Value creation and the UK economy: a review of strategic options

Abstract

In this review paper, we ask how UK business might realize improved productivity through value creation. Our aim is to evaluate the ability of UK firms to reduce the productivity gap by assessing the challenges associated with the following strategic options: (a) increasing efficiency and effectiveness through the adoption of better practices; (b) innovating to produce products or services that generate more revenue (through either higher prices or larger volumes) while remaining at the same position in the value chain; and (c) fundamentally changing position in the value or supply chain and moving to a position where the products and services that are delivered inherently generate more value. To this end, we contend that the core issues that affect such endeavours relate to the conceptualization and management of change and innovation. By considering the interconnections between firm-level activities and wider institutional processes and structures, we assess the links between knowledge production, skills provision and productivity, including the role of the state and other institutions in the context of the micro-processes of innovation. We conclude with a discussion of the research and policy implications of the attempt to make more sense of innovation and reduce the UK's productivity gap.

Climbing the value chain

“…It was only through taking advantage of these alliances that Company' s A and C were able to develop a NPD capability, moving from acting as a subcontractor to a firm that was able to create more value through creating and developing new products. This observation illustrates that alliances can underpin the ' third option' described by Edwards et al (2004) for valuechain repositioning, where new products are generated to fundamentally change the firm' s value proposition. Undertaking a fundamental change in position in the value chain, moving to one where products and services generate more value in new and better ways than before, has largely remained an unclear strategic option.…”

“…In order to ensure such 'fit ' Edwards et al (2004) propose three strategic options in the pursuit of greater value creation. Firstly, a firm can deliver value by increasing efficiency and effectiveness within the value chain.…”

“…The literature presents a number of strategies that involve external relationships with other firms such as value-adding partnerships (Edwards et al, 2004), strategic alliances (Hooley et al, 1998), licensing relationships (Tsai and Wang et al, 2008) and collaboration (Sawers et al, 2008). Therefore this study will take a wider perspective and examine what we refer to as 'networked partnerships', acknowledging the activities that extend outside a firm's boundaries and where firms come together for mutual benefit.…”

“…By working together, each can benefit from the relationship by sharing and drawing on each other's skills, resources, capabilities and knowledge. Edwards et al (2004) argues that value-adding partnerships are now increasingly viable given advances in computer technology, where information can be easily shared along the supply chain enabling easier control and collaboration.…”

Enhancing Productivity: The Role of Management Practices

“…Wall and Wood (2005) suggest it is unlikely that there exists a 'one size fits all' set of productivity-enhancing management principles or practices. Edwards et al (2004) builds upon this contingency approach, stating that the success of management practices are firm-specific and these are affected by the prevailing institutional environment.…”