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Skills, employment and innovation in the digital economy

A major two-year project looking at the impact of digital technologies on the UK labour market begins in the New Year.

Funded by the Alliance MBS Strategic Investment Fund, the study will look at the changing nature of work and the effects of digitalisation on innovation, while also exploring the effects of digital technologies on the dynamics of skills and employment, and how these changes are affecting innovation performance.

The project is being headed by Silvia Massini, Professor of Economics and Management of Innovation, and Dr Mabel Sanchez-Barrioluengo, a Presidential Fellow at Alliance MBS.

Dr Sanchez-Barrioluengo explained: “Much of the focus of research studies in this area has been on the effects of automation as a substitute for human labour and the effects of technological change on labour market dynamics. But while the process of computerisation and automation requires companies to rethink their activities and workers to be reskilled, little is known about the societal consequences on sustainable economic growth and innovation, and on the related evolution of traditional businesses and business models.”


She said that what also makes this study unique is that rather than focusing on the impact of such technologies in a set geographic area, it will assess the impact at the firm level by analysing multiple datasets from the Office for National Statistics (ONS).

“The datasets we are going to use span four decades from the 1980s to 2010s which will create a unique source of information to disentangle skills and employment dynamics in the UK labour markets, as well as assess the impact of digital transformation on the innovation capacity of firms, and help us understand the match or mismatch between supply and demand of skills. The data will, for instance, include skills surveys, workplace employment surveys, UK census data and patent information.”

Prof Massini added that it is a fallacy to simplify the debate by simply saying that robots replace workers. “At the end of the day someone still has to develop and produce robots in the first place so there will be an increase in the manufacture of robots. Robots and computers are changing the way we work, but it doesn’t necessarily mean that workers are replaced. Instead there is likely to be a different division of labour. Employees will need different or new skills, but they will still be needed in the same company or in other companies in the supply chain.”


The project has three interconnected objectives. Firstly to identify the key features of skills change over recent decades in the UK, both at local and national level, and gauge the impact of technology on the changing nature of occupations. Secondly, to assess new skill requirements needed in the digital economy. And thirdly, to analyse how skills and employment changes affect innovation performance.

Professor Massini said the project would also derive managerial and policy recommendations to inform the design of strategies, initiatives, guidelines and policies in the digital era. “The study will help employers and policymakers understand the trends of skills changes and we anticipate that our work will be relevant to policymakers fostering growth at different geographical levels, as well as for public and private enterprises pursuing innovation activities.

“The study also links in with the wider UK Industrial Strategy where digital transformation has been identified as one of the key challenges, and with the government’s wish to understand how changes in technology will affect skills needed in the future.”


Professor Massini added that these debates were far from new and stretched back centuries. “Ever since the industrial revolution economic writers have been looking at the impact of substituting workers with technologies. Fast forward to today and Mabel and I have both been looking at these issues independently for many years, such as at how the skills needs of firms are developing through innovation and Industry 4.0 technologies. So it will be great to work together on this project.”

The data being used for the project pre-dates Covid-19 so the academics won’t be looking specifically at the impact of the pandemic in this study. However they say that there is a lot of potential to develop their work further in the future to look at the impact of Covid-19 on labour markets and innovation.

Other academics from Alliance MBS involved in the study are Dr Chiara Marzocchi, Lecturer in Innovation Management, and Dr Marti Lopez Andreu, an Honorary Lecturer at Alliance MBS.