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The changing innovation policy landscape

Sajid Javid’s speech to the Lord Mayor’s Dinner last week gave us a preview of his thinking on the Government’s role in promoting innovation. Among his priorities were a more open industrial policy, ‘determined deregulation’ and better use of government procurement. It’s likely that the upcoming Budget will attempt to deal with some of these thorny issues.

Before then - and for those out there who don’t avidly watch the progress of innovation policy - here’s a summary of the main issues we’ve been talking about over the past few months.

Institutions for science and innovation

Following Dowling, Nurse, and Science and Innovation Audits, the past year has seen a big emphasis on how the innovation system should adapt to make better use of our universities. This entails, in Jo Johnson’s words, becoming ‘significantly better at exploiting all the IP and excellent research that sits in our system’. 

Government priorities are being played out here at another level: there was a proposal - one-line in the Spending Review - that innovation agency Innovate UK should be tucked into the new organisation coordinating the work of Research Councils, Research UK.

As Nesta set out in a recent brief, Innovate UK’s autonomy and its business-facing character are two of its strongest characteristics, and under current budgets a full merger with Research UK would very likely make Innovate UK the junior partner. As Paul Nightingale put it more explicitly in the title of a recent article, innovation shouldn’t be a branch of science policy.

What’s more, few other similar countries with similar innovation and research capacity have a single institution that coordinates all ‘discovery’ and ‘commercially-oriented’ research and development funding. Those that do are either very small economies (like Iceland) or large federal systems (like Canada). These arguments in the brief are based on observations from a longer piece of international comparative research on innovation agencies, to be published later this year.

Local growth - Science and Innovation Audits (SIAs)

We’re seeing a clear Government shift towards place-based innovation. SIAs are an important part of this, featuring in Javid and Johnson speeches throughout 2015. They intend to improve data and measurement of local research excellence and innovation networks across the country.

The audits will require gathering local consortia of representatives from universities, cities, Local Enterprise Partnerships (LEPs) and businesses to map each area’s innovation attributes and comparative advantages. In turn, the results of each audit will support the delivery of England’s already existing Smart Specialisation strategy, coordinated at the LEP level (led by the newly created Smart Specialisation Hub) .

If this already sounds complicated, that’s because it is. There’s an obvious challenge here of how to reconcile contrasting views and interests across different institutions, geographies and overlapping consortia.

In theory though, SIAs are a good idea. As our colleague Stian pointed out recently, there’s a strong case for local funding decisions - like where to locate the next Catapult centre or allocate European Structural Funds - to become better informed by reliable evidence on strengths of different regions.

But for SIAs to provide something innovative and helpful, they need to go beyond often official datasets. They need to make use of unstructured data, relational (network data) and have willingness to merge a range of business and research datasets to provide a new and insightful tool for policymakers.

Nesta has been working in this area too. In partnership with Growth Intelligence, Tech Nation aimed to improve our mapping of the fast-moving nature of UK’s digital technologies and clusters, utilising a number of novel data techniques. These include using machine learning to scrape firm level data from company websites, or measuing local talent pools and peer-to-peer networks by combining official information about graduates with new data sources like Meetup.com and GitHub (for more examples see this, this and this).

We’re also using similar techniques to understand networks within and between the golden triangle (combined with qualitative data), as well as developing a live innovation dashboard for Wales to triangulate official, unstructured and open data. Rather than measuring ‘just because we can’, our experiments and research questions consider how policymakers or institutions might also adapt to extract value from these data (see skills below).

Dealing with the UK’s productivity gap

Productivity is likely to be the prime motivator behind BIS economic strategy in 2016. Last year saw the release of the 15-point Government Productivity Plan. From housing, to education, to a ‘higher pay, lower welfare society’ the document comes a little close to reading like a broad-based policy manifesto, with platitudes abound. This was one of the main criticisms by the recently released BIS select committee inquiry into the Plan.

Still, the underlying focus in the Plan on long term investment and business dynamism is positive. Indeed NIESR’s research for Nesta has shown that a dynamic firm growth distribution is one of the most important drivers of UK productivity. Put simply, the British economy is underperforming when it comes to allocating resources to the best businesses; the implication being that Government support should become more focused on creating conditions that enable the most productive firms to scale up.

On top of that, it emerged from our research that new firms are not particularly special from an economic point of view, and may even be dragging UK productivity down. While might be politically advantageous to celebrate support for SMEs - ‘the lifeblood’ of our economic recovery - this serves as an important reminder that quality is far more important than quality when it comes to tax breaks for new firms or loans for entrepreneurs. We’ll be publishing research over the coming weeks shedding further light on productivity trends since the financial crisis.

Skills for the future

Of course skills are intimately tied up with productivity performance. Building on the above insight, faster resource allocation might come from the more effective transfer of skills between firms. We' ve briefly mentioned Scandinavian flexicurity for example, which protects individuals rather than jobs through flexible contract arrangements alongside stronger support through employment transition.

On a more obvious level, last week Sajid Javid made it clear that “building skills for the future” will be a strategic priority, and government has recently been exploring in more detail what those skills actually are. For example, Government cites Nesta analysis that data-active companies - or ‘datavores’ - are over 10 per cent more productive that those who are not.

Our Analytic Britain policy briefing, in partnership with Universities UK, made a number of recommendations for how we should act on this. These include improved promotion of statistics education in schools; embedding quantitative skills in higher education across disciplines (since innovation in analytical methods often occurs at the intersection between disciplines); or training solutions between universities, LEPs, local authorities and digital clusters to upskill local data communities.

We’ve also recently built a visualization using data from Burning Glass. Data was scraped from over 40,000 online job advertisements to build a live and more detailed picture of innovative employment, their growth and demand; a further insight - complementing official jobs statistics - into where jobs of the future will lie.

 

[Photo: George Evans, Creative Commons Attribution ShareAlike 2.0]

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Theo Bass

Theo Bass

Theo Bass

Senior Researcher, Government Innovation

Theo is a Senior Researcher in Nesta's Research, Analysis and Policy Team

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