The Innovation Gap

Innovation is at the heart of economic and social progress. It creates wealth and increases our quality of life. But where does it occur in the UK and how best can we measure it?

Innovation Gap: Myth or Reality?

Compared to other developed economies in the global market, the UK underperforms on traditional innovation indicators. Our overall research and development (R&D) spending is low, particularly on investments in science and technology, and we lag behind on patenting. But are these effective innovation metrics and can they be applied across all sectors?

The UK has strengths in service sectors, such as financial services, the creative industries and retailing, where formal R&D is much less important. NESTA's latest report - The Innovation Gap - suggests that the real innovation gap lies not between the UK and its competitors, but between the reality of innovation and how we measure it.

"A lot of past work has focused on another 'supposed' innovation gap - between the UK's 'poor' performance in innovation and the performance of countries such as the United States, Sweden or Finland," says NESTA Research Fellow and co-author of the report, Dr Michael Harris. But when researchers looked in more detail at this 'gap', they realised there were many forms of innovation that weren't captured in the typical measurements. For example, the UK's financial services invest heavily in innovation, particularly in developing new products and services and by exploiting IT, but this isn't captured in indicators such as patents.

"Policymakers across the UK are also increasingly realising that policy and measurement have fallen out of sync with the reality of innovation. So we're well placed to move the innovation debate forward and to reap the rewards from doing so."

Uncovering Hidden Innovation

If the UK is to become a competitive player in the innovation arena, policymakers must take a broader view of innovation. But to do this, we must first discover where innovation occurs, and uncover sectors of the economy and society that are currently neglected by traditional innovation metrics and policy.

"We've conducted research in five new areas that we call 'hidden innovation'. These are: medical technology, engineering, social housing, product and service innovation, and social innovation. This work is important because although academics are recognising there's a mismatch between policy and practice, they haven't, as yet, done much work in learning about the types of innovation going on in other areas."

Shaping innovation policy that is appropriate to the UK

"We hope that policymakers realise that this isn't just a case of theory matching reality, but that closing the innovation gap will be important for the UK's future economic and social wellbeing. In other words, the better we understand what innovation is, the better we can support and promote it.

"Innovation is so important for our future that it can't just be a matter for civil servants in Whitehall. That means that as employees, customers and voters, we have a role in helping to shape what innovation is and the areas in which we want and need more innovation. We are confident that policymakers and researchers can broaden innovation policy and make it more appropriate for the context of the UK - using new measures and creative ways of supporting innovation. But the next big challenge will be to include the public in innovation, to make innovation policy reflect what we want and need, collectively, from innovation."