Innovation, skills and performance in the downturn: an analysis of the UK innovation survey 2011

Abstract

The link between firms’ innovation performance and economic cycles, especially
major downturns such as that of 2008-10, is a matter of great policy significance, but
is relatively under-researched at least at the level of micro data on business
behaviour. It is, for example, often argued that economies need to ‘innovate out of
recessions’ since innovation is positively associated with improvements in
productivity that then lead to growth and better employment (Nesta, 2009).

The issues of how individual firms respond to downturns through their investment in
innovation, and how this impacts on innovation outputs and ultimately business
performance and growth during and after downturns, has been less studied because
relevant data has not been readily available. The UK Innovation Survey (UKIS) 2011
now makes this possible. The UKIS 2011 with reference period 2008 to 2010 covers
the downturn in economic activity generated by the global financial crash. The build-up of panels over the life of the UKIS also supports analysis of the longer-term interactions between innovation and the business cycle. This report analyses the last four waves of the surveys. Further, the latest survey includes questions on whether firms employ a specific set of skills, which adds materially to the ability to research the role of skills and human capital in innovation at the micro level.