
(development activity)
SECTOR SEARCH: AIR
POLLUTION
(((air* contr*) OR (dust* contr*)
OR (particular* contr*) OR (air*
qual*)) AND (pollut*))
*UK: 1995-2007; US: 2003-2007; reference years 2012-2014
2. Methodological Innovations Sustaining Growth in Innovative Enterprises 4

5. 3.1 SME Sample
3. Descriptors Sustaining Growth in Innovative Enterprises
Sectors UK USA
Emerging Low
Carbon
158 52% 94 31%
Renewables 61 20% 28 9%
Environment &
Other
85 28% 178 59%
Total 304 100% 300 100%
Solar PV (US South)
Green Cleaning (US South)
Green Goods Sector Enterprises, UK Sample, 2003-2012 (N=187)
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6. 6
3.2 Geography
3. Descriptors Sustaining Growth in Innovative Enterprises
UK GGS SMES (N = 304)
US GGS SMEs (N=300)
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7. 3.3 R&D Activities
R&D in green goods SMEs
• UK firms – more
publications but
relatively lower in
patenting
• UK firms report more
R&D activities on web
than would be
expected from
conventional data
sources
• Web-based R&D
mentions are
frequently downstream
(development, trials,
test, pilot, demo, etc.)
Variables UK US China
Green Goods SMEs 2004-2012 2008-2010 2002-2014
Publications 15% 10% 1%
Patents 5% 19% 19%
R&D spend 17%
R&D employees 92%
TSB awards 22%
US contract registration 48%
R&D web mentions 68% 66% 97%
N (companies) 296 271 300
Publications in Web of Science; Patents in Derwent patents; UK R&D spend
from FAME; TSB = UK Technology Strategy Board; US active contract
registrations with Sam.Gov; R&D web mentions (UK, US) & R&D employees
(CN, N=213 in 2014) from web-mining.
3. Descriptors Sustaining Growth in Innovative Enterprises 7

