Linking Entrepreneurship to Productivity: Developing 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 recognised 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. Using a two-stage analysis with the Malmquist Index (MI) of total factor productivity (TFP) on cereal farms from the Farm Business Survey (FBS) over 11 years, the study identifies innovators and, it assesses changes in productivity, technical efficiency, and economic efficiency. The second stage decomposes the MI to understand factors enabling innovation, including changes in technology scale. Objectives include a literature review to map innovation variables, integrating FBS data for validation and assessing productivity impacts from asset enhancements and changes in farming scale. Results reveal significant productivity variation and a moderate overall improvement. Future research directions emphasize expanded data collection on managerial behaviours and technology investments' role in efficiency frontier shifts. The study concludes by emphasising nuanced agricultural policies that leverage farmers' knowledge for innovation through enhanced management efficiency. It 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.