Innovation modes, determinants and policy effectiveness: a firm level empirical study using the UK CIS 4, 5 and 6

Bonnyai, Samuel (2013) Innovation modes, determinants and policy effectiveness: a firm level empirical study using the UK CIS 4, 5 and 6. PhD thesis, University of Glasgow.

Abstract

This thesis makes use of recently collected UK Community Innovation Survey data to investigate 3 areas that allow to characterise and thus understand more clearly the innovation process in the UK. Firstly strategies of innovation used by firms are identified. Next the determinants of innovation, that is factors driving innovation inputs and outputs, are estimated. Thirdly this work examines the effectiveness of financial public support towards innovation. This also allows to establish which firms are more likely to be in receipt of public support and thus whether government innovation policy is in line with its objectives. Furthermore in this thesis a measure of absorptive capacity for the CIS is created, to see whether this proxy contributes in explaining innovative activities and the receipt of public support towards innovation. Similarly a measure of appropriability is generated for use as an explanatory variable in the estimation of the determinants of innovation. Both of these measures permit to find out if their latent variables have nonlinear effects in explaining propensity and extent of innovative spending. All these aspects have not received attention in previous literature, in large part due to the novelty of the data used.

Besides the empirical evidence gained on the above, the addition to the literature of this thesis lies in examining several CIS survey rounds together. For one this serves as a robustness check for the conducted applications and on the other hand it allows investigating the comparability of the survey rounds. For this work the CIS 4, the CIS 5 and the CIS 6 are used as they are the most similar and comparable samples of UK businesses to date. Nevertheless it was found that differences in terms of design, wording and exclusion of responses to some question sets in the different surveys impedes their use for trend analysis and panel data analysis. Something the data collecting agencies need to address in the future. Despite these issues the conducted investigation has provided useful insights into innovation as it takes place in the UK.

The first empirical chapter has been able to identify two major modes of innovation as captured by the survey. A ‘traditional’ or ‘linear’ strategy aimed at introducing product and process innovations, relying on innovative activities such as R&D and also making use of sources of information, more strongly from market sources then from science sources. Secondly a ‘dynamic’ or ‘systemic’ strategy also involving innovative activities such as R&D but more strongly making use of knowledge sources from science as well as relying on cooperation. The interpretation of this “blue skies strategy” which is not directly linked to achieving technological outputs is that it generates knowledge that helps to keep abreast of market developments and to be ready to spot opportunities in line with the literature on dynamic capabilities thus the identified strategies allow for a plausible interpretation congruent with innovation theory. In this chapter the aforementioned measure of appropriation and absorptive capacity were also successfully generated.

These were then shown to play a significant role in explaining innovative activities in the subsequent empirical chapter, both exhibiting decreasing returns to scale. Following the CDM methodology this work has confirmed that knowledge capital as proxied by predicted R&D spending intensity is as important in generating service innovations as it is in stimulating goods innovations for the UK. The results also show that absorptive capacity not only indirectly impacts the likehood of introducing service innovations through its effect on knowledge capital as for goods innovations but also directly. This suggests that services once conceived further have to be tailored to individual customer’s needs. Hence absorptive capacity is specifically important in a developed economy dominated by service sector industries. At the same time the fit of the models confirmed that the CIS could do better at explaining service and process innovations by soliciting more information that are likely to cause these types of innovation. Finally further support for the innovation productivity nexus has been found.

The last empirical chapter then established that absorptive capacity is also an important factor explaining the likehood of firms to be in receipt of financial public support towards innovation. This chapter further concluded that the financial public support towards innovation in the UK has in the recent past been effective at stimulating innovative performance besides just R&D spending. The government’s objective of supporting start-ups, that potentially face difficulties in financing their innovative activities, as well as supporting cooperation, vital for the dissemination of knowledge in the economy, is met according to the results. However SMEs could not be shown to be statistically more likely to be in receipt of public support despite facing the same problems as start-ups, though at least they are not less likely to be in receipt of public support then large firms. This finding stipulates that policy objectives are not achieved with regard to specifically targeting SMEs.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Keywords: UK Community Innovation Survey Analysis, Strategies of Innovation, Determinants of Innovation, Innovation Policy Effectiveness
• Subjects: H Social Sciences > HA Statistics; H Social Sciences > HB Economic Theory; H Social Sciences > HC Economic History and Conditions
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Economics
• Supervisor's Name: Harris, Professor Richard and Flamini, Dr. Francesca
• Date of Award: 2013
• Depositing User: Dr Samuel Bonnyai
• Unique ID: glathesis:2013-4689
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 08 Nov 2013 08:49
• Last Modified: 07 Jan 2014 12:29
• URI: https://theses.gla.ac.uk/id/eprint/4689