Case study

Business innovation and the moving workforce

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Author: Riccardo Crescenzi, London School of Economics, and Luisa Gagliardi, London School of Economics

Date: 10 May 2012

Type of case study: Research

About the research

Innovation, or the successful use of new ideas that generate economic, social or environmental value, has been regarded as a key driver for Britain's economic growth by the Department of Business, Innovation and Skills (BIS). What can stimulate innovation? Does the mobility of knowledgeable, highly skilled workers have an impact on the local economies that attract them? Two researchers from the London School of Economics and Political Science have been investigating this question.

To conduct their research, they used the Secure Data Service (now part of the UK Data Service), which allowed them to access the sensitive and potentially disclosive data from the Community Innovation Survey (in a dataset known as the UK Innovation Survey) remotely via a secure server.

The researchers developed the hypothesis that knowledgeable individuals (such as inventors) with the flexibility to change geographical location, would positively impact the innovative behaviour of firms in the areas they moved to. The empirical results demonstrated that the relocation of these individuals does not have a direct impact on the firms' innovation: a positive effect emerges only after controlling for the capability of local firms to exploit external sources of information (such as suppliers, clients, customers, competitors, other businesses in the industry, consultants, commercial labs and private R&D institutes). Only those firms who complemented their internal knowledge with external sources were able to benefit from the arrival of highly-skilled individuals into the local labour market, improving their innovative performance.

The research suggests that policies that target the geographical mobility of innovative individuals should be complemented with those that increase or reinforce firms' receptiveness towards these new sources of knowledge.

About the data

This research used the UK Innovation Survey, 1996-2008: Secure Data Service Accessdataset. The survey is the UK's segment of the Europe wide Community Innovation Survey and provides the main source of information on the nation's business innovation. The Eurostat and Member State developed questionnaire includes general business information, innovation activity, goods, services and process innovation, the context for innovation and general economic information.

This survey contains the use of anonymised postcodes and includes links to the reference numbers from the Inter-Departmental Business Register. Due to the high risk of disclosure this dataset has a Secure Data Service access arrangement.

Methodology

The research drew on the 2004 and 2007 Community Innovation Survey. Data from the European Patent Office was also used and linked with the data from the Secure Data Service (now part of the UK Data Service). The key dependent variable is based on firms performing any product of process innovation in the time period under investigation.

The inflow of inventors into the local labour market was used as a proxy for the overall mobility of highly skilled 'innovative' individuals. By looking at inventors' mobility the research is able to investigate the internal mobility of a very specific group of knowledgeable and 'innovative' agents that goes beyond the simple classification of highly educated individuals by explicitly taking into account their capability to participate in the generation of economically valuable innovation.

The probability of firm innovation was carried out using econometric techniques of a Linear Probability Model and a Control Function Approach.

This research was conducted, including data access and analysis, on the Secure Data Service's Citrix-based secure, remote-access server. This ensures the security of the sensitive data being used by the researchers.

Publications and outputs

Crescenzi, R. and Gagliardi, L. (2012), Moving people with Ideas: does inventors' mobility make firms more innovative? LSE Spatial Economic Research Centre Discussion Papers (forthcoming)

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