8. 4.1 Growth in UK GGS Enterprises
UK key finding:
Higher growth is found in UK
green goods sector firms that
 engage in R&D activities;
 are in receipt of government
grants; and
 are aware of regulation / product
standards.
i.e. access to knowledge combined
with funding is important
4. Selected Key Findings Sustaining Growth in Innovative Enterprises
Growth Rate % >0 >5 >10 >20
EMPL_LAGGED -ve*** -ve*** -ve*** -ve***
R&D_REP (lag) +ve* +ve* +ve*** +ve***
GLOBAL_LINKS +ve +ve +ve +ve
R&D_WEB -ve -ve -ve -ve***
PUBFUNDS -ve -ve -ve -ve
R&D_WEB x
PUBFUNDS
+ve +ve*** +ve*** +ve***
Growth Rate % >0 >5 >10 >20
EMPL_LAGGED -ve*** -ve*** -ve*** -ve***
R&D_REP (lag) +ve +ve +ve*** +ve**
GRANTS (lag) +ve +ve +ve +ve***
GLOBAL_LINKS +ve +ve +ve* +ve
PRODUCT
STANDARDS
-ve -ve* -ve -ve**
PARTNERSHIPS -ve* -ve* -ve -ve
PRODUCT
STANDARDS x
PARTNERSHIPS
+ve** +ve*** +ve*** +ve***
Note: All UK firms, 829 pooled observations. Dependent variable is 1 when growth is greater than zero, 5%, 10% or 20%. The sign of coefficient and
significance is p>0.01 (***), is p>0.05 (**) and is p>0.1 (*). GGS = Green Goods Sector.
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9. 4.2 Growth in US GGS Enterprises
US key finding
 In the US green goods SME sector, linkages
with two or more triple helix sectors
increases the rate of growth and local links
are more effective than national links
 These productive mixes of linkages may
include:
– Research commercialization assisted by
government programs (links with university
and government)
– Coordination across all three sectors (links
with university, government and industry)
 Government links have a particularly large
contribution to the effectiveness of overall
mixes of linkages
4. Selected Key Findings Sustaining Growth in Innovative Enterprises
Linkage variables: US
University -ve**
Government +ve
Industry +ve
Uni x Govt +ve**
Uni x Industry +ve*
Govt x Industry -ve
Uni x Govt x Ind(a) +ve*
(45% more
growth)
Local links +ve***
National regional +ve
N = 271 US-based green goods sector (GGS) enterprises. Triple Helix = industry-university-government partnerships
For full details, see: Li, Y., Arora, S., Youtie, J. and Shapira, P. (2014). Micro-Level Relationships of Innovative Firm Growth: Exploring the Mix of Links
Underlying the Growth of Small and Mid-Size Enterprises in Green Goods Sectors. Working Paper: Sustaining Growth for Innovative New Enterprises Project.
Note: Hausman-Taylor Model with first difference of log of sales. Sign of coefficient and significance if p< 0.1 (*), p < 0.05 (**); p < 0.01***. (a). Based on total
marginal effects.
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10. 4.3 US GGS Enterprises – Returns to Pivoting
Strategic pivoting increases probability of positive sales growth
Predicted probabilities for each category of the ordinal dependent variable, sales growth, as a function of dpq and dpqsq, holding all continuous variables at
their means and application area as environmental. Underlying regression model dependent variable: sales growth (2010 to 2012) collapsed on negative, zero,
and positive values, ordinal logit model, growth = f(pivoting, website variables, controls). N = 198 US green goods panel firms.
Source: Arora, S., Youtie, J., Yin. L., Shapira, P. (2015). Does "Pivoting" Matter for Entrepreneurship? Using Web Mining to Explore Strategic Business Changes
and Growth of Startups in US Green Goods Manufacturing, Working Paper: Sustaining Growth for Innovative New Enterprises Project
4. Selected Key Findings Sustaining Growth in Innovative Enterprises
Probability
dpq (measure of distance between topics)
Business line change
Churning Too rapid change
limits scale up,
exploiting
innovations
The
strategic
pivot
Timely response
to technology
and market
changes
Lock-in Too little change
leads to inertia
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11. Strategies of growing
UK GGS businesses
 Most are active exporters,
some mainly operate in
global markets.
 Despite economic downturn,
many of these firms have
grown successfully by:
 Product, market and
technology
diversification
 Business model
innovation
 Servitisation of
manufacturing
 Access to finance remains a
major issue for many firms,
followed by access to skills.
Energy (S England). Est. early 2000s.
Approx. 65 employees. Manufacturer of
exhaust energy recovery technology.
Sales in Germany and Brazil. Diversified
from transport (heavy vehicles) to
stationary power generation sector.
Biofuels (SE England) – Est. 1990s.
Approx. 200 employees. Leading
supplier of biofuels, mainly in UK.
Investment in inventory control, back-
office, IT, as well as transport and
logistics to improve efficiencies and
economies of scale.
Fuel Cell (S England) – Est. mid 2000s.
Approx. 45 employees. Exporting to
Korea. Developer of alkaline fuel cell
systems for industrial markets
Business model innovation (selling
power rather than fuel cells)
Boiler (N England) Est. late 1990s.
Approx.100 employees.
Diversified from an energy technology
business to an energy supply business.
Electricity-generating gas boiler
offered via an innovative finance deal.
4. Selected Key Findings Sustaining Growth in Innovative Enterprises
4.4 UK GGS business model innovation
Source: UK interviews with 26 green goods manufacturing
SMEs (from study panel) & 14 policy organizations and
experts, 2013-14. About one third are fast growing firms
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12. 5.1 Green Goods Manufacturing
Shared Transatlantic Perspectives
•Green goods sectors are important in sustainable economic
growth, job creation, & exports, and addressing global challenges
Green economic
development
•Green goods sectors can boost manufacturing (vis-à-vis services)
and narrow regional dividesRebalancing
•Green goods sectors can exploit public R&D: new knowledge and
technology development in renewables, low carbon, and
environmental technologies
Exploiting R&D
•SMEs can pioneer new innovations and business models
SMEs as innovation
catalysts
•Policy frameworks are important in growing and scaling up green
goods sectorsPolicy
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125. Insights and Implications Sustaining Growth in Innovative Enterprises 12

13. 5.2 UK and US green goods sectors:
Knowledge, linkages, and growth
UK Green Goods SMEs
• Challenges of scale-up by SMEs…
• … Higher growth in sales associated with reported R&D and government grants,
and with:
• Interactions of Web mentions of R&D and public support, and awareness of
product standards and partnerships
US Green Goods SMEs
• Hyped expectations of green goods versus modest outcomes - at the micro level,
while about half the green goods firms added sales, the other half did not and
many relied on public funding…
• …Where there is higher growth in sales, this is associated with linkages with two
or more triple helix sectors
• Local links are more effective than national links
• Government links have a particularly large contribution to the effectiveness of
overall mixes of linkages
5. Insights and Implications Sustaining Growth in Innovative Enterprises 13

