Productivity Project Funding: Open Call Round 3
Round 3 has now funded a number of new innovative pioneer and small projects. The details of which are listed below.
Productivity Project Funding: Open Call Round 3
Pioneer Projects (Round 3)
Sustainable and Productive?! Helping Manufacturing SMEs to Manage Multiple Goals
Increasing productivity is one of the most important goals for organisations but it is not the only goal. The UK must also achieve zero net emissions by 2050. Yet, research focuses on productivity in isolation from environmental sustainability In this project, we recognize that sustainability and productivity are not independent with obvious (e.g., reducing waste) and less obvious (e.g., sales travel, well-being) interdependencies
These knock-on effects are particularly difficult for manufacturing small and medium enterprises (mSMEs) which do not have spare resource, are carbon “heavy” and where productivity has stalled. Goal conflicts are also likely to occur in regions with lower innovation and poorer infrastructure
We show how multiple goals frameworks can be used to understand and improve organizational decision-making so mSMEs can thrive beyond 2050. We have built a team comprising expertise across psychology, sociotechnical systems, environmental sustainability and engineering and have designed the research to ensure co-creation with mSMEs themselves.
Using Shocks to Construct New Perspectives on Productivity: Designing Systems Dynamic Model(s) of Productivity in Northern Ireland
This project proposes to build on research previously funded by PIN, which applied systems approaches to analysing productivity policy narratives in Northern Ireland in the context of Brexit. This research will serve to deepen PIN’s relationship with a key regional stakeholder, the Northern Ireland Department for the Economy, and pioneer new approaches to modelling long-term productivity patterns in a case study region. Specifically, it asks: What effect do mounting economic uncertainties and risks have on productivity both in anticipation of the shock of Brexit and after? What can productivity trends in the wake of other historic economic shocks teach us about what to expect as the UK reorients itself in the global market in a post-Brexit world? In other words, how does Brexit intersect with long-term economic trends and tendencies, in particular in the realm of productivity growth?
It will employ a complex systems approach to create a broad database of productivity measures and to design systems dynamics models of productivity patterns and use the Brexit event horizon as a natural experiment to test hypotheses about the productivity puzzle and produce foresight about potential impacts.
Rethinking Capital Allocation in a Context of Financialization: Producing and Index of High Productivity/Low Financial Engineering Firms for Investors
This project addresses an under-explored factor in the UK’s productivity puzzle: that if managers are able to make high shareholder distributions over the short term from financial engineering (i.e. the use of creative accounting practices and innovations in legal structure), they may be less inclined to pursue productive investments as a means of generating shareholder returns, with negative effects on productivity. However, the high short-term shareholder returns made possible by financial engineering may position firms favourably in capital markets relative to those firms with a longer-term horizon. Financial engineering, in other words, may ‘crowd out’ investment-led productivity opportunities and lead to a misallocation of capital.
This project will:
- examine the use of financial engineering to pay high dividends and productivity performance in three companies in each of five UK sectors (banking, retail, construction, extraction and business support services).
- examine their access to, and use of, capital in those company cases to assess the ‘crowding out’ effect.
- develop a scoring mechanism which would allow us to rank firms according to low-financial engineering/high-investment/high-productivity features to produce an index for use in the investment community, to help attract capital to those firms.
Drivers and productivity Impacts on Underemployment - Insights on labour Market Effects and Employers' Decision-Making in Contrasting Local Labour Markets
This project aims to: (a) explore spatial patterns in short-hours working and underemployment and identify associated local labour market conditions using LFS data; (b) conduct qualitative research with employers to understand better the drivers of underemployment and views of its impact on productivity; and (c) draw on these mixed-methods analyses, along with engagement with policy stakeholders and academic experts, to arrive at policy prescriptions on reducing underemployment and enhancing productivity and skills formation. We use the LFS definition of underemployment as “those people in employment who are willing to work more hours, either by working in an additional job, by working more hours in their current job, or by switching to a replacement job…’’ (full definition: https://www.ons.gov.uk). The consistently high level of employment alongside low growth during the UK’s slow recovery from the Great Recession is seen as contributing to weak labour productivity. However, counter-intuitively, some argue that underemployment is both an important cause and consequence of the productivity puzzle in the UK’s disadvantaged labour markets.
This research, therefore, engages with PIN’s priorities on work & the workplace, especially the relationship between job quality and productivity, and factors impacting job quality (e.g. sector and employee voice, but adding value by exploring spatial/labour market dynamics and employer decision-making). The focus on employers’ behaviour and sectoral and spatial/labour market factors influencing underemployment also links to PIN work on well-being & inclusive growth and our engagement with policy stakeholders (to inform policy) connects with the theme on regional & city productivity debates.
Redefining SME Productivity Measurement and Assessment for a Low Carbon Economy
The UK faces the twin challenges of low productivity growth and the threat of climate change.
