Application of National Innovation System in the UK - Research Paper Example

Application of National Innovation System (NIS) in UK Application of National Innovation System (NIS) in UK IntroductionThis paper focuses on the implications of National Innovation System in United Kingdom. Starting off with the interesting features of UK’s business environment, we would discuss how NIS plays its role in creating welfare for the country. Moving on, we would highlight the major elements of government, finance and industry NIS systems of the country so that we clearly understand how innovation is giving benefits to all the citizens of this country. In the end, we would provide some conclusions which would entail our personal and critical views on whether to invest in UK or not. The overall idea is to understand NIS deeply and clearly. Main Features of the Business Environment of UK There are many interesting features that one would notice in United Kingdom’s business environment. If we look at the latest analysis of this country, we will see that it has attracted many foreign investments. “The UK is the second largest single destination globally for US investment and in 2011 accounted for 26 percent of all the US investment stock in the European Union.” (UKTI, 2012). The economy is doing really well for the past few years and inflation is in control of the Bank of England, which is responsible for setting interest rates. Businesses are flourishing well in UK’s industrial arena because the exchange rates are relatively stable. Currency plays a significant role while operating in foreign countries. Companies operating globally have to keep an eye on the exchange rate each coming day. Imports and exports are doing well in the country. There are more exports than the imports, which is the main reason behind earning foreign income. UK is also working on lowering the corporate tax rates so that more and more businesses could be attracted into the country. Recently, UK has lowered the tax rate up to 3 percent. The employees of this country are satisfied employees because they pay less social security contributions as compared to other European countries. Entrepreneurial businesses are on the boom. Even a fresh graduate can start up a small business easily here because of the favourable market conditions. For example, running food truck is very simple in UK. On the whole, setting up a business in UK is very fast and easy. One can set up his business and get himself registered in this country within 24 hours, but it all depends on what kind of business he wants to start and in which state. There are many business advisors within the country who can guide you well about this. They can update you with the current status of businesses and the related industry, what competitors you might be facing, what other important details you need to know and the fulfilment of paper work. UK also provides these services online. There are many well equipped information and advisory websites that can help you in starting up a business here. Not only information is presented here but legal help can also be obtained by the best business advisors by contacting them on the websites. “Innovation is the confluence of product development and a business model that can deliver those products to customers at a profit.” (Wessel, 2012) Government Component of NIS The decisions taken by the government has direct and indirect implications on everything that is happening in a country. Same goes for NIS process in UK. In United Kingdom, government has been spending relatively less in research and development when compared to the governments of other countries like USA, Finland, and Germany etc. Although, the contribution in research and development has increased from the year 2007 to 2010 (Annual Innovation Report, 2012), but it still is very less from the other related countries. Moreover, there has been direct and indirect funding from the government for the innovation taking place anywhere in the country. Again, this proportion is quite less from those countries mentioned above. But there is one interesting fact that can be noticed here: the government supports for high levels of innovation in UK. It provides equal funding of direct and indirect support in this case. Innovation infrastructure institutions in UK offer knowledge that is easily and widely accessible to science institutions so that innovation can take place in an easy and convenient manner. The costs of innovation can be reduced in this way and this is where government plays its vital role. Government takes care of the flow of information which is made available to all the relevant organizations of NIS. Government makes sure that the information is disseminated to all the relevant institutions so that the process of creating innovation is not lagged behind in any way. Business led technology innovation is funded by UK’s governments through incentives so that each organization takes full advantage of technology in any required field that they are working on. The priority areas are defined so that the funds that are to be transferred to the respective institutions can be allocated accordingly. “This would imply improving the available statistics on innovation and coordination between the numerous government programs in place to improve the innovation performance of companies and the country.” (Livesey, Minshall, Moultrie, 2006). Furthermore, the connections from one institution to another are made smooth so that the flow of information can be guaranteed. In this way, the flow of funds can also be tracked easily. Apart from all that, UK’s government high buying power helps in triggering the innovation process more rapidly. For instance, when the government is having high buying power then it is likely to buy more products and services for other requirements of the country and the institutions would try to innovate those products so that the needs can be met sufficiently. Finance Component of NIS The three types of financial institutions help in three ways in the process of NIS in UK. There are commercial banks that provide banking services rather than the capital. Then there are investment banks and venture capitalists that have their own responsibilities. Each institution contributes differently towards the innovation process in UK. “There is a bias to servicing the needs of large multi nationals, private equity groups and hedge funds together with an accent on residential and commercial property lending.” (Andersen, Brinkley, Hutton, 2011). It is said that this has some bad effects on the economy in some ways. The reason is that the financial institutions focus a lot on risk measurement and are less willing to invest in new innovation ventures that might or might not to be successful in future. Besides, the financial needs of large trans-national institutions are met in this way but the small medium enterprises (SMEs) are neglected badly. Even though the small institutions are mainly responsible for creating innovation in UK and offering job posts in this respect but they are highly underfunded by the financial institutions of UK. “Economic dynamism- the whole country’s capability and proclivity to innovate ways that prove lasting and viable- is one of the essential drivers of growth, employment and prosperity. Financial institutions and capital markets have an important role to play in this regard.” (Tillman, 2010). This is very true for UK because the country has favourable business and economic growth patterns for the past few years and that is the reason that the country has been able to attract FDI. UK’s financial institutions are very active in this regard because they have to look upon a lot of money matters especially when foreign investment is involved. There are risks of the foreign countries and institutions that are involved within United