Published: 14 July 2020
In light of concerns about persistently weak productivity levels in UK firms, this study focuses on the relationship between investment in R&D and innovation activity and how this relates to business growth and productivity. The context for our investigation is micro-enterprises, i.e. employing up to 9 employees. These enterprises dominate the business landscape and in Northern Ireland account for almost 20 per cent of the workforce while also playing an important development role in the economy.
Drawing on survey data of nearly 10,000 micro-enterprises in 3 countries: the UK, Ireland and the US, our analysis emphasises the importance of R&D – an investment activity that is often considered not suitable for small enterprises - in supporting the relationship between innovation and productivity.
Some of our main findings include:
• Despite resource and capability constraints within micro-enterprises, that curtail their ability to undertake R&D, we find that investing in R&D has a strong and positive effect on enhancing the contribution of innovation to productivity and turnover growth. This result is consistent throughout all of our estimations, even though the actual effect might be varied across different types of industry.
• In order to explain the importance of R&D investment, we also estimate the innovation function with two innovation outcomes: product and process innovation. Our results indicate that investing in R&D activity is important not only for product/service innovation, but also for process innovation.
• R&D investment undertaken inside the enterprise is positively associated with both product innovation and process innovation, however R&D acquired externally has no significant relationship with product innovation but is positively related to process innovation.
• In line with previous studies, we identify a significantly lower level of productivity for Northern Ireland micro-enterprises.
Productivity and performance
We used depth interviews with business managers from the Midlands Engine area of England to explore the ways in which they and their organisations experienced mental health issues during the Covid-19 lockdown period. We spoke with our participants before and after lockdown. Four key themes emerged from the managers’ narratives. Firstly, the crisis has meant significant changes to the ways that many people experience the workplace and this has led to a number of new triggers for mental health issues. Secondly, mental health issues during and post-lockdown affected some groups of employees more, or in different ways, than others. Often, those affected were different from those who had experienced mental health issues pre-Covid. Thirdly, while stigma is known to discourage people from disclosing mental health issues, employees may be even less likely to admit to mental health issues during and following the crisis and lockdown than before. Fourthly, with increased remote working, it may be more difficult to identify the changes in behaviour that can signal that someone is struggling with mental health issues. Taking account of these insights is important to allow employers, policymakers and mental health practitioners to be aware of potential issues, and to design appropriate interventions. Our findings also have implications for the future research agenda.
Published: 4 November 2020
The pandemic has brought about difficult times for many businesses in the UK. Currently, with the onset of a second wave, and the end of the Brexit transition period nearing, the road to economic recovery looks arduous. Inevitably, the rate of job and firm destruction will increase but for those businesses that manage to survive, sustainable long-term productivity will be key to recovery and growth. However, are we using the right measure of an average when looking at productivity?
Published: 16 October 2020
Enterprise Research Centre
Warwick Business School
University of Warwick
Coventry CV4 7AL
Enterprise Research Centre
Aston Business School
Birmingham B4 7ET
0121 204 5392