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Economics

The innovation agenda: policy to drive economic growth

Innovation and R&D policies based on our research were at heart of the Coalition Government’s economic growth initiatives

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Prof Metcalfe's work demonstrates shows how ideas grounded within evolutionary economics can be successfully applied to the study of innovation policy.

Our research has influenced UK Department for Business Innovation and Skills (BIS) policy, providing key support to the Coalition Government’s growth agenda.

It has also featured strongly in European Union (EU) research and development (R&D) strategies and has shaped Australia’s innovation agenda.

As a result of his research into evolutionary economics and innovation policy, J Stanley Metcalfe (Stanley Jevons Professor of Political Economy, 1990‐2009) secured a number of high level appointments, most notably membership of a panel of six economists who wrote the Department for Business, Innovation and Skills (BIS) ‘Economics Paper 15’. This paper forms the basis of the Coalition Government’s subsequent ‘Innovation and Research Strategy for Growth’ (IRGS), announced in December 2011.

Key IRSG actions

  • Incentivising companies, especially small and medium enterprises (SMEs), to innovate through R&D Tax Credits
  • Additional £75 million to support small business innovation
  • £200 million additional funding for the UK Research Partnership Investment Fund
  • Additional funding for Smart – grants that support R&D in SMEs
  • New innovation voucher programme to enable small businesses to engage with universities and the wider knowledge base

Overseas policy contributions

  • Report to UNESCO in 2009 on ‘Innovation for Development: Converting knowledge to value’.
  • Contribution to the (2005-2009) EU Knowledge for Growth Expert Group (K4G) which has influenced European Commission policy on innovation strategy, with Prof Metcalfe’s approach at the heart of the Europe 2020 target of 3% GDP for R&D and innovation investment.
  • One of four international experts consulted as part of Australia’s ‘2008 Review of the National Innovation System’, now implemented in the country’s 10-year innovation plan.

Key quote

“Stan [Metcalfe]’s thinking played an important role…  the over-arching objective of the Economics paper…  [was] to create a coherent framework within which to formulate innovation policy in order to promote economic growth.” (Chair of the IRSG working group)

Our research

Prof Metcalfe's work demonstrates shows how ideas grounded within evolutionary economics can be successfully applied to the study of innovation policy. Key findings include:

  • Two types of innovation processes: (a) those that determine the range of innovations introduced in the economy, and (b) those that alter the relative economic importance of the competing alternatives. These processes are sustained and supported by innovation systems – the infrastructure and institutions that facilitate innovation within and across firms
  • Two types of policy instrument: (a) policies to reduce the cost of research, and (b) policies to improve the innovation infrastructure
  • Two key roles for Government: (a) to ensure the existence of ‘knowledge generators’ (called innovation ecologies) and (b) to facilitate the formation and strengthening of connections that create innovation systems from these ecologies

Key people