Kingdom matters and they have to be taken care of very closely. There are many criticisms over the UK’s financial system due to supporting only the large transnational businesses while ignoring the small and core businesses; there is a need for changing this concept and creating an innovation friendly financial system. Scientific, Technological and Educational Components of NIS No country can flourish without science and technology. We have limitations and opportunities at the same time because the world we are living in has both poverty and technological breakthroughs. “The boundaries of these knowledge and competence networks are likely to vary depending on the particular technology in question.” (chapter by James) Innovation and knowledge centres have been established in UK so that collaboration can be made for such an environment which is conducive to innovation. Currently, there are six such centres and the seventh is being planned. The basic design of these centres rests upon the idea of giving rise to collaboration and delivers competitive advantage to the businesses that they interact with. These centres have expert knowledge and they understand that there is a need of core emerging science and technology for the creation of innovation within the country. The use of science and technology is ensured in the new products and services of the country and the UK’s government is also making sure that the technology that is being used in NIS process is commercialized properly. From a general point of view: “Not all education entrepreneurs using technology generate innovation, and most of their designs have failed to transform the sector and not all innovators using technology have produced designs that can be scaled with the ambition and potential to change the conversation or the sector.” (Reimers, 2011). However, this is not the case in United Kingdom. Educational institutions play an important in the NIS of UK. It is here where the future of a country is being nourished in such way that can bring prosperity to the whole country. The fresh minds can be nurtured in such a way that they can be moulded to any form an educational institution wants. Measures have been taken to fund the educational institutions so that they take on new technologies and apply them within their institutions. This will help in creating new products and services for the welfare of the economy of the country. The students are given access to public research institutes through their educational institutes so that they can innovate in every positive possible way they like. Secondly, funds have also been given to the educational institutions so that they train their students in such a way that they think innovatively and generate new ideas which can prove to be helpful for whole of the UK society. Industry Component of NIS The main key of prosperity of any business or any country is to have access to the people having the skills and expertise in the relevant field. An industry can flourish when it invests in the right choice of people and when the flow of information is smooth among all the levels of people within an organization. This is the core concept of creating innovation within a country as well. In UK, this process takes place in a very constructive way. “As companies grapple with long odds on innovation like these, they are also looking for ways to improve the likelihood of their intrapreneurial success. Internal innovation presents a number of challenges.” (Altringer, 2013). It is observed that UK has a kind of economy that supports individual businesses very strongly. The collaboration between the businesses and government can be fostered when the funds are transferred smoothly between the two areas. That is only possible when the industry shows high growth patterns; then and only then the government will fund heavily for the industrial sector of UK. UK has most of the people of the view that big businesses are the successful one while that is not the case because they have more resources, more talent and more market research. But most of the times, the big businesses are not very willing to welcome change. They are not willing to change their status quo and therefore do not want to involve any kind of risk in their business. This is not the case with small businesses in UK. Small businesses are the one who generate innovation in the first place as they are willing to take risk. Innovation has to be there within the company’s mission and goals. The strategy has an inbuilt element of innovation in UK’s industry. “Therefore, innovation is not merely an individual act of learning by a firm or entrepreneur, but is situated within a larger system that both enables and draws on the innovative process.” (Feinson) Conclusion In todays fast pace world, innovation has to be inculcated within a country’s processes so that it can make the most out of it. UK has been doing the same for the past few years, especially when the country has recognized the core need of it. Innovation is not only necessary for creating new ideas but it is also now has an elementary position for the survival of a country. Investing in UK will prove beneficial in every way because the country is doing well recently. The innovation processes that we have highlighted earlier in our discussion show that the country promotes innovation gracefully. Not only one but all of the institutions are contributing their part towards the NIS process within the country boundaries. Although each country puts high emphasis on military RnD but UK has to take care that it must not exceed its expenses unnecessarily in this area. Rather, these expenses can be used in other fields such as education and technology. A decline in the status of engineers has been observed, which should not be the case. An engineer is responsible for the growth of a country in every small way. They must be encouraged and benefitted well so that they add fairly towards the welfare of United Kingdom. The failure of entrepreneurial culture should be handled cleverly. Although, there are some ventures which have been really successful but when it comes to a failure, the UK government must have some reforms for such a business. References Altringer, B., 2013. A New Model for Innovation in Big Companies. Harvard Business Review, [online] November. Available at http://blogs.hbr.org/2013/11/a-new-model-for- innovation-in-big-companies/ [Accessed on 27th February 2014] Andersen, B., Brinkley, I., Hutton, W., 2011. Making the UK a Global Innovation Hub; How Business, Finance and an Enterprising State can transform the UK. Big Innovation Centre, [online] September. Available at http://www.theworkfoundation.com/DownloadPublication/Report/304_Making%20the% 20UK%20a%20Global%20Innovation%20Hub%20HR.pdf [Accessed on 27th February 2014] Department for Business Innovation and Skills, 2012. Annual Innovation Report. [online] available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34805/12- p188-annual-innovation-report-2012.pdf [Accessed on 27th February 2014] Feinson, S., n.d. National Innovation Systems Overview and Country Cases. [online] Available at [Accessed on 27th February 2014] James, A.D., n.d. The Place of the UK Defense Industry in its National Innovative System: Co- Evaluation of National, Sectoral and Technological Systems. [online] Available at http://kms1.isn.ethz.ch/serviceengine/Files/ISN/16873/ichaptersection_singledocument/6 2df358f-b3e1-457a-a675-f640303ffaee/en/OP25_Ch06.pdf [Accessed on 27th February 2014] Livesey, F., Minshall, T., Moultrie, J., 2006. Investigating the Technology Based Innovation Gap for the United Kingdom. University of Cambridge, [online] June. Available at http://www.ifm.eng.cam.ac.uk/uploads/Research/CIG/Innovation_gap_FINAL.pdf [Accessed on 27th February 2014] Reimers, F., 2011. 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