New report on innovation in a changing economy

In difficult economic times, firms need to adapt if they are going to survive. Innovation is particularly important at such times. However, as the economy changes to one increasingly dependent on services then so must our view of innovation.

One of the Observatory’s new State of the Region thematic reports, The Importance of Innovation in a Changing  Economy (PDF, 685kb), looks at how innovation can continue to drive change in the economy of the future.

The majority of the report is made up of four independent essays commisioned from academic experts in the field of innovation. These essays were presented at an innovation workshop day on 19th March 2009 at Birmingham City University and covered the following themes (you can listen to the presentations at the links below):

• Innovation in services
• Innovation in the public sector
• Innovation links between industry and universities
• Innovation and skills

Innovation in services

In the first essay, Dr Palie Smart highlights the blurring of traditional distinctions between manufacturing and services. This is because new and innovative products now often combine elements of both, with successful firms such as Rolls Royce providing integrated packages.

They are also increasingly dependent on collaboration with other businesses and a deeper, more frequent, dialogue with users.

Innovation in the public sector

Professor Adrian Cole from Birmingham City University highlights the differences between the drivers of innovation in the public and private sectors.

In the absence of market pressures which drive the private sector, organisation structures within the public sector play a more important role.

Professor Cole argues that centralised direction, a risk-averse environment, the need for stakeholder engagement and limited knowledge exchange all contribute to hinder innovation in public sector organisations.

Innovation links between industry and universities

Bill Joy, founder of Sun Microsystems, is quoted as saying, “Not all the smart people in the world work for you”.

Open innovation requires sourcing new ideas from external as well as internal sources. Universities are acknowledged centres of expertise but they often find it difficult to share this knowledge with businesses.

In the third of the essays, Prof. Lynne Martin and Dr. Julia Rouse argue that effective knowledge exchange works best where long-standing relationships built on trust exist. There is a role for skilled intermediaries to help the process of developing these relationships and, hence, to improve innovation links.

Innovation and skills

In the last of the essays, Dr. Vania Sena highlights the availablity of higher level skills as a key driver of innovation. This occurs at both the level of the firm and the wider economic environment.

At firm level, a highly-skilled workforce leads to innovation opportunities being identified and exploited. This can then lead to a spillover in the wider economy, particularly where concentrations of skilled workers are located close together, allowing knowledge to transfer through formal and informal contacts.

Related links

• The Importance of Innovation in a Changing Economy: A State of the Region Thematic Report (PDF, 685kb)
• Key contact: Stephen Howarth, Deputy Chief Executive, West Midlands Regional Observatory. Tel 0121 503 3239 / email stephen.howarth@wmro.org.
• Innovation in services presentation by Dr Palie Smart
• Innovation in the public sector presentation by Prof. Adrian Cole
• Innovation links between industry and universities presentation by Prof. Lynne Martin