Economic crisis and innovation: Is destruction prevailing over accumulation?

► The 2008 economic crisis has severely reduced the short-term willingness of firms to invest in innovation. ► Before the crisis incumbent firms were more likely to expand their innovation investment. ► The crisis has changed the picture with a few, small firms and new entrants “swimming against the stream” as they expand their innovative activities. ► Overall, our findings suggest that during the depression firms’ innovation behaviour is closer. ► To creative destruction, while before the depression there is an overall landscape of creative accumulation. The 2008 economic crisis has severely reduced the short-term willingness of firms to invest in innovation. But this reduction has not occurred uniformly and a few firms even increased their investment in spite of the adverse macroeconomic environment. This paper, based on the latest three waves of the UK Community Innovation Survey, compares drivers of innovation investment before and during the crisis. We find that the crisis led to a concentration of innovative activities within a small group of fast growing new firms and those firms already highly innovative before the crisis. The companies in pursuit of more explorative strategies towards new product and market developments are those to cope better with the crisis.