Science, innovation and business growth

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UK firms benefit from public support for science and innovation in a number of ways. Research Councils such as the Engineering and Physical Sciences Research Council – EPSRC – provide grants for R&D, and Innovate UK provide grants to support innovation. But do these grants actually work? Do they help businesses to innovate and grow?

The answer seems to be ‘Yes’. 

New research just published by the Enterprise Research Centre (www.enterpriseresearch.ac.uk) compares the growth of over 10,000 UK firms which received grants from EPSRC and InnovateUK with a matched group of non-funded firms. Firms which received grants grew their turnover and employment 5.8-6.0 per cent faster in the three years after the grant, and 22.5-28.0 per cent faster in the six years after the grant, than similar firms which did not receive support.

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Our new research also provides an indication of what types of firms benefit most from grants for science, research and innovation. Figure 1 illustrates this in terms of the impact of grants on turnover growth over the six-year period following the receipt of a grant. For all firms (the top bar) receiving a grant adds 28 per cent to turnover growth. This effect is larger for manufacturing firms, particularly in high-tech industries. It is also larger where firms are smaller. Larger firms benefit less in proportional terms from such grants. 

Figure 1: Turnover growth impact of grants for science, research and innovation after 6 years (%)

Figure-1

For firms, this suggests the potential business benefits – enhanced growth and productivity – which getting support from InnovateUK or EPSRC can offer. For example, the government’s ‘innovation funding finder’ (https://www.gov.uk/apply-funding-innovation) currently lists 23 opportunities to apply for innovation grants. Current funding opportunities include grants to help develop autonomous vehicles, battery technologies, low carbon technologies  and machine learning. The EPSRC website also lists a range of funding opportunities (https://www.epsrc.ac.uk) and also provides useful resources such as model collaboration agreements. 

Other UK research councils provide support to firms in other sectors. The Arts and Humanities Research Council, for example, has funding available for developing immersive experiences and dealing with anti-microbial resistance (http://www.ahrc.ac.uk). Other sources of R&D and innovation funding are also available to UK firms. European schemes such as Horizon 2020 remain accessible to UK firms, and in Scotland, Wales and Northern Ireland, regional schemes provide targeted support for local companies. 

For the government (and UK tax payers) our research provides some reassuring evidence of the value of grants for science and innovation. This is particularly important given the massive growth in grant funding which is envisaged in the Industrial Strategy Challenge Fund. This will provide an additional £2bn of public support for science and innovation by 2020. Much of this new money should be available to firms to support R&D and innovation across a range of industries. The challenge for government is to ensure that this new money supports UK innovation in the best way possible.

Author

Stephen Roper is Director of the Enterprise Research Centre and Professor of Enterprise at Warwick Business School.

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