UK Innovation Index

The UK’s National Endowment for Science Technology and the Arts (NESTA) has released its new pilot Innovation Index
. As the press release states:

The aim is to make a significant improvement on existing metrics, both by making clear the contribution of innovation to productivity and growth, and by capturing ‘hidden innovation’.

The index is now in its pilot form with launch of its final form due in the fall of next year. The Index is actually three reports.

The first report provides a growth accounting framework, built in part on the measurement of intangible assets as formulated by Corrado, Hulten and Sichel in the US and Marrano, Haskel and Wallis in the UK (see previous postings).

The second report is a follow on to their earlier report of “hidden innovation” – that is innovation in industries where levels of traditional R&D investment are low. These include: architectural services: accounting; business and management consultants; legal services; software and IT services; automotive industry; construction; energy; and design services. The report shows that low R&D intensive industries are not necessarily low in innovation. And even in areas were industry wide innovation may be low, successful companies are more innovative than their peers.

The third report looks at seven clusters of what it calls the “wider conditions” for innovation:

• Public research. Both the amount spent on public research, and the strengths of business-industry links.
• Openness. How quickly and effectively good ideas can diffuse and be absorbed. This includes both the physical infrastructure for openness (such as broadband internet) and its social underpinnings (such as how hierarchical workplaces are).
• Entrepreneurship. How effectively new businesses spring up to take advantage of innovative opportunities, and how willing people are to take the risks necessary to innovate.
• Demand. Whether customers are willing to buy innovative products. An important part of this is government’s willingness to procure innovative products.
• Competition. The overall level of competition in the economy.
• Access to finance. Whether risky, innovative businesses can attract funding, in particular venture capital, but also other forms of finance such as business credit.
• Skills. Whether skilled workers are available to work in an innovative venture, and whether workforces have the necessary skills to innovate themselves.

The study concludes that the UK does well in competition and entrepreneurship, needs work in the areas of public research and openness and lags in access to finance, demand and skills.

These three reports are essentially refinements and follow-on to previous NESTA work. Taken together they point to a new direction of measuring and understanding innovation. As they show, innovation based on investments in intangibles assets occurs across economic sectors. It is not simply a function of what we traditionally see as R&D These report highlight that our industrial age notions of innovation are woefully out of date. As the hidden innovation report states: “One reason for this innovation gap is that traditional metrics do not reflect the nature of innovation in today’s economy.” New metrics will come from the new formulations of innovation presented in these report — and in turn the metrics will help us better the workings of the I-Cubed Economy.

2 thoughts on “UK Innovation Index”

  1. Example of Hidden Innovation – not even on the survey

    The previous posting mentioned NESTA’s reports on Hidden Innovation. I was at an event this morning with Digby, Lord Jones, the former UK Minister for Trade & Investment. When I mentioned the study, he remarked that even with the report…

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  2. US innovation data — finally

    Apropos of innovation metrics (see previous posting), the US is now beginning to collect innovation data as part of the NSF’s Business R&D and Innovation Survey — formerly known as the Survey of Industrial Research and Development. The survey (which…

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