The impacts of innovation on productivity across DCMS sectors

About the study

Innovation and productivity are key to improving living standards as they lead to higher incomes, and better public services. Although it is hard to measure innovation, getting more companies to innovate is crucial for boosting productivity in the UK, especially with recent estimates showing productivity has struggled to recover after the pandemic. The Department for Culture, Media and Sport (DCMS) commissioned the National Centre for Social research (NatCen) to carry out mixed-methods research aimed at investigating the role of innovation in boosting productivity across its sectors, and the drivers affecting it.

Key findings  

Evidence suggests that innovation in DCMS sectors leads to productivity in two ways:

• Streamlining processes and improving efficiency: by streamlining workflows, and using technologies, organisations reduce costs and improve productivity.
• Boosting engagement, sales and revenue: creating new or enhanced products and services enables organisations to address changing consumer demands, boosting customer retention and increasing revenue, which in turn improves productivity.  

Evidence suggests that technological innovations are more common than non-technological ones, though the complexity and sophistication of technology application vary across sectors.

Three key factors influence innovation in DCMS sectors:  

• Attitudes and values: employees may be resistant to adopting innovation due to fears of job security and principal-agent issues. Managers’ lack of awareness about new technologies may be due to information asymmetry.  
• Finance and funding: market failures prevent organisations from obtaining the necessary finance, particularly in sectors with many young, small firms producing intangible value.
• Skills, and training: skills gaps and limited training access hinder innovation. High training costs and uncertainty about benefits contribute to these issues.

Although limited, evidence suggests three types of adaptations to innovation:  

• Technological adaptation involves organisations updating software and integrating new systems with existing ones.  
• Organisational adaptation refers to changes in structures and operations in response to innovation.  
• Skills adaptation involves upgrading skills to effectively integrate innovation

Policy recommendations

1. Improve workforce digital skills  
2. Provide guidance to employers on the use and adoption of technology  
3. Foster a supportive environment and culture for innovation  
4. Enhance financial support for technology adoption  

Methodology

The study is based on a mixed-methods design, including:  

• A rapid evidence assessment (REA) of existing literature on innovation and productivity across five DCMS sectors.
• Four case studies identified from the REA, exploring different types of innovations, challenges, and outcomes across various DCMS sectors.
• Eight in-depth interviews and a workshop with 12 industry practitioners.
• Four policy recommendations developed from combining the REA, case studies, interviews, and workshop, aimed at supporting innovation and improving productivity in DCMS sectors.
• A benefits analysis of the policy recommendations.