Innovation has played a major part in both private sector and economic growth in recent years, research has revealed.
A new report by the National Endowment for Science, Technology and the Arts (NESTA) found a clear link between business performance and investment in innovation, which drove two thirds of private sector productivity growth between 2000 and 2007.
According to the research, UK businesses invested £133bn in innovation in 2007 (the most recent year covered by the Index), representing 14% of private sector output. More than three quarters of this came from “hidden innovation”, in areas other than research and development.
NESTA said its Innovation Index was “the most ambitious attempt yet to measure the contribution of innovation to the UK’s economic growth”.
Jonathan Kestenbaum, chief executive of NESTA, commented: “For people who care about the prospects for our economy, this Index will be as important as the Consumer Price Index. The Innovation Index measures arguably the most important driver of growth.”
The Index measured investment in a broad range of innovative activity. Rather than focusing solely on research and development (the traditional measure), it looked at areas such as product design, training in new skills, organisational originality, the commericialisation of ideas, developing new customer offerings and brands and copyright.
NESTA added that robust measures of innovation and the contribution it makes to the economy would help both shape and improve innovation policy in the UK.
Lord Currie, chairman of the report, said: “This report measures the direct contribution of innovation to productivity and economic growth, through a much wider set of channels than hitherto captured. This is critical in refocusing innovation policy on what really matters for enhancing the UK’s prosperity.”
Software firms that had invested in innovation were found to have experienced a much faster growth rate than those that hadn’t (an average of 13% a year compared with just over 0%). Innovative legal services firms grew by 10% on average, while non-innovative firms' revenues shrank.
© Crimson Business Ltd. 2009