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Firstly, the ‘innovation ecosystem’ collectively referrers to innovative ideas to efficiently generate, develop, test and ultimately scale for development impact. They also require the coordinated, collaborative action and resources of the actors noted above.

The innovation ecosystem within the UK consists of a set of supportive institutions that work to boost innovation. These institutions include the legal and regulatory frameworks, physical and digital infrastructure, and incentive. They set through regulation, standards, competition, and Intellectual Property. Summarising, an effective ecosystem supports innovation, and a poorly functioning system stifles innovation.

Regulations and innovation

Initially, in the 2016-2018 UK Innovation Survey reports that 12% of UK firms participating in innovation activity believe UK regulations are a barrier to innovation. However, regulations can also accelerate new ideas, ensure decreased investment risk. First, build consumer confidence, second, drive the development of new products. Third, they allow rapid but safe implementation of new technologies.

The 2020 Business Perception Survey illustrates that firms’ perceptions on regulation impacting on overall innovation activity. Also, various innovative businesses report a higher burden from obeying regulations. In addition, 61% of businesses consider that regulators’ approaches affect their willingness to invest in innovation. As a result, the UK Innovation Strategy plans to commission the independent Regulatory Horizons Council to develop a set of high-level pro-innovation principles to guide regulation. This will ensure regulations are not an unnecessary barrier to innovation.

Standards and measurement role in innovation

By having efficient standards, there is a decrease in the cost of trading by providing an approved way of producing a product, managing a process, delivering a service, or supplying a material. In addition, standards are part of the infrastructure for innovation as they categorise technology knowledge. They also act as a source of information for innovative firms.  

The UK Measurement Strategy, publishing this Summer, will outline how the UK will provide the measurement infrastructure that the UK needs. The Department of Business, Energy & Industrial Strategy sates that measurement supports innovation through:

Accelerating innovation: A method used for measuring technology performance serves as an independent criterion. This is demonstrating and testing improvements on existing technology.

Bringing confidence to investment decisions: Common and reliable measurement standards for assessing performance provide confidence in the data used to evaluate a technology’s potential. Providing this reassurance can help speed up investment decisions.

Safeguarding competition on quality: Testing protocols development supports product certification activities. Agreeing and relaying in testing protocols for demonstrating conformance to quality standards. In turn, makes the comparative advantage associated with such knowledge more resilient and secure.

Enabling the use of standards on performance-base: the existence of measurement protocols is fundamental to implementing more flexible and less prescriptive approaches to regulation and associated standard-setting.

Competition policy and innovation

While there is no specific consensus. Potentially, competition encourages innovation. Mergers within the digital sector are described by high levels of innovation that can develop quickly. On the other hand, it has been found considerable body of empirical evidence links mergers to lower R&D effort and lower innovation activity.

Moreover, competition can impact innovation and should be considered when setting competition policy, particularly in highly innovative and fast-moving digital markets. The UK Innovation Strategy is setting out plans to consult on reforms that will ensure the competition framework is effective. This involves innovative modern economy and set up a new, pro-competition regime for digital markets.

Intellectual Property and innovation

Remarkably, the UK has a well-developed Intellectual Property (IP) system that enables investors to assume the return of their investments. This is thanks to providing legally enforceable rights on the use of their inventions and innovations. With the increasing importance of intangible assets (design, software, R&D) in establishing a competitive advantage for businesses, the IP system has become increasingly important.

In a report by Office for National Statistics, in 2016 it was found that firms in the UK market sector invested an estimated £134.3bn in knowledge assets such as software R&D. From this, £63.8bn is protected by IP rights, equating to 6.8% and 3.2% of total GDP. The European Patent Office (EPO) found that ownership of IP rights is strongly associated with improved economic performance at firm level, especially for SMEs.

Concluding, the UK government needs to consider the relationship between innovation and the various regulatory frameworks. Also, with wider innovation impacts when developing and setting regulatory frameworks and the interplay between them. The UK Innovation Strategy sets out plans for high-level innovation-supportive principles to guide regulation through the independent Regulatory Horizons Council. The Regulators’ Pioneer Fund (RPF) will enable regulators to test and pilot ambitious and experimental pro-innovation approaches to regulation.

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Some of the above information you can find in the Evidence for the UK Innovation Strategy put together by the Department for Business, Energy, & Industrial Strategy.

Hit this link to access the UK governments Evidence for the UK Innovation Strategy!

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