Shaping the future of innovation policy: public R&D investment, economic growth, and technological transformation

The UK Government has placed innovation at the centre of its economic strategy, recognising research, development, and innovation (RDI) as a key driver of productivity growth, technological transformation, and regional development. Against a backdrop of sluggish productivity growth and persistent regional inequalities, public investment in RDI is increasingly viewed as a critical policy instrument for fostering innovation-led growth and supporting the UK's Industrial Strategy. 

Research led by Dr Enrico Vanino at the School of Economics of the University of Sheffield, contributes directly to these policy debates by providing rigorous evidence on how public support for innovation can be designed and evaluated more effectively.

About our work

Through collaborations with UK Research and Innovation (UKRI), the Department for Science, Innovation and Technology (DSIT), and other funding bodies, Dr Vanino’s work has demonstrated that public support for innovation can generate significant benefits in terms of employment, productivity, and business growth. However, these effects are highly heterogeneous. The effectiveness of public interventions depends on the characteristics of supported organisations, the type of research undertaken, and the funding mechanisms employed. This research highlights the importance of targeted support, particularly for small and medium-sized enterprises and for policies that facilitate the diffusion of knowledge and technology from frontier firms to less productive businesses.

A second strand of research examines the role of innovation policy in technological transformation and regional development. Recent work funded by the Innovation Research Caucus shows that public RDI support can strengthen interregional collaboration and knowledge exchange, enabling regions to develop new technological specialisations. The findings demonstrate that these effects are strongest in economically diversified regions and in activities that are technologically related to existing regional capabilities. This work provides evidence in support of smart specialisation and technological branching strategies that build on local strengths while encouraging diversification into emerging technologies.

Dr Vanino’s research also shows that uncertainty surrounding the UK’s withdrawal from the European Union had substantial negative effects on innovation activity. Brexit reduced patenting by UK organisations, particularly patents involving European collaborators, and led to a decline in both the quantity and quality of innovative outputs. Evidence suggests that these effects were driven by the disruption of cross-border research networks, with UK organisations increasingly replacing European collaborators with domestic partners. While this shift reflected a move towards greater technological self-reliance, it came at the cost of reduced innovation performance. 

Through his British Academy Innovation Fellowship at the Office for National Statistics, Dr Vanino worked closely with policymakers and analysts across government departments and international organisations to improve the evidence base underpinning innovation policy. His research demonstrates that linking administrative, survey, and alternative data sources can substantially improve the measurement of business innovation, and highlights the value of integrated data infrastructures for developing a more comprehensive understanding of innovation dynamics across the UK economy. By integrating ten large-scale datasets, the study identified between 35,000 and 140,000 “hidden innovators”, firms undertaking innovative activities that are not captured by conventional survey-based measures. 

Building on this research agenda, Dr Vanino is leading the ESRC-funded Money to Knowledge–Knowledge to Money.  Public organisations such as UKRI invest billions of pounds annually in R&D, yet the economic impacts of research often take more than a decade to emerge. The project will develop novel data-driven scientometric indicators capable of estimating both the likelihood and potential economic value of research projects at the application stage. By combining large-scale data on research grants, patents, university spinouts, and firm performance, and applying advanced machine learning and econometric techniques, the project will provide funders with new tools to support evidence-based funding decisions and contribute to more effective allocation of public resources.

References

Vanino, E. 2026. Uncovering hidden innovators: Linking survey, administrative and big data to develop comprehensive measures of firms’ innovation. IRC policy brief and ESCoE webinar.

Vanino, E., Douch, M. and Çakmak, I., 2026. Political, economic and research disintegration: The impact of geopolitical uncertainty on innovation and cross-border R&D collaborations. Research Policy, 55(5), p.105471.

Vanino, E., 2026. Evidencing the Economic, Societal, Scientific Benefits of UK Research and  Innovation. IRC Insight Paper 013.

Corradini, C., and Vanino, E., 2025. Exploring the Link between Publicly Funded R&D Collaborations and Regional Technological Development. IRC CoE project FFCoE005.

Roper, S., Vanino, E. and Hewitt-Dundas, N., 2025. Trade-offs and complementarities between regional, sectoral, and national support policies for firms’ innovation. Industrial and Corporate Change, 34(4), pp.775-804.

Becker, B., Roper, S. and Vanino, E., 2023. Assessing innovation spillovers from publicly funded R&D and innovation support: Evidence from the UK. Technovation, 128, p.102860.

Aitken, A., Foliano, F., Mariona, L.S., Nguyen, D., Rincon-Aznar, A. and Vanino, E., 2021. From Ideas to Growth: Understanding the Drivers of Innovation and Productivity across Firms, Regions, and Industries in the UK. BEIS research paper, 41.

Vanino, E., Roper, S. and Becker, B., 2019. Knowledge to money: Assessing the business performance effects of publicly-funded R&D grants. Research policy, 48(7), pp.1714-1737.