New research published in the latest issue of the Economic Journal shows that a stable
economic environment is important for firms looking to introduce new innovations.
British companies have been more willing to invest in high-tech products and processes
when their market conditions are more predictable. In particular, in conditions of
economic stability, higher patenting activity has a stronger effect on firm’s labour
producti vity. Greater economic stability in recent years could have increased the uptake
of new innovations by British firms, promoting the ‘new economy’.
Report co-author Nick Bloom, a Senior Research Economist at the Institute for Fiscal
Studies, comments:
‘When market conditions are stable, firms are willing to gamble on introducing
new technologies. But when conditions deteriorate and their outlook looks
uncertain, they delay making high-tech investments for fear of a downturn. Our
research highlights an important effect of firms’ uncertainty on their incorporation
of innovative patented ideas into new products and processes.’
The research findings have implications for the government’s innovation policy. It may
well turn out that the biggest single boost to the new economy and innovation brought
about in recent years will have been measures to ensure greater macroeconomic
stability.
ENDS
Note for Editors: ‘Patents, Real Options and Firm Performance’ by Nick Bloom and
John Van Reenen is published in the March 2002 issue of the Economic Journal.
For Further Information: contact RES Media Consultant Romesh Vaitilingam on 0117-
983-9770 or 07768-661095 (email: romesh@compuserve.com).