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Measuring the impact of our innovation grants

Posted by: , Posted on: - Categories: Funding, Support

Innovate UK significantly increases the economic performance of UK companies

Economic performance

New analysis published last week has provided some of the strongest evidence yet that innovation support from Innovate UK significantly increases the economic performance of companies, in terms of those companies’ survival rates, and also their employment and turnover.

Co-funded by Innovate UK and BEIS, The impact of public support for innovation on firm outcomes, conducted by independent researchers at Frontier Economics, presents an analysis of the impact of innovation support provided to companies by Innovate UK and the National Physical Laboratory.

Innovate UK-funded companies perform better than if they hadn’t received funding

Specifically, for companies who receive an Innovate UK grant, it analyses whether their chance of survival, their number of employees, or their level of turnover improves in the following five years, compared to similar companies which did not receive a grant.

That last bit is crucial; it’s not enough to demonstrate that companies we support perform well - in order to justify what we do, we need to demonstrate that they perform better than they would have done without the grant.

This paper does just that.

More likely to survive, more jobs created, higher turnover

It’s a technical paper, and as ever the results come with caveats, but the findings look very positive;

  • Companies which receive an Innovate UK grant are more likely to survive than similar companies which didn’t receive a grant, and that impact increases each year for five years following the grant. 95% of companies supported by Innovate UK survived for three years after receiving a grant, compared to 84% of the similar companies which didn’t receive a grant. After five years the gap has grown to 16 percentage points.
  • Grant recipients saw higher employment levels than similar non-grant recipients, averaging around 30-40 additional employees within two to four years following the award; equivalent to an increase of between 11%-14%.
  • Turnover was also higher for those companies which received a grant from Innovate UK, around £5m higher per annum after 4 years, or around a 12% increase on average.

A few caveats, but don’t negate the positive impacts

And what of those caveats I mentioned? This type of econometric analysis is rarely straightforward, and this project was no exception.

The main issue, analytically, is the strong impact on survival we see above. For reasons set out in full in the paper, this can affect the findings on turnover and employment, either positively or negatively – and we don’t know whether these effects are present in the findings or not.

We do know those effects would have to be very large to negate the overall gist of the findings, and so we are confident this paper does represent strong evidence of the positive impact of Innovate UK grant support for business-led innovation.

Continue to understand Innovate UK’s impact

This paper is a real step forward for our evidence base, but we have plans to take this further. For example:

  • This analysis covered around 2,700 companies supported by Innovate UK; we now have data on three times as many
  • We can take what we learnt in this analysis to overcome some of the caveats, to improve the robustness of the analysis further
  • As more time has passed since the grants were awarded – instead of looking at what happens in the five years following a grant award, we may now be able to look over seven years

All these things mean we can continue to improve our understanding of the impact Innovate UK has, and continue to demonstrate the value we add to the UK economy.

Follow me on Twitter: @EconDanH

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1 comment

  1. Comment by Michael Kenward posted on

    "Firms" are not companies? (Ask the lawyers.)

    Actually, the title is gibberish. There are too many ways or parsing it.

    What is "innovation on firm outcomes"?

    How about "The impact of public support for innovation on business"?

    What does this mean: "Our study focuses on the outcome additionality of support."?

    Oh dear.

    Apart from that, worth studying.