Pathways to productivity, pathways to growth: Evidence from the UK Innovation Survey
SITE (Science, Innovation, Technology, and Entrepreneurship)
Previous studies have suggested there is little correlation between productivity and growth at firm level. Do different types of innovation drive productivity and/or growth? Does the source of firms’ R&D finance matter? Is there a difference between the innovation effect of publicly-supported and wholly-privately-funded R&D? Here, we use firms’ responses to consecutive waves of the UK Innovation Survey to examine the effect of innovation on productivity and growth two years later. Our analysis suggests that product or service innovation has a positive relationship to business growth but a negative effect on productivity after two years. Organisational innovation has a positive productivity effect but no significant growth effect while process innovation has a positive effect on both productivity and growth. Firms undertaking R&D are significantly more likely to report each type of innovation. However, firms receiving public R&D support are no more likely to innovate than those paying for all of their own R&D costs. This result proves robust across a range of sectors and firm sizebands. Our results suggest the importance of aligning innovation investments with broader corporate and policy objectives related either to supporting firms’ scaling productivity improvement.