Food and drink innovations: models of policy support and other incentive mechanisms
Project Lead
Challenges
The current state of the Scottish food and drink sector shows mixed levels of investment in innovation across food and drink supply chains. The extent to which firms engage in innovation is a function of the context in which they operate. External factors, such as market forces, public policy, geography or sector, knowledge flow and networks, influence internal firm processes: how, why, and when firms innovate, who are the players engaged in the innovation process, and what the outcome of the innovation is.
The Scottish Government is a critical player in supporting innovation in firms through different regulatory mechanisms to incentivise innovative behaviour. Incentives are either directly, through changing firms’ internal processes, or indirectly, through influencing the context in which firms innovate. Scottish Government policy can affect consumer demand, encourage supply chain restructuring, channel technological development, and shape the knowledge flows within specific regions.
Scottish Government assistance to the Scottish food and drink industry has been increased due to the Covid-19 pandemic and includes a mix of financial, regulatory and policy support, and industry-led initiatives, which is likely to have wide-ranging implications on the sector’s propensity to engage in innovation. Despite this assistance, the food and drink industry has been affected by the lockdown and there is a high vulnerability risk to the sector linked to changes in international trade. This is a key moment for taking stock and identifying the development potential through innovations, in the form of developing new products, engaging in new processes, or adopting new models to organise an activity. This requires a good understanding of the barriers to and drivers of investment in different forms of innovation and ranking the most effective incentive mechanisms as an essential step towards a high-value, high-productivity food sector.
Questions
- What policy levers and types of support available to the food and drink industry are the most effective in encouraging innovation and advancements?
Solutions
This project is providing evidence to better understand what policy levers and types of support are available to the food and drink industry and are the most effective in encouraging innovation.
State of food supply chains support
We are reviewing the current state of food and drink support, the spread and extent of incentive mechanisms such as regulatory support, in particular subsidies, and the relationship between these and the form and extent of innovation uptake.
Incentives to business innovation - causal mapping
We are identifying types of incentives at different levels of government intervention that have successfully supported innovative behaviours in the food and drink industries across the globe. The current incentives are being mapped to innovative behaviours in the main Scottish food and drink supply chains such as fruit and vegetables, beef or dairy, aquaculture, and fisheries. We are providing a better understanding of the factors leading to a demonstrable change in innovation and investment in these supply chains, in particular, the role of policy and government support; ranking and categorising incentives to innovation by their effectiveness; and, finally, developing models of support to the uptake of innovation at supply chain level feeding into an innovation uptake incentive framework at sectoral level.
Business innovation support - system dynamics
We are providing policymakers and industry stakeholders with a better understanding of what policy levers and types of support available to the food and drink industry are the most effective in encouraging innovation. The latter are receiving clear information on the factors leading to demonstrable change in innovation and investment in agrifood supply chains, in particular the role of policy and government support. Selected case studies will highlight the implementation potential of support interventions.
Project Partners
Progress
We have completed a rapid evidence assessment (REA) of the current state of food and drink support, the spread and extent of incentive mechanisms such as regulatory support, in particular subsidies, and the relationship between these and the form and extent of innovation uptake. The review has identified types of incentives, e.g., public subsidies, at different levels of governmental intervention (national, central and local government agencies) that have successfully supported innovative behaviours in food and drink industries across the globe. Different forms of innovations - product, process, business model - are incentivised by different factors, where policy and private measures range from 'softer' ones, e.g., education and training, to regulatory mechanisms of either carrot or stick type (e.g., subsidies, taxes, compulsory/voluntary standards).
The review was completed in parallel to an in-depth qualitative appraisal of the support to innovation in the Scottish food and drink supply chains using secondary data and in-depth interviews with stakeholders from primary production, processing, transport/wholesale of the agrifood supply chain, and academics on health/safety and welfare technological uptake. The findings underline stakeholders' perceptions on the effects of recent trends for the domestic food and drink markets recording higher vulnerability risk to the Scottish agrifood sector, linked to changes in international trade and changes in domestic demand, and the potential effect on sector's development potential through innovations.
Based on the findings of the stock taking analysis, the research identified the political, economic, social and technological factors most relevant to the Scottish food industries that act as drivers for different forms of innovation, e.g., process, product and business models. These are differentiated through the link between types of incentives and types of impact to ensure the outcomes better align with existing initiatives and strategies of different stakeholders. For example, aligning with net zero targets in terms of uptake of green technologies, or development of new products to respond to changes in post pandemic domestic demand, of uptake of innovation business models in response to post-Brexit trade environment changes.
Following direct interaction through semi-structured interviews with stakeholders, a mapping exercise of the innovation uptake in the Scottish supply chains is in progress, to be completed as planned during the second year of the project. The mapping is structured using a supply chain-based approach, where causality from drivers of, and incentive mechanisms to innovation uptake is represented through balancing loops in a causal loop diagram. The main elements of the diagram have been identified and the design will be tested iteratively with stakeholders involved.
Outputs from the project can be viewed here.
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