Joint Cambridge-MIT study finds it's just as tough across the pond
Executives in the US find running a business just as challenging - if not even more so - than their counterparts in the UK, according to research funded by the Cambridge-MIT Institute (CMI).
Despite British firms railing against 'red tape', it turns out that US corporations are even more concerned about taxation, legislation and regulation as a constraint on their ability to innovate; and surprisingly, they are also more worried about a lack of skilled labour and getting access to finance than British firms.
These issues emerged at last month's joint CBI-CMI co-hosted conference to unveil the results of the CMI-funded "International Innovation Benchmarking" project.
The project surveyed 3,600 companies on both sides of the Atlantic about what they do to make themselves innovative and how they perform as a result.
The research has been carried out Cambridge University's Centre for Business Research and the Industrial Performance Center at MIT and is yielding findings on several innovation policy issues including:
• The role of universities in the innovation system. Universities and businesses in the UK are doing more to link up with each other, not least because of some policy stimulus, but they aren't as enthusiastic about its importance to innovation as in the US. Professor Alan Hughes, Director of the Centre for Business Research and one of the principal investigators, told delegates: "In America, for example, firms both use internships as a link with universities more frequently and rate them more highly than UK firms: this is a key people-based link between industry and the science base that is neglected in the UK."
• Competition: US companies face more competition than UK firms, but UK firms have more overseas competitors and are likely to have to deal with the complexities of overseas trade sooner in their lifespan than US firms.
• Barriers to innovation: Surprisingly, given the perceived superiority of the US environment for business, it turns out that US companies are more worried than their British counterparts about particular constraints, including 'red tape' (legislation, taxation, regulation), getting access to finance, and finding skilled labour.
• Public support: A higher proportion of UK firms get government support - this is particularly marked amongst the largest UK businesses, with over 1,000 staff. But the amount received per company is much higher in the US, both in the how much they get, and the percentage of sales that it represents.
• Comparative innovation: US companies are much more likely to have introduced novel innovations (those new not just to the company but also the industry) than their UK peers - except in the high-tech services sector, where British businesses (eg in telecoms, computer software and R&D consultancy) are ahead.
Some Surprises
CBI Chief Economist Ian McCafferty told delegates he "was surprised by the data on 'innovation inputs' that suggested firms in the US find life just as challenging, and in many cases harder than those in the UK, particularly in areas such as workforce skills, access to finance, regulation, and even technology-related factors. Clearly the popular impression of the US - that it offers a much better climate for innovation than the UK - does not fully stack up."
In discussion, delegates returned several times to the discovery that while more UK than US businesses (two-thirds UK compared to one-third US) use universities as a source of knowledge for innovation, strangely they value such relationships less highly than US businesses.
Project leader Dr Andy Cosh said: "There is lots of noise (about university-industry links) in the UK, but less action than there is in the US. UK companies are more likely to get involved in some form of university-collaboration, but the US companies that collaborate with universities are more likely to rate this as important, and they devote more of their innovation expenditure to such collaborations."
The CBI has done its own recent research into innovation, and is running its Innovation Campaign to heighten awareness of innovation issues.
Mr McCafferty said "The overall impression from this work is that, based on levels of business innovation activity and return on government investment, the differences between US and UK firms are not as great as you might expect. In spite of the greater resources devoted, and the greater 'novelty' shown in the US, the UK holds its own.
"Maybe this has something to do with our necessarily earlier and greater exposure to international competition - it makes life tougher for companies early on, but those that can cope are likely to end up more competitive as a result."
19th March 2006