Public policy is searching for interventions to address these, with much emphasis on improving access to finance for innovative SMEs. This study identifies ways for improving measurement of productivity amongst SMEs, drawing on the experience of SMEs and impact investors working in the low carbon economy. This requires new consideration for how productivity and economic growth is measured, to account for environmental outcomes.
There are particular challenges in this sector as low carbon innovation is often long-horizon, making financing problematic, with lagged standard GVA productivity per employee outcomes. There is urgent need for a study which can redefine productivity measurement, explore how productivity should be assessed within the context of the emerging low carbon economy and inform policy focus on SMEs generating a sustainable green economy.
The study is multi-disciplinary, combining expertise in policy evaluation, productivity,
entrepreneurial and behavioural finance, and low carbon innovation. The project will review the literature on productivity and the impact of low carbon investment, explore the metrics and indicators used by those investors and SMEs trying to value the environmental, social and economic value of their investments, review the existing SME data sets to identify areas for improvements, and conduct workshops to provide deep insights to deliver policy and practice impacts.
Access to finance and productivity enhancing investments in the UK: does the source of finance matter?
In line with the aim of the PIN, the intention of this project is to explore new directions in
productivity research to contribute to unlock the UK productivity puzzle. We build on some of the PIN’ Gap Analysis, which have highlighted the importance of financial factors as a “potential (major) source” behind the UK productivity puzzle (i.e. Harris, 2019).
The notion behind this explanation is that barriers to access finance disrupt the efficient allocation of resources and the financing of productivity-enhancing investments.
This project proposes a new direction to this line of research by exploring the importance of diverse sources of finance for firms’ productivity-enhancing investments across different regions in the UK.
Whilst prior studies have examined the relationship between access to finance (in general) and firms’ productivity, surprisingly little is known about the importance of diverse sources of finance, and their regional variation, for diverse firm-level productivity investments.
The capital structure literature mainly distinguishes between debt and equity, however,
heterogeneity in these sources of finance have been rarely investigated. Yet, the interdisciplinary financialization literature argues that finance from different types of shareholders (i.e. equity finance from families, pension funds, hedge funds, mutual funds etc.) have different implications for firm’s investment decisions (e.g. Bushee, 1998, and Brossard et al. 2013).
This project will investigate explicitly the type of debt and equity finance, as well as alternative funding sources, used by UK firms across different regions to support their productivity-enhancing activities.
Small Projects (Round 3)
Relating Productivity to Organisational Context: Meaning, Measures, and Maximising Through Workforce Engagement
The government’s most recent Business Productivity Review (November 2019) calls for a new Business Change Cycle; business support to help identify solutions, with new services and products to deliver the desired change, and strong leadership to embed the change in the business. The report evidenced that a root cause is the disconnect between policy-makers, their performance statistics, and the business view (or dismissal!) of the importance, meaning and metrics of productivity (e.g. Work Foundation Manufacturing in the UK 2016, Green & Stanfield PIN Project Report 2019, ERC Understanding Value Added per Employee in Six UK Sectors, 2019).
In a 2016 UKCES-funded applied research project (SQW for UKCES, Evaluation of the UK Futures Programme: The Jaguar Land Rover High Performance Working Practices Programme, 2016) developed and tested a fully-customised process to introduce High Performance Working principles and practice. The outcomes were more productive environments, created through employer-led enhancement of employee engagement and discretionary contribution, with demonstrable business benefits. The many findings included the signal benefit of the employer-led methodology, from the initial self-assessment through the consequent improvement projects design and delivery to the closing evaluation.
This project will now strengthen the link between the HPW processes and the productivity agenda. It will derive and test a framework and methodology for a company to (1) articulate its own take on productivity to align with its business environment, operations and plans, (2) specify appropriate success factors, measures and targets, and (3) propose mechanisms to link these parameters with value-added criteria.
A Microscale Approach to Understanding Spatial Productivity Patterns in the UK
This project will create a powerful quantitative resource and conduct analysis that can be used by network researchers to interrogate the interrelationship between productivity, land use and infrastructure provision. This strengthens PIN’s core objectives of developing place and sector-based insights, by challenging more conventional siloed interpretations and explanations of the productivity puzzle. While data is available at low levels of spatial disaggregation; until now researchers have been unable to directly link this to productivity outcomes as estimates of workplace productivity are not available on a similar scale. Being able to do this will advance our understanding of productivity by providing a much finer-grained analysis of the relationship between productivity, land-use, infrastructure provision and a wide range of other economic variables.
Our analysis will focus on the following questions:
1. What new insights can we gain about spatial productivity by exploring patterns at more granular scales?
2. What is the significance of the spatial distribution of high productivity LSOAs? What is the link between land use profiles and productivity?
How Can Enterprise Ecosystems Enhance SME Capability to Tender for Public Sector Contracts?
