Innovation in the UK Regions and Devolved Administrations: A Review of the Literature Report for the

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Innovation in the UK Regions and Devolved
Administrations A Review of the
LiteratureReport for the DTI and ODPM

• Marion Frenz and Christine Oughton
• Birkbeck, University of London
• May 2005
•  

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Regional Innovation Background and Context

• Growth in innovation studies since 1960
• Revival of regional innovation (from Marshallian
  industrial districts to clusters, to the new
  economic geography)
• Link between innovation and growth, productivity
• Closing the regional productivity gap an
  important part of closing the UKs productivity
  gap

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Innovation and Economic Performance

• Performance variables growth, productivity
  growth, GDP per capita, GDP per worker
• RD heavily concentrated in 2 regions (South
  East and Eastern)

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Figure 2.1 Business expenditure on RD in 2002
million
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Figure 2.2 Government expenditure on RD in 2002,
million
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Figure 2.3 Higher education expenditure on RD in
2002, million
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Figure 2.5 Growth rates in per capita GERD
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Table 2.1 Business RD Expenditure per employee
CIS and ONS data
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Table 2.3 Analysis of variance in RD intensity,
innovation activity and living standards across
178 regions and 12 nations of the European Union,
1999
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Table 2.4 Matrix of correlation coefficients for
indicators of innovation activity, RD intensity
and competitiveness
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The Community Innovation Survey

• There is variation in product innovation across
  UK regions, notwithstanding
• That CIS provides a broad measure of innovation,
  capturing diffusion as well as novel innovation
• The measure does not capture the extent of
  innovation
• Innovation and RD are concentrated in a
  relatively small number of firms
• Greater regional variation in new-to-market
  innovations
• South East and Eastern regions exhibit higher
  proportions of novel innovators

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Percentage of product innovators and novel
product innovators
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Percentage of enterprises introducing
organizational changes
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Percentage of enterprises that had co-operation
arrangements
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Average number of employees per enterprise that
hold a degree
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Theoretical Evidence

• Neoclassical approach
• Firm based
• Technology is exogenous (more recent models are
  endogenous)
• Growth accounting
• TFP
• Innovation is a residual and not explained

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Theoretical Evidence II

• Marshallian externalities
• Pecuniary
• Agglomeration
• Pools of skilled labour
• Industrial atmosphere (RD spillovers)
• Geography of innovation
• Tacit and codified knowledge
• Systems of innovation
• National systems (Freeman, 1987)
• Regional Systems (Cooke, Howells)
• Learning regions

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Empirical Evidence

• Growth accounting models
• Regional disparities in TFP
• These persist even when RD is included
• Key explanatory variable of regional TFP stock
  of human capital
• Geography of Innovation
• Spillover effects are
• positive within regions (intra-regional)
• decay across distance
• positive across regions (inter-regional) but
  smaller than intra-regional effects
• Positive role of (regional) public sector RD

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Empirical Evidence II

• Systems of innovation
• How does knowledge spillover?
• inter-firm cooperation (innovation)
• business-firm cooperation (novel innovation)
• mobility of star researchers
• If business-firm cooperation increases
  innovation, why is there so little of it?
• absorptive capacity

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Empirical Evidence III

• Role of multinationals and openness of regions
• Multinationals attracted by
• infrastructure
• strength of science base
• skilled labour
• industry specialisation (agglomeration economies)

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Empirical Evidence IV Governance and Institutions

• Study of 17 OECD countries, 1980-2000
• Looks at convergence in living standards and
  productivity
• Finds strong positive relationship between
  decentralisation and regional equality
• Fiscal decentralisation has biggest impact

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Empirical Evidence V Case Studies

• Descriptive - snap shot
• Historical stages of development
• Agglomeration economies
• Role of the public sector (research and skilled
  labour)
• Long lead times
• Availability of venture capital
• Collective external economies (networks)
• Political commitment
• Real time case studies

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Future Research

• how each of the different types of external
  economies promotes innovation and growth
• the necessary and sufficient conditions for each
  type of externality to be realised
• how the different types of external economies
  interact
• the extent and range of spillover effects
• the stages of development of a locality and the
  relative importance of different types of
  externalities at each stage

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Future Research II

• the processes of cumulative causation
• the mechanisms via which knowledge spills over
  from one organisation/firm to another, for
  example, bi-lateral cooperative agreements,
  formal network agreements, informal networks,
  movement of skilled labour, spin-offs, an
  atmosphere of innovation, accidental spillovers
• the role of absorptive capacity, human capital,
  skills and managerial capability
• organisational innovation and
• institutions, social capital and governance.