On Business Innovation Policy

Prof Paul NightingaleSPRU, University of Sussex

Traditional view

Evidence

Alternative

Traditional view?

Entrepreneurship constrained by

1. Culture & Market failures 2. Creating barriers to entry3. Growth then easy

Policy – remove barriers

1. Enterprise culture2. Funding3. Tax breaks4. Reduce red tape5. Schumpeterian Universities£7bn a year

Evidence

Market Entry Hard?

Growth Easy?

Performance Convergence?

Brutal Selection

Churn

Skewed performance distributions

(business models)

Evidence Excessive entry Low survival & churn Skewed performance

US v EU Not >> entrepre or

innovation Faster growth Faster entry into new

industries, Universities & Scale

Alternative?

Theory “Schumpeter”

Confuses invention (an event) with innovation (a long term process)

New, small firms maybe at a disadvantage

Lifecycle technology not same as firms

Encouraging market entry

Excessive churn Subsidies little effect Demand side constraints Thin markets

Growth not Entry constrained

Quality not quantity matters High growth very difficult BM innovation to capture

value Raising performance of long

tail

Policy

Realism in enterprise policy Alignment with market needs Upgrade quality Universities ‘talent not

technology’ Competition policy

Conclusion

Conclusions

Realism Better not more

entrepreneurship Skewed performance Innovation & upgrading

(diffusion) Value capture not just value

creation