14. 5.3 Business and collaboration strategies
of growing UK green goods firms
Strategy and markets
• Role of pivoting – reorienting products, business model innovation, value-
added services
• Export markets important for many UK firms - UKTI valued
Innovation value chains
• Innovation networks are mainly with customers and suppliers – importance of
value-chain collaboration
University collaborations
• Fast growing firms tend to actively engage with universities, mainly on
testing, one-off consultancies; student projects, sponsor PhD, KTPs; and
research and European projects
• Some research links are local but in general fast growing UK GGS firms benefit
from varied non-local research links with UK and global universities
5. Insights and Implications Sustaining Growth in Innovative Enterprises
Reference: Uyarra, E., Shapira, P., Harding, A. (2015) Low carbon innovation and enterprise growth in the UK: Challenges of a place-blind policy mix. Working
Paper: Sustaining Growth for Innovative New Enterprises Project.
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15. 5.4 Location strategies and regional
frameworks – UK green goods firms
Locational path dependency
• Location in certain clusters generated as a result of spin-off processes, deregulation of
energy sector or diversification processes from traditional manufacturing sectors.
• They tend to exhibit strong locational inertia. Main locational advantages (or reasons for not
relocating) linked to people retention/availability of skills
Weak regional clustering
• Other locational advantages (e.g. access to markets, local supply chain, availability of
research infrastructure) not very important.
• Decreasing role of local supply chain links: “We used to have our suppliers located nearby us
in the past, now we are finding ourselves having to go further afield.”
RDAs to LEPs
• Missing-middle in industrial policy between the ‘national’ and the ‘local’.
• RDAs to LEPs loss of regional sectoral/ supply chain expertise in areas such as offshore
wind.
5. Insights and Implications Sustaining Growth in Innovative Enterprises
Reference: Uyarra, E., et al. (2015).
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16. 5.5 UK funding & policy landscape
not perceived by business as helpful
Finance
• Difficulties in accessing finance in intermediate stages of the innovation phase (valley
of death), particularly in sectors with greater technological risk and high capital
intensity.
• Insufficient visibility of funding opportunities  Low-Carbon Funding Landscape
Navigator useful but still low awareness.
Innovation support landscape
• Perceived fragmentation of innovation support landscape. “It is very hard for a
reasonably well-informed outsider to understand how this fits together, let alone the
small businesses.”
• Business value long-term stability of incentive frameworks, which they perceive is
insufficient in the UK. “For our particular type of application, feed-in-tariffs around
landfill gas, the government is only really now starting to put in place what they are
and we haven’t had much continuity or stability in terms of those regimes”.
• Need for greater alignment / greater public shaping influence. “The UK does not
compare well with other countries”. More attractive regulatory regimes overseas
driving exports: “for our particular type of application, we haven’t had much continuity
or stability, hence we have no customers in the UK.”
5. Insights and Implications Sustaining Growth in Innovative Enterprises
Reference: Uyarra, E., et al. (2015).
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17. Concluding Observations
•Contributing (albeit perhaps modestly) to rebalancing and
sustainability
•Most vibrant companies innovate, pivot, and export
UK base of SMEs in
green goods sectors
•In UK, Triple Helix is also important but possibly less powerful
Triple Helix
relationships are
important in US
•Effective (“joined-up”) government policy is an underpinning of
broad success in Green Goods manufacturing sectors
•Strategic pivoting aided by long-term frameworks for skills,
financing, and technology and business support
In most green goods
sectors, relationships
with government are
particularly important
Sustaining Growth in Innovative Enterprises 17

18. The Manchester Institute of Innovation Research (MIOIR) is the research centre of excellence in the Manchester
Business School (MBS) and the University of Manchester in the field of innovation and science studies. With
more than 50 full members and a range of associated academics, the Institute is among Europe’s largest and one
of the World’s leading research centres in management and policy for innovation and science.
Manchester Institute of
Innovation Research
Manchester Business School
University of Manchester, UK
Sustaining Growth for Innovative
Enterprises: Green Goods Sectors
Download reports and papers from:
http://bit.ly/sustaining-innovation
Contact: pshapira@mbs.ac.uk
Twitter: @philipshapira