Corporate governance and innovation: The UK compared with the US and ‘insider’ economies

Abstract

How well does the UK corporate governance and financial system (CG&FS) support and encourage innovation? Each CG&FS faces four challenges which vary by sector: novelty, reconfiguration, visibility and spill-overs. High novelty in technologies and markets requires high industry-wide expertise; need for radical reconfiguration requires strong pressure for shareholder value. Low visibility of innovation processes requires shareholder engagement; high spill-overs to and from stakeholders require substantial stakeholder inclusion. The UK CG&FS is rated in these terms against the US and ‘insider’ economies, drawing on recent fieldwork, and the ratings are shown to account well for the relative R&D intensity and specialisation of UK-owned firms.