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Innovation, Trade and Connectivity

Published 6th April 2009

Headline findings from the report are that:

  • Large numbers of firms in MCR identify themselves as having no trading links with other firms in the City Region. However, they are well connected to firms outside the region, and these external links will be highly beneficial in increasing access to innovative ideas.
  • The strong connections to firms outside the region means that creative businesses have good access to innovative ideas, but their lack of internal networks means the spread of these innovations within MCR is limited.
  • These results suggest that there may be large and immediate payoffs to MCR’s capacity to innovate if creative firms can be better integrated into supply chain networks in MCR.
  • Mimicking innovations introduced by competitors is a poor method for spreading new ideas. The results for MCR networks studied indicate that it takes a large number of firms to have adopted an innovation before others will follow suit, so this is a slow process.
  • Trading links are much more effective at spreading innovations quickly. An innovation can quickly cascade through almost two thirds of a network of firms connected by supply chains.
  • Increasing the density of links increases the spread of an innovation. The strength of this increase varies between industries with Life Sciences and Financial and Professional Services seeing less sensitivity to the density of the network than the others.
  • The greatest capacity to spread innovations within MCR is found in the Financial and Professional Services sector, followed by Creative/Digital/New Media and ICT; there is the lowest capacity in Life Sciences (explained partly by the prevalence of links external to MCR instead).
  • The lesson we draw from this is that innovation within an individual firm is only part of the story. Even firms with strong external networks, through which they gain access to innovations, only get part way to the ideal situation for MCR businesses as a whole. The capacity of the whole regional economy to innovate depends on links between firms within MCR. Without this kind of network, the innovative potential of MCR will remain limited.

Innovation, Trade and Connectivity Report (PDF, 2.5Mb)