17th July 2017
Tell us a bit about the Close Encounters: The Power of Collaborative Innovation report?
To understand the importance of collaborative innovation to corporate strategy, we commissioned the independent economics and business research consultancy Centre for Economics and Business Research (Cebr) to conduct economic research and produce our report.
The Close Encounters: The Power of Collaborative Innovation explores the relationships between large businesses and UK SMEs, including mergers and acquisitions, minority stake purchases and joint ventures from April 2013 to April 2017.
Why did Bond Dickinson decide to commission the report?
At Bond Dickinson we’ve been identifying the many different approaches our clients are taking to driving innovation through their businesses. In an age of disruption where the race to innovate and stay ahead of the competition is increasingly becoming a top priority for many of our clients, the power of collaboration has never been as strong.
What did the research show?
The research identified that those in business feel that while collaboration is not new concept, the ways in which businesses work together is changing and it has become a key strategy for corporate innovation.
Many of our clients are looking for sustainable innovation – the ability to innovate multiple times – rather than a single new product or service. While our larger corporate clients have the reach, resources and operational efficiency, some of them recognise that they can lack the speed and agility to adapt and innovate.
Our research also reveals that one promising strategy in the race to adapt is working in partnership with dynamic young SMEs and entrepreneurs, combining their different capabilities to deliver collaborative innovation. Outward-looking companies are building networks and tapping into entrepreneurial talent to make them more productive.
The research quantifies collaboration between UK SMEs and large domestic and international corporates. The report also reveals how firms are choosing to collaborate, including a rise in more flexible partnerships, including minority stakes and acquisition without integration.
So is collaborative innovation now a vital component of corporate strategy?
In the last 12 months, large organisations have invested £21 billion in more than 1100 collaborative deals with SMEs in the UK. This significantly exceeds the £16 billion large businesses spent on UK research and development (R&D) in 2016. So this suggests that collaborative innovation is a vital corporate strategy.
As the lawyers of both established multinationals and mid-market disruptors, Bond Dickinson has been in the fortunate position of guiding these alliances from both sides.
What impact is this having on the North East?
The data we have collated shows that in the North East 157 deals took place between SMEs and large organisations over the last four years, known to have exceeded £2.4 billion in value. Manufacturing and technology firms dominate the table of North East companies entering into collaborations with corporates, with 27 per cent and eight per cent of all North East deals respectively. Deals were largely in the form of mergers and acquisitions (83 per cent) and minority stake purchases (17 per cent).
How does this compare to other regions?
Taking into account the number of SMEs in each UK region since 2013, the North East came second only to London in the volume of collaborations between SMEs and corporates. It is clear that SMEs in the North East are making the most of the opportunities that corporate alliances can open up. Coming second only to London reflects the vibrancy of the region’s entrepreneurial businesses.
Our research has also shown that the North East has a particular strength in high-end manufacturing and automotive, with US auto giant Lear Corporation’s recent decision to bring its European R&D activities to Sunderland adding a further vote of confidence. Cluster groups like the North East Automotive Alliance are helping to spark partnerships between businesses, large and small.
Our region is also one of the UK’s fastest growing regions for tech start-ups. Collaboration with corporates will become increasingly important to these dynamic businesses, which are brilliant at ‘proof-of-concept’ innovation but often lack the regulatory pathways, brand and finance to make the most of their intellectual property. Together, though, they can be a powerful force.
Do you think the EU referendum result has had any impact on collaboration?
Businesses are operating in uncertain times, and our research did reveal a dip in collaborative activity over the past 12 months which suggests a possible impact on confidence following the Brexit vote. That said, I believe fortune favours the brave and our report pulls together insight from business leaders and legal advisors to help our clients be best placed to seize the opportunity that collaboration presents.
View the full report at www.bonddickinson.com/close-encounters