Boosting Innovation and Productivity in Enterprises: What Works?

9/11/2011

Innovation Key to Higher Productivity and Restoring Competitiveness The ESRI has published new evidence on whether and how Irish enterprises innovate. Innovation in indigenous enterprises is crucial to Ireland’s efforts to regain competitiveness and restore growth. Based on a wide range of international evidence, the new ESRI study concludes that enterprises that innovate also tend to be more productive. This result is mirrored in Ireland. Yet in the case of indigenous enterprises, the productivity benefits of innovation are not primarily about the development of new and improved products, but rather about process and organisational innovation. The paper found that in the international studies reviewed, successful innovators tend to be larger enterprises, those that have higher innovation expenditure per employee and enterprises that co-operate with others in innovation. Among indigenous enterprises in Ireland, successful innovation is also associated with size, with exporting and with co-operating with other enterprises, and with universities or other higher education institutions. Nevertheless, innovative products were found to account for a greater share of sales for smaller enterprises. Drawing on both international and national evidence, the authors indentify three key policy messages:

• Irish government policy needs to enable enterprise growth, strengthen the Irish innovation system, and promote links with the international innovation system.
• Policy to promote innovation at enterprise level needs to take account of differences across enterprises and especially in their capacity to absorb new knowledge.
• In the current context with limited budgets, all programmes should be evaluated for effectiveness, using metrics and methods that take account of complexity of the innovation process and the mixture of policies in place.

Note to Editors: 1."Boosting Innovation and Productivity in Enterprises: What Works?" by Dr Frances Ruane and Dr Iulia Siedschlag (ESRI) is the third paper in a special series of ESRI studies that aim to survey available evidence to address issues related to Ireland’s ongoing economic crisis. It will be published online on the ESRI website (www.esri.ie) at 00:01 a.m. Wednesday 9 November. 2. A total of 12 studies are being undertaken as part of this “Renewal” project, which is supported by FBD Trust. 3. This paper will be presented at a conference on improving productivity and growth, to be held at the ESRI on Wednesday 9 November, which will also feature papers on how best to respond to the unemployment crisis and how to target public investment in infrastructure to get the best returns.

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