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27 September 2021

The role of challenge prizes in a revitalised UK Innovation Strategy

While the pandemic has hit the UK public finances hard, the Government remains committed to growing public investment in R&D significantly over the coming years.

It is hoped this will deliver an upsurge in private R&D spending and productivity growth and faster progress in addressing some of the defining challenges of our era. Alongside increased funding, the Government’s Innovation Strategy puts timed, measurable Innovation Missions at the heart of its approach to achieving these aspirations.

Challenge Works argues in this new report that the success of these Innovation Missions will require a fresh approach to how Government invests in innovation, complementing traditional R&D grants with methods that are able to bring together public sector strategic direction with private sector ingenuity.

The report makes the case that innovative methods such as challenge prizes have an essential role to play in a balanced portfolio of government innovation investments, and can help address longstanding weaknesses in the UK’s innovation ecosystem.

Alongside the report Challenge Works sets out seven specific proposals for Mission-aligned challenge prizes to drive innovation in key UK high value sectors.

The role of challenge prizes in a revitalised UK Innovation Strategy

Section 1

Section 2

Section 3

Section 4

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End Notes

1. Department for Business, Energy & Industrial Strategy (BEIS), 2021, p.18.

2. In 2019 UK domestic spending on R&D was 1.8 per cent of GDP, and the average across the OECD was 2.5 per cent of GDP.
Source: https://data.oecd.org

3. The Prime Minister has stressed the need for Government to play a more strategic role in innovation policy: “It is also the moment to abandon any notion that government can be strategically indifferent, or treat research as a matter of abstract academic speculation.” Source: https://www.gov.uk/government/speeches/prime-ministers-article-in-the-daily-telegraph-21-june-2021

4. Data as of January 2021, from National Audit Office, 2021.

5. BEIS, 2021, p.19.

6. Source: https://www.gov.uk/government/publications/thevaccine-taskforce-objectives-and-membership-of-steeringgroup/vtf-objectives-and-membership-of-the-steering-group

7. BEIS, 2021, p.83.

8. Source: https://www.gov.uk/government/publications/beis-research-and-development-rd-budget-allocations-2021-to-2022/beis-research-and-development-rd-budgetallocations-2021-to-2022

9. See e.g. Bloom, Nicholas, Schankerman, Mark, & Van Reenen, John, 2013, ‘Identifying Technology Spillovers and Product Market Rivalry.’ Econometrica, 81(4).

10. Grants programmes can include match funding requirements for the private partner(s) to address this risk. But apart from the practical difficulties of monitoring compliance with a match funding requirement, there is no robust way of calibrating what an appropriate match funding requirement should be for any given project.

References

Department for Business, Energy & Industrial Strategy, ‘UK Innovation Strategy: Leading the future by creating it.’ July 2021.

Industrial Strategy Council, ‘Lessons for industrial policy from development of the Oxford/AstraZeneca COVID-19 vaccine’, February 2021.

National Audit Office, ‘UK Research and Innovation’s management of the Industrial Strategy Challenge Fund.’ February 2021.

Challenge Works, ‘The Great Innovation Challenge: How challenge prizes can kickstart the British economy.’ July 2020.