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27 February, 2006 - 14:36 By Staff Reporter

US firms backed by government get five times the cash of UK counterparts

Smart money is finding its way to a more targeted selection of innovative companies in the United States than in the UK, new research reveals.

UK government money is being spread too thin while fat federal resources in the States are being hurled at cherry-picked market leaders.

This stark contrast in funding fundamentals screams out of the Cambridge-MIT Institute’s International Innovation Benchmarking research project – the first like-for-like comparison of the innovative behaviour of UK and US firms.

Although a higher proportion of UK companies get government support, the amount received per company is much higher in the US both in terms of the amount they receive and the percentage of sales it represents.

Only half as many small firms in the US receive government finance for innovation – but the amount they receive is on average five times larger than that received by UK companies.

The proportion of their R&D spending that this represents (38 per cent) is over three times greater than that for UK firms.

The way funding is filtered is just one example of how US innovation companies are making more of less.

US SMEs are shown to have even more concerns over red tape as a constraint on their ability to innovate than their UK counterparts. They are also more worried about a lack of skilled labour than British firms and face more competition.

Despite these perceived constraints to innovation, US companies are much more likely to have introduced novel innovations – new not just to the company but also the industry – than their UK peers except in the hi-tech services sector, where British businesses (eg in telecoms, computer software and R&D consultancy) are ahead.

There is also a stark contrast in the way US companies maximise their relationships with academia – a key source of science & technology innovation.

The CMI research shows that universities and businesses in the UK are doing more to link up with each other, not least because of some policy stimulus to do so. Yet they aren't as enthusiastic about its importance to innovation as in the US.

Project leader Dr Andy Cosh says: “There is lots of noise (about university-industry links) in the UK, but less action than there is in the United States: 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.”

Professor Alan Hughes, director of the Centre for Business Research and one of the principal investigators, adds: “In America, 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 relatively neglected in the UK.”

• The new report, ‘UK Plc: just how innovative are we?’ by A.D. Cosh, R.K. Lester and A. Hughes (2006), Cambridge-MIT Institute, is available to download from:

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