A Proposal for Industry-Led Innovation Consortia

Innovation — the introduction of new-to-the-firm or new-to-the-world products and methods of production — is a necessary requirement for ongoing competition. Without innovation, other types of competitive action — advertising, training or price cutting — are subject to diminishing returns. You cannot keep cutting prices without making your production method more efficient and there is little point forever increasing staff training if your products and production methods are static. Over the long haul therefore, businesses must change their product line-up or mode of production in order to remain competitive. The major side-effect of this competitive process is that businesses raise national productivity and thereby our standard of living. Empirical studies consistently find that spending on R&D raises productivity both in the business that undertakes the R&D and in surrounding businesses (Hall, Mairesse and Mohnen 2010)