New LSE innovation research programme to help boost UK productivity

We need to reignite innovation and diffusion to recover from this pandemic and the other headwinds beyond.
- Professor John Van Reenen
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A new Programme on Innovation and Diffusion (POID) based at LSE and led by world-leading economist Professor John Van Reenen will be funded by £4m from the Economic and Social Research Council (ESRC), part of UK Research and Innovation (UKRI).

It is part of a £30m package of measures by the ESRC – its largest ever single investment - to help solve the UK’s stagnating productivity, as well as boost wage growth and drive up living standards. This research, which will inform significant decisions by governments and business leaders, has become more pressing given the need to support economic recovery in the context of the COVID-19 pandemic.

POID is rooted in the argument that productivity growth rests ultimately upon two elements: innovation - ideas that are new to the world - and the diffusion of these ideas across the economy. ESRC is contributing £4m, while LSE is providing £1m. The programme will be led by Professor Van Reenen, OBE, who is Ronald Coase Chair in Economics at LSE, and an associate and former director of the Centre for Economic Performance.

He is renowned for his research on productivity, which looks into the causes and consequences of innovation for economic life, both in terms of ‘soft’ innovation such as changes in management practices and ‘hard’ technologies such as Information Technology and Artificial Intelligence.

His work shows how important innovation is for economic growth, what can be done to increase management quality and productivity, and how and why governments should support research and development.

Professor Van Reenen said: “For over a decade, Britain’s economy has suffered from stagnating productivity and wages. We need to reignite innovation and diffusion to recover from this pandemic and the other headwinds beyond.”

Professor Simon Hix, Pro-Director for Research at LSE, said: “We very much welcome the opportunity the ESRC has given LSE to apply cutting-edge research in the social sciences to help solve what is perhaps the UK’s most difficult economic policy challenge of our times.”

Separately from LSE’s work, the ESRC investment also includes a new Productivity Institute based at the University of Manchester.

Science Minister Amanda Solloway said: "Improving productivity is central to driving forward our long-term economic recovery and ensuring that we level up wages and living standards across every part of the UK.

“The new Productivity Institute and LSE’s innovative research will bring together the very best of our researchers, boosting our understanding of the different drivers of productivity and helping people and businesses earn more in every area of our economy.”

ESRC’s Executive Chair, Professor Jennifer Rubin, said: “The Institute at Manchester and the LSE research programme address what is arguably the UK’s biggest economic challenge. This funding represents the largest economic and social research investment ever in the UK, befitting its enormous potential to improve lives for millions of people.

“The Institute and programme will address low productivity by traditional measures, but also go beyond these measures to explore wider issues, including variation across places and what can be done to improve productivity for the UK as a whole; the importance of delivering a low carbon economy; relationships between well-being, productivity and skills; and the need for new ways of measuring productivity in a changing economic, technological and environmental context.

“The aim is to ensure that advances in knowledge inform the significant decisions and interventions that policy makers, businesses and individuals must make to improve productivity, and to achieve the attendant improvements in wages and living conditions that doing so can drive.”

These new investments align with ESRC’s Delivery Plan, which names ‘Transforming Productivity’ within the Productivity, Prosperity and Growth priority area.

They also complement ESRC’s existing investments in the Productivity Insights Network (PIN), the Enterprise Research Centre, the What Works Centre for Local Economic Growth, and the Productivity Outcomes of Workplace Practice, Engagement and Learning (PrOPEL) Hub, a multi-disciplinary hub at Strathclyde Business School.