Linking Entrepreneurship to Productivity: Using a Composite Indicator for Farm-Level Innovation in UK Agriculture with Secondary Data

Abstract

In agriculture, the intricate relationship between innovation, productivity, and entrepreneurship is underexplored. Despite the widely recognized role of innovation in driving productivity, concrete indicators and comprehensive farm-level studies are lacking. This research aims to unravel this complexity by exploring the impact of innovation, specifically in agricultural entrepreneurship, on transformative changes in farm productivity. The work presented in this manuscript explores how farm-level data derived from the Farm Business Survey (FBS) for the period between 2003 and 2014 is used to identify innovators and to assesses changes in productivity, technical efficiency, and economic efficiency. Therefore, it aims to contribute to comprehensively exploring the role of innovation, particularly within the context of entrepreneurship in agriculture, and its influence on driving transformative changes in farm productivity. Results reveal significant productivity variation and a moderate overall improvement. Furthermore, investment in human resources, particularly managerial input, significantly enhances farm productivity across various models, indicating experienced managers utilize technology effectively. Notably, management and human capital innovation drive positive productivity changes in the UK cereal sector for the period 2003–2014, surpassing technological advancements. Efficient farmers leverage experience to benefit from operational scale changes, emphasizing the importance of accumulated knowledge. Hence, policy interventions should recognize these nuances; while promoting vocational training aids technology adoption, it may not spur management innovation. Thus, strategies must balance various aspects to effectively foster innovation in agriculture, considering both technological and managerial advancements for sustained productivity growth. The study advocates for a departure from the ‘bigger is better’ mentality, proposing educational programs and support services to encourage informed decision-making. This forward-looking approach aims to inform future policies and enhance understanding of the intricate dynamics between agricultural innovation, productivity, and entrepreneurship.