Incentivising innovation

Why are some businesses and markets more successful than others in fostering innovation?

Is innovation the key to raising productivity?

Innovation comes in many forms

In the words of Nobel Prize-winning economist Paul Krugman, “Productivity isn't everything, but in the long run it is almost everything.” And what’s the key to raising productivity? Above all, it is innovation in all its forms – the application of scientific and technological advances, the design of new products and services, improvements in management techniques, and much more.

Incentives to spur innovation

The incentives to innovate will inevitably vary from industry to industry. In energy, for example, the combination of variable tariffs and smart household technology can encourage consumers to use more off-peak power. But there are common threads. In every sector regulators and policymakers need to strike the balance that gives business sufficient motivation to invest in innovation. And drawing on behavioural insights can help companies develop ground-breaking products and services.

Team thoughts

Harnessing new technologies to deliver higher levels of customer service and a greater recourse to markets are among the most promising channels to spur innovation.
Michael Yang
Manager, Transport and Water
Technology will enable consumers to respond to real-time energy price signals as readily as fluctuations in petrol prices at filling stations today.
Abbas Hussain
Manager, Energy
Regulators who are increasingly concerned about more vulnerable consumers, need to ensure that operators have sufficient incentives to invest while still protecting end-users from undue market power.
Tom Ovington
Manager, Telecoms

In numbers


investment needed for 5G rollout


CMA reduces its remedies process


of customers in Spain are now on dynamic ‘time of use’ energy tariffs

Team Thoughts

# of #

Enter your details below to sign up for our e-magazine and general updates, which will be sent to you via e-mail.

For the purposes of the General Data Protection Regulation (GDPR), the data controller is Frontier Economics Limited, 71 High Holborn, London WC1V 6DA.  We rely on your consent when processing your personal data for the purpose of sending you information and you have the right to withdraw your consent at any time either by using the link at the foot of each email (‘unsubscribe’), writing to our Data Protection Officer at the address above or emailing us at  You can view our full privacy statement here.

Sign up to join the conversation: