Corporate Innovation and Government Regulations

Corporations are in a strategic freeze as they grapple with the fear of recession, layoffs, income loss, and higher supply chain costs. How have these developments impacted corporate trends in 2023?

The current market for innovation is diminishing, with corporations allocating fewer resources toward innovation initiatives. Corporations are apprehensively awaiting the development of Artificial Intelligence and its potential effects. 41% of finance corporate executives are planning to curtail mergers and acquisitions, leading to a decline in the acquisition of startups. 44% of corporates plan to strengthen their collaborations with startups over the next 18 months, while 26% plan to decrease such engagements. These figures reflect a mixed sentiment within the corporate sector regarding their involvement with startups.

The “corporate venture client,” a new corporate innovation model, has recently gained traction. This model involves corporations engaging startups as clients, enabling corporations to access new solutions while providing startups with the early revenue they require to grow and succeed (S&P, February 2023 & Bundl 2023).

The US and EU have implemented major regulations to mitigate inflation and promote economic growth and innovation. The US Inflation Reduction Act of 2022 aims to reduce the deficit, accelerate the transition to a clean energy economy, and lower healthcare costs. Key provisions of the IRA include $300 billion in Deficit Reduction and $369 billion in Energy and Climate Change programs.

The InvestEU initiative has allocated €372 billion to stimulate sustainable investment, innovation, social inclusion, and job creation across Europe. This substantial investment aims to bolster the European economy and support promising ventures. Horizon Europe, the EU’s key funding programme for research and innovation, continues to bolster the European innovation ecosystem: in its first two years, the programme has overseen 5,000 grants signed with a success rate of 16% and has disbursed a total of €11.83 billion.

Main Takeaways & Opportunities

• Companies that continue to invest in innovation during times of crisis enjoy increased levels of growth and performance following the crisis.
• The optimal way for innovators to proceed is to understand that innovation sits on a continuum of efficiency, sustaining and transformative innovation.
• Innovation is not exclusively a long-term strategy. Investing in innovation can yield high and immediate returns for a company.
• Companies should capitalize on market uncertainties and shifts in the corporate landscape by orienting their corporate ethos around innovation.

To conclude, despite the global financial crisis, the tech industry continues to thrive. The United States remains a top destination for startups, while Nordic and Southern European countries show promise as emerging tech ecosystems. Venture capital firms are adjusting their strategies, and early-stage startups are gaining traction. The crisis has spurred creative solutions and the emergence of innovative startups, leaving us eager to witness the future advancements that will shape the tech industry going forward.

*About the Author: Maayan Sharon has spent her last three years working in the EIT Global Outreach. Maayan’s insights are based on research, interviews, and her extensive experience in leading programmes and fostering open innovation with corporates from Israel, Europe, and the USA.