Industry and location effects on UK plants' innovation propensity

This paper uses UK plant-level survey data to examine the relative importance of industry concentration, technological opportunity and locational factors in determining innovation propensity. The results suggest no evidence that industry concentration has any significant positive effect on innovation. Industries' technological characteristics are important, however, with the potential for industry-specific spill-over effects. Plants' own technological activities in terms of undertaking R&D and having an R&D department were also important determinants of innovation propensity as were plants' participation in technology transfer and inter-firm networks. Strong locational effects were identified relating to industrial composition, the level of R&D activity, external ownership, the preponderance of small firms and the general level of regional prosperity. In addition, strong interactions were evident between plants' R&D activity and their regional environment. Undertaking R&D enabled plants to take advantage of any environmental benefits for innovation and insulated them from potential negative effects.