The effective exclusion of most SMEs from public sector supply chains, or their positioning at lowest end of value chains, impedes productivity by: 1. undermining SME growth and local economic development; 2. inhibiting innovation and competitiveness in public supply chains; 3. wasting scarce SME resource in unsuccessful tendering.
The draft UK Industrial Strategy (IS) included a chapter highlighting this problem and a pledge to award SMEs 33% of public spending by 2022 (UK Government, 2017); this was cut in the final IS, perhaps because of uncertainty about how to tackle market failure. Until recently, research on the SME tendering problem has been scant, focused on SME resource scarcity or offered partial models of capability. Turner and Rouse (2018) and Turner (2017), drew on comparative case studies to detail how competitive tendering is a knowledge-intensive process of developing a complex set of routines that combine in various patterns to build operational capabilities, then enabled/renewed by dynamic capabilities, Encouragement from procurers, SMEs and business supporters that our model provides important insight into how SMEs learn to tender led us to found Centre for Tendering.
This project proposes to explore:
1. How enterprise ecosystems can support SMEs to learn tendering capability.
2. What change to enterprise ecosystems is likely to enhance SME learning to be capable
Quantifying Agglomeration Productivity Potential in Long-Term Infrastructure Planning
This project focuses on aspects relating to the interrelation of the effects of urban connectivity, agglomeration, and morphology (e.g. land-use, housing, etc.) on efforts seeking to ‘rebalance’ urban and regional output in a UK context.
Current understanding of and approaches to devising and selecting infrastructural and
ultimately land-use interventions for better urban economic performance are of limited capacity in providing long-term ‘place-based’ blueprints. These have been best framed by Sir David Higgins, the former Chair of HS2 Limited, as a need for an overall national transport strategy for and against which individual interventions can be constructed and appraised.
These issues are echoed in PIN’s Infrastructure and Regional and City Productivity Debates evidence reviews. PIN’s evidence reviews have specifically highlighted a number of gaps in our understanding and framing of the wider effects and role of infrastructure, particularly that of mobility and transport, on the productivity prospects of the UK cities. Difficulties in directly determining and measuring precise improvements in overall GVA as a result of particular transport infrastructure interventions and a lack of mechanisms/tools that would enable a more longer-term oriented planning of infrastructure targets have specifically been highlighted in these evidence reviews.
Here, we seek to advance understanding of productivity premiums that may be associated with the spatial organization and connectivity of small-area land-use and demographic profiles within cities. Using the Sheffield Travel-to-Work Area as a testbed, this project will examine ways to quantify agglomeration productivity potential in long-term planning for land-use and transport infrastructure.
Can Fintech coordinate and support physical consumption in a COVID-19 economy
An exit from lockdown allows us to consider what socially distant physical economic activity will look like. The retail and hospitality sectors will be crucial to recovery, however these traditional cash heavy sectors have key barriers to operation arising from the need to socially distance. In particular their physical premises and reliance on cash. Various policy reports are explaining the benefits of going cashless for these businesses. This research will investigate the cashlessness journey for businesses in the hospitality sector and examine the role of cashless payment systems for coordinating physical economic activity allowing for socially distant use of premises.
This rapid move toward cashlessness is an acceleration of an ongoing trend. The proposed benefit of ‘going cashless’ for the firms include far easier banking, less risk of crime and anti-social behaviour, easier accounting and audit trails, advantages for supply chains and real-time decision making, reductions in staffing costs and hours associated with ‘cashing up’ and depositing takings, the requirement for less senior staff to money monitor and less training.
The proposed benefits to the consumer, centre around convenience, safety and security as well as a variety of linked in budgeting tools and spending controls.
In light of COVID-19 we can add to these, benefits around social distancing for staff and customers with the traditional benefits of cashlessness including, for example, no change requirements, speedier point of sales, no bank trips etc. However the coordination of physical activity, including for example, remote ordering, self payment and remote direction and instruction could also facilitate socially distant economic consumption.
This research will investigate:
1. Cashlessness as a facilitator of social distant economic activity.
2. New Business Models in hospitality arising from COVID-19.
However, whilst we can see that these benefits could increase short term productivity through reduction of hours per business output unit, there are three longer term issues the proposed project will investigate:
1. The benefits of cashlessness in hospitality may fail to materialise for organisations servicing gig and entertainment locations.
2. The introduction of cashlessness in a retail organisation may remove routes for promotion from the ‘shop floor’.
3. The behavioural effects of cashlessness may encourage spending and potentially debt accumulation.
Additionally, the project will investigate if the business decision to ‘go cashless’ is taken alone or in the context of a reduction of bank cash services. This will help to understand if the decision is business-driven or a response to the changing environment. The idea of cashless business in the traditional cash-heavy areas provides an interesting and unexplored area for productivity research. The increasing pace of implementation in the proposed project’s target areas of hospitality and retail provides an insight into the technological attempts to increase productivity in the so-called low productivity areas.