New technologies to drive growth and jobs by Professor Luis Araujo, Lancaster Univ Management School on 04-Dec-2012

T he government must do more to turn new technologies into jobs and growth, according to a report published today by the business-backed Big Innovation Centre entitled Market Making: A modern approach to industrial policy. There are many new technologies with the potential to transform the UK economy, from self-driving cars to 3D printing, but the government is not putting enough emphasis on creating markets for them. A smarter approach to emerging technologies, based on making new markets, could help kick-start the economic recovery.

The UK economy is made up a series of interlocking markets, with a total value of over £3 trillion. The research shows how economic growth is driven by the creation of new markets, which are often based on radical new technologies. However, the report challenges the view that these markets form instantaneously, instead arguing that they depend on a range of social and institutional factors which are extremely hard for individual businesses to put in place.

The report calls on the government to adopt a more deliberate approach to making markets, by working with businesses and coordinating different parts of government policy to help new technologies fit into everyday life. The research identifies seven aspects of market making, ranging from infrastructure and standards to consumer and social attitudes (see appendix for more details).

In a separate essay also published today, marketing experts from Lancaster University focus on self-driving cars and ask what it would take for driverless vehicles to become commonplace on UK roads. The essay highlights the potential benefits of self-driving cars, such as increased road safety and less traffic, but stresses that a range of barriers need to be overcome before people buy them en masse.

"The government has identified a large number of technologies that could transform the UK economy – 53 of them to be precise – but it must go further in helping entrepreneurs bring them to market," said Andrew Sissons, co-report author and researcher at the Big Innovation Centre. "There are a whole series of barriers facing new technologies and individual businesses and entrepreneurs can rarely tackle them alone. Often they need help from governments."

"At a time of economic turmoil, new technologies are Britain’s best hope for jobs and growth, but we must consider how we exploit as well as develop them. If it isn’t possible for people to use these new technologies – because the law forbids it, because it doesn’t fit with existing systems or because key services are missing – we will get none of the benefits and none of the jobs. The government has been slow to respond to these opportunities in the past, most notably with the debacle over 4G licenses, and it cannot afford to ignore these issues in future."

"Self-driving cars could bring huge benefits, but they are still a long way from becoming an everyday reality," said Professor Luis Araujo, co-author of Self driving cars: A case study in making new markets and chair in Marketing at Lancaster University Management School. "We must persuade a range of constituencies that self-driving cars are the way to address the transport problems of the 21st century, as well as being a safe and effective technology. Markets are social constructs as much as they are technical and economic constructs. We need to think more about how new technologies interact with existing infrastructures."

"When the first cars were developed over a century ago, drivers often found themselves stranded if they broke down, with only a token repair and refuelling services network available to deal with problems. Autonomous cars may face the same issues. Equally, there may be serious questions about legal liability should self-driving cars be involved in road accidents. Lastly, the security of the digital systems self-driving cars run on could present a further set of challenges. Unless these issues can be satisfactorily addressed, self-driving cars are unlikely to take off," concluded Professor Araujo.

The report identified the seven aspects of market making as:

• Technologies: technologies often underpin the workings of a market. They need to be available, viable and compatible with the wider infrastructure and institutions of the market.
• Infrastructure and locations: markets almost always require some sort of physical infrastructure to bring buyers and sellers together, whether it is roads or broadband cables. They also need a location, whether it is a place or a digital domain.
• Standards: markets often depend on having established standards which all players can follow, to allow them to be coordinated and achieve critical mass.
• Customer behaviour and conventions: customer habits play a major role in shaping markets and determining value. Unless customers are willing to adopt new products and services, products or new services will not take off.
• Supply chains and networks: there is a wide range of structures and logistics which provide the 'plumbing' within a market. These structures often rely on relationships between many different firms.
• Regulation: regulation on competition, on health and safety and a range of other areas can help to create markets and build consumer confidence, but it can also hold them back.
• Legal rights: property rights – be they intellectual or tangible property – play a central role in defining what is traded in a market, and enabling buyers and sellers to capture the benefits from what they exchange.

The Big Innovation Centre is an initiative of The Work Foundation and Lancaster University The Work Foundation is the leading independent authority on work and its future. It aims to improve the quality of working life and the effectiveness of organisations by equipping leaders, policymakers and opinion-formers with evidence, advice, new thinking and networks.

The Big Innovation Centre is a leading research institution to promote effective innovation and investment in the UK. The six research programmes are:

• The enterprising state: public action to drive innovation
• Building innovative markets, places and networks
• Building an innovation friendly financial system
• Universities as interactive partners in systems innovation
• Organisations and business models
• Skills for innovation

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