Research: The invisible drag on UK R&D

This research, from innovation foundation Nesta, considers how corporate incentives within the FTSE 350 are inhibiting innovation. It argues that remuneration packages are dominated by measures that stifle innovation.

Key findings:

  • Just 16% of total FTSE 350 annual bonus conditions encourage spending on innovation compared with 39% that discourage it.
  • Long-term incentive plans are strongly skewed towards discouraging executives from innovating at a ratio of 6:1.
  • These ‘incentives’ are in place despite agreement from companies, investors and regulators that innovation needs to be promoted.

The research argues that businesses and shareholders should re-evaluate whether incentives are promoting or discouraging innovation.

The report sets out a number of recommendations, including: the need for investors to use their power to demand better incentives for investment in innovation; the Financial Reporting Council should include innovation as a measure of effective stewardship; and the government should consider whether the value-for-money of R&D tax credits is reduced by improper executive